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Budget 2015 – bank assets: Sale of Lloyds shares will raise billions, says George Osborne Budget 2015 – banks: Osborne raises levy and plans sale of shares to cut national debt
(about 5 hours later)
Chancellor George Osborne today said that he would raise a further £22 billion through the sale of more shares in Lloyds Banking Group and mortgage books held by the nationalised former building societies Northern Rock and Bradford & Bingley. Britain’s banks will bear the brunt of the Chancellor’s extra tax-raising over the next few years and will also contribute considerably to cutting the country’s debt.
The taxpayer stake in Lloyds has already been cut from 40% to just below 23%. Osborne said he expects to raise a further £9 billion from the shares owned by the Treasury. At today’s share price of 79.3p that would equate to reducing that stake by a further 16% to around 7%. This includes the 5% which investment bank Morgan Stanley is currently dribbling out into the market on behalf of UK Financial Investments which has a further 3% to go. George Osborne will raise more than £1bn a year extra in taxes from banks and raise a further £22bn through the sale of more shares in Lloyds Banking Group and mortgage books held by the nationalised former building societies Northern Rock and Bradford & Bingley.
Such a drip sale is unlikely for as much as another 12% of Lloyds because of the scale of the sell. Instead a retail offer of further shares in Lloyds is seen as a popular option by Osborne. His first move is to increase the bank levy, which could raise the spectre of more foreign banks pulling out of the UK or even UK banks moving their headquarters abroad.
Osborne is targeting a further £9 billion in sales of mortgage portfolios from the former building societies now run by the so-called bad bank UK Asset Resolution. These have become more valuable as the economy has recovered and last October UKAR sold a portfolio of residential mortgages to a consortium controlled by JP Morgan for £2.7 billion at a modest £33 million premium over book value. The charge, levied as a percentage of the value of banks’ balance sheets, is going up from 0.156 per cent to 0.21 per cent, which will raise the amount banks pay by about £900m a year. That is up from £2.8bn this year to £3.7bn in each of the next two years.
Osborne made no mention of selling any of the Treasury’s outstanding 80% stake in Royal Bank of Scotland. The taxpayer bailed ot RBS to the tune of £45 billion in 2008 and 2009. Anthony Browne, the chief executive of the BBA banking lobby group, said: “The bank levy imposes a significant cost on banking businesses in the UK, which is making many banks move work and jobs to other parts of the world. This major increase is likely to damage the competitiveness of the UK economy.”
The levy on banks will be raised from the 0.156% it was set at for 2014 to 0.21% which Osborne said would raise an extra £900 million. He also said that PPI mis-selling compensation and costs  would no longer be offsetable against tax by the banks. Mr Osborne also announced that banks will no longer be able to offset the compensation they pay and costs they incur for mis-selling protection payment insurance against corporation tax. That is likely to save the Exchequer £150m this year and £260m the next. UK banks have so far paid out more than £20bn in compensation for mis-selling.
David Hillman, of the Robin Hood Tax campaign, said: “George Osborne is right to ask the financial sector to pay more – but the bank levy increase falls short of the mark.”
The taxpayer stake in Lloyds has already been cut from 40 per cent to just below 23 per cent. Mr Osborne said he expects to raise a further £9bn selling shares owned by the Treasury. He is also targeting a further £9bn in sales of mortgage portfolios from the former building societies now run by the so-called bad bank UK Asset Resolution. These have become more valuable as the economy has recovered and last October UKAR sold a portfolio of residential mortgages for £2.7 bn.
Mr Osborne made no mention of selling any of the Treasury’s outstanding 80 per cent stake in Royal Bank of Scotland, which received a £45bn bailout in 2008 and 2009.