Government Sells 7.8% of Lloyds - Legalised Theft

The government has today announced that it has sold 7.8% of shares in Lloyds Banking Group, at 75.5p per share.

The government has now sold 36% of its original stake in Lloyds, which now stands at 24.9%.

Chancellor of the Exchequer, the Rt Hon George Osborne MP, said:

"I can confirm this morning that we have sold a further £4.2 billion of shares in Lloyds Banking Group at 75.5p a share, taking the taxpayer’s stake down to below a quarter of the bank. This represents good value for the taxpayer and the money will again be used to reduce the national debt.

This is another step in the government’s long term economic plan to deliver a more secure and resilient economy. It is another step in repairing the banks, in reducing our national debt and in getting the taxpayer’s money back."

The taxpayer paid an average of 73.6p per share when it was forced to rescue Lloyds in 2008. Thus the "profit" is little more than 1.9p per share, or £106.4M.

The sale comes at a time when Lloyds has been exposed as unilaterally reducing payouts to people who were mis-sold PPI. The bank’s behaviour has been described by one expert as “a scandal coming out of a scandal”.

An investigation by the BBC has found evidence to suggest that in some months the bank provided more than one in four PPI claimants – a figure that the bank disputes – with “alternative redress” – an obscure loophole that allows Lloyds to assume victims who were wrongly sold single-premium PPI policies on loans would have bought a cheaper regular premium PPI policy. Single-premium policies involve one-off payments, rather than monthly outlays.

Claims management companies told BBC Radio 4 that when they challenge Lloyds’ reduced offers on behalf of clients, the financial ombudsman has overruled the bank in every single case.

Cliff D’Arcy, an expert on the PPI scandal, said he believes Lloyds has reduced payments by tens of millions of pounds over the past year. He is quoted by the Independent:

“Frankly, I’m amazed that this problem has existed throughout the last year and hasn’t emerged into the light.

What’s happening here is a taxpayer-sponsored bank depriving taxpayers of their rightful compensation by using a loophole. It’s a scandal coming out of a scandal.”

The MP John Mann, who sits on the Treasury Select Committee, said:

 “This appears to be legalised theft and yet again it shows Lloyds as the unacceptable face of banking. This raises major questions for the Treasury, which has a multibillion-pound stake in the bank. ”

The government may be itching to relieve themselves of their stake in Lloyds, lest other scandals emerge that destroy value.