George Osborne 'to signal sale in shares of taxpayer-backed Lloyds Banking Group'

George Osborne is expected to use a keynote speech to the City to signal a sale in shares of taxpayer-backed Lloyds Banking Group, it was reported today.

The Chancellor will use his Mansion House speech on June 19 to announce the sell-off of the 39 per cent chunk of the bank owned by the state believed to be worth approximately £17 billion at current prices, according to the Sunday Times.

The sale is expected to come in the form of discounted shares for the public, where stocks would be offered at a lower price than that available to big investment funds. There would also be incentives to hold on to the shares for several years. It is not known whether all of the shares would be sold at once.

Mr Osborne is reported to believe that a privatisation could rekindle the enthusiasm of the “Tell Sid” advertising campaign which saw millions buy shares in British Gas during the 1980s.

At the height of the financial crisis Lloyds had to be bailed out by taxpayers but its shares have now recovered enough to a level at which the Government can break even on its investment by selling its stake.

Mr Osborne's announcement will also reportedly indicate plans for the disposal of shares in Royal Bank of Scotland, although this would come after the Lloyds sale - with shares in the 81 per cent state-backed RBS still well below the value at which the Government bought them.

The Treasury has declined to comment on the report.

Mr Osborne spoke earlier this year about setting out plans for Lloyds and RBS after the Commission on Banking Standards produces its report. This is due in the next couple of weeks but according to speculation is about to be finalised and could be out in the next few days.

Last month Mr Osborne said: “Having refocused their business, now is the time for a clear strategy on how to return RBS and Lloyds to the private sector in a way that protects value for the taxpayer.

“The Parliamentary Banking Commission I established is completing its work and we will then set out the way ahead. We need functioning banks supporting the real economy, instead of nursing their wounds, and I'm determined we'll deliver it.”