Tory derision at Nick Clegg's 'free shares in banks' call

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A Coalition row erupted yesterday as senior Tories poured scorn on a call by Nick Clegg for voters to be given free shares in state-owned banks.

The Deputy Prime Minister backed a suggestion that all 45 million registered electors should be handed a stake in the Royal Bank of Scotland (RBS) and Lloyds Banking Group.

During a visit to Brazil, he disclosed he had written to the Treasury asking it to consider the move as a way of creating a "people's banking system". The Liberal Democrat leader also said he would have been "much tougher" on curbing bankers' bonuses but for his Conservative coalition partners.

Back in Britain, Tory sources were scathing about Mr Clegg's proposal, dismissing it as "dead in the water".

They claimed he had not alerted Chancellor George Osborne in advance that he was going to speak out on the initiative. He also appears not to have warned Mr Cameron about his intervention.

Under the scheme, which has been developed by a City firm, all adults would be receive about 1,450 shares in RBS and 440 in Lloyds.

A "floor" price would be set below which the shares could not be sold to ensure the Treasury at least broke even. However, individuals would be able to cash their shares in if their value rose above that level. But a Tory source said: "He is the Deputy Prime Minister and should know better. This is not the way you make policy."

Reflecting growing tensions between the coalition partners, the sources accused Mr Clegg and Vince Cable, the Liberal Democrat Business Secretary, of hypocrisy. They pointed to pre-election comments by Mr Cable in which he dismissed a plan for a discounted shares sale as "electioneering at its most cynical".

Mr Cameron's official spokesman also gave a lukewarm response to Mr Clegg's proposal. He said: "It is one idea we will look at, but we will look at all options. What we will do is make sure we get value for money for the taxpayer."