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The UK chancellor has ditched plans to offer cut-price shares in Lloyds Banking Group to the public and is pushing ahead with an alternative scheme to sell the taxpayers’ remaining £3.6bn stake within a year.
Philip Hammond announced that he was dropping his predecessor’s plan during a trip to Washington to meet senior bankers and reassure them following the Brexit vote. Mr Hammond blamed “ongoing market volatility”.
It is the first step by the new chancellor towards returning the state-backed bank to private ownership, some eight years after it received a £20.3bn injection from taxpayers during the financial crisis.
The previous chancellor, George Osborne, had promised to sell part of the taxpayers’ remaining 9 per cent stake to retail investors at a discounted price.
Chris Philp, a Conservative MP, told the Financial Times: “Scrapping the retail share sale is understandably disappointing for retail investors, but the government does have a duty to achieve best value for general taxpayers.”
Instead of selling shares to the public, the government said it would dispose of the stake through a “trading plan”. This involves gradually selling shares into the market, as long as they are above a certain price, which has not been disclosed.
The government launched a trading plan for Lloyds shares at the end of 2014 as a way to speed up reprivatisation. At this time, shares were sold if they were trading above 73.6p, the price paid by the government to bail out the bank during the financial crisis. The process stopped this year after shares fell below 73.6p.
One person briefed on the latest plan said the price threshold was lower. Shares in the bank are currently trading below 55p.
Mr Hammond said on Friday: “I believe the best way to secure value for money for the taxpayer . . . is through a trading plan to offload the shares into the market rather than a retail offer.
“We will recover the full investment the taxpayer made. We would be delighted if there was a surplus on that.
“I have listened to the experts. Ongoing market volatility means it is not the right time for a retail offer. Our plan will get back all the cash taxpayers invested in Lloyds during the financial crisis and leave the bank in a better place to continue the crucial role it plays in supporting individuals, families and businesses up and down the UK.”
The trading plan, which will be run by Morgan Stanley, will end within a year, the government said.
Mr Philp said: “Abandoning the price target is not unreasonable, as the government has held shares for eight years now. Having an artificial target may slow the sale and could mean the government ends up holding shares for years.”
The government has not yet unveiled plans for the 73 per cent stake it has in Royal Bank of Scotland.