Osborne Faces Scepticism Over Lloyds Sale

By Mark Kleinman, City Editor

George Osborne is facing scepticism from inside his own department about the prospect of a multibillion pound sale of Lloyds Banking Group shares to the general public.

Sky News understands that some Treasury officials are expressing private concerns about the complexity of a retail offering of part of the Government's remaining 33% stake in Lloyds.

A mass public sale of shares in the bank is widely-seen as likely in the early months of next year following last week's successful placing of a 6% stake through a deal which raised £3.2bn.

The Chancellor must convince Treasury officials of the sale

The Chancellor wrote to Andrew Tyrie, chairman of the Treasury Select Committee, following the transaction, saying that he would "consider all options for later sales of our shareholding in Lloyds, including a retail offering to the general public".

The idea is backed by many of Mr Osborne's allies, who believe that such a sale would be politically beneficial in the run-up to the next general election.

However, some Treasury officials believe that the likely requirement to publish a full prospectus as well as the delay between doing so and executing an actual sale of shares would be far riskier than further transactions such as last week's.

Value-for-money for British taxpayers would be the "overriding consideration" when planning future disposals, the Chancellor told Mr Tyrie.

Andrew Tyrie, chairman of the Treasury Select Committee

A public offering would not necessarily involve a giveaway of the shares, although that idea has been advocated by a number of think-tanks.

There remains significant demand among institutional investors for Lloyds shares, and any retail offering would encompass only part of the Treasury's remaining stake in the bank, said one insider.

A decision will in any case not be made for months, since UK Financial Investments, which manages taxpayers' shareholding in Lloyds, said last week it wold not seek to further reduce its stake for at least 90 days.

It is possible to waive that commitment but it is seen as unlikely.

The Times reported in May that Treasury officials had similar reservations about a public offering of a stake in Royal Bank of Scotland, although RBS shares - unlike those of Lloyds - are trading at a significant loss on the taxpayer's investment.

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