Chancellor moves up a gear on sell-off of taxpayers' stake in Lloyds Bank

George Osborne has fired the starting gun on another huge sell-off of taxpayer-owned shares in Lloyds Banking Group as proceeds from previous sales topped half the original £20bn bail-out for the first time.

The Chancellor has told UK Financial Investments to continue the drip-drip sell-off of taxpayer shares through the broker Morgan Stanley which began last December. Since then the broker has sold 4.2 billion shares in the market at an average price of just over 80p, raising a total of £3.4bn.

That represented just over 5 per cent of Lloyds and thanks to the reintroduction of dividend payments, the disappearance of Labour’s threat to banks at the general election and rising profits from Lloyds, the shares were all sold above the average 73.6p paid by the taxpayer in 2009’s bail-out.

Morgan Stanley has now been mandated to sell a further 5 per cent or so of the Government’s stake so long as it can do so above that bail-out price. After sales on Friday the stake has come down to below 19 per cent. It was just under 25 per cent in December.

Mr Osborne said: “The trading plan has been a huge success, with almost £3.5bn raised for the taxpayer so far. This means we have now recovered over £10.5bn in total, more than half of the taxpayers’ money put into Lloyds, and we now own under 19 per cent of the bank.

“But we’re determined to get on with the job of returning Lloyds to private ownership. That’s why I’m extending the plan for six months so that we can make even more progress in returning money to the taxpayer and paying down the national debt.”

He added that this would be part of his Budget announcement that the Treasury planned to raise £9bn through further Lloyds shares sales in the current fiscal year. That includes just over £1bn already raised by the first tranche of Morgan Stanley sales.

The Chancellor made no mention of his pre-election pledge to offer Lloyds shares to retail investors at a 5 per cent discount to the stock market price, with the promise of a bonus one-for-ten free share to those who held on for at least a year. That sell-off could come late this year or, more likely, early next year.