Today the privatisation of Lloyds Bank began, in an attempt by the government to help pay down the national debt
The sale of the shares will result in a £61 million profit for the Treasury, and the funds from the privatisation will be used to reduce the national debt by half a billion pounds. The government’s stake in the bank will fall from 38.7% to 32.7%.
Share prices on the up
The price of shares in Lloyds closed at 77.36p yesterday – much higher than the 61p Chancellor George Osborne regards as the break-even point to make a profit.
During Lloyds’ bailout in the financial crisis, the government bought shares at 73.6p, despite the fact they were worth just 61p. The government added the 12.6p difference to the national debt, which it is now trying to reduce with this sale.
Our guide to finding the right bank account explains how to choose the right account for you. During the height of the crisis, £20.5 billion was pumped into the Lloyds Group.
Money for taxpayers
The sale is expected to make a considerable dent in the national debt. The 6% stake is worth more than the whole of Royal Mail, which is also being privatised over the coming weeks. Our news story has more details on the Royal Mail sale.
Chancellor George Osborne said: ‘This is another step in the long journey in putting right what went so badly wrong in the British economy; it’s another step in repairing the banks; it’s another step in getting the money back for the taxpayer; and it’s another step in reducing our national debt.’
Improving fortunes for Lloyds
Things have been improving for Lloyds over the past year. It recently brought back its TSB brand, transferring five million accounts to it, and that bank will be sold off next year. It also announced profits of £2.1 billion for the six months to the end of June 2013 – compared with a £456 million loss for the same time last year.
The government still has an 81% stake in Royal Bank of Scotland (RBS), which it is not expected to sell in the near future. RBS received a £45 billion bailout in 2008, and in 2009 the bank reported the biggest annual loss in UK corporate history.
Our Big change in banking campaign wants a culture change in banking to ensure this doesn’t happen again.