George Osborne: Lloyds Banking Group sale will cut debt

 
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George Osborne today insisted Britain’s economy is “turning a corner” as he hailed the sale of a £3.2 billion chunk of the taxpayer-backed Lloyds Banking Group.

The Chancellor rejected a gloomy warning from Business Secretary Vince Cable that “amber lights” were flashing that the growing economic recovery could collapse as it was too reliant on a house price boom in London and the South-East and a banking pick-up.

Mr Osborne was backed by Liberal Democrat Chief Secretary to the Treasury Danny Alexander, who said that the Coalition had steered the UK economy through its “darkest hour” and rejected talk of a house price bubble.

The Chancellor yesterday announced the first sale of the State’s share of Lloyds, knocking Mr Cable’s speech to the Lib-Dem annual rally in Glasgow down the TV news schedules.

The stock, six per cent of the bank, was snapped up by institutional investors at 75p per share, only a small discount to last night’s closing price on the FTSE 100 of 77.36p.

It means the taxpayer stake in Lloyds, which was rescued by the State with a £20 billion bail-out at the height of the financial crisis has been reduced from 38.7 per cent to 32.7 per cent.

The sale price represents a £61 million profit on the 73.6p average price paid by the Government at the time.

But experts said the National Audit Office may calculate down this profit once it takes into account the lack of dividends paid on the billions of pounds which the taxpayer ploughed into the crisis-stricken bank.

The sale of 4.28 billion shares was announced by UK Financial Investments, which holds the taxpayer stakes in the rescued banks on behalf of the Government. It will register as a paper profit of £586 million on the Government’s books because its stake in Lloyds is recorded in the public finances as 61p per share.

Mr Osborne said: “The money will be used to reduce the national debt by over half a billion pounds. This is another step in the long journey in putting right what went so badly wrong in the British economy.

“If you look at what has happened over the last 12 hours with Lloyds, you have investors from around the world investing in a British bank. That is a sign the British economy is turning a corner.”

At the Lib-Dem conference yesterday Mr Cable warned against “settling for a short-term spurt of growth, fuelled by an old-fashioned property boom and bankers rediscovering their mojo”.

He also repeated his concerns that the Chancellor’s Help to Buy scheme could send London property prices even higher when it is extended to cover existing homes in January.

But Mr Alexander told BBC1’s Breakfast the recovery was “lasting and sustainable” and added: “I don’t see any sign of a housing bubble.”

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