March 11 2014 Latest news:
Wednesday, December 18, 2013
Taxpayers took a loss of at least £230million from the return of a 6% chunk of Lloyds Banking Group to the private sector, according to a National Audit Office (NAO) report.
The figure, which takes into account the cost of borrowing to fund the £20billion bank bail-out in 2009, appears to undermine a claim at the time by Chancellor George Osborne that the share sale in September represented “a profit for taxpayers”.
It suggests that the overall loss on the bailout could be nearly £1.5bn if the rest of the taxpayer stake is sold off at a similar price, although the NAO report itself does not make such a calculation.
Mr Osborne said in the autumn that the £6.2bn Lloyds share sale had resulted in the national debt being reduced by more than half a billion pounds, a claim that was later backed in data from the Office for National Statistics.
This £586m figure represented the difference between the value for accounting purposes of the shares on the Treasury’s books, at 61p, and the 75p sale price, although the Treasury acknowledged at the time that the cash profit was far less, at £61m.
Today’s report by the spending watchdog does not dispute these calculations but also takes into account the effective interest paid by the Government to make the original investments in the bail-out.
The report finds that the average rate paid for the shares by the Government of 73.6p was effectively reduced to 72.2p by the repayment of some of this money by Lloyds in fees, producing a cash profit of about £120m.
But it says that. if the cost of financing is taken into account, the sale resulted in a shortfall of £230m, and that the Treasury should consider these financing costs when analysing the value to the taxpayer of any future sale.
However, it is broadly positive about how the initial sale of Lloyds shares was handled.