David Cameron has raised the prospect that Royal Bank of Scotland could be returned to the private sector at a loss to the taxpayer through a share sale to the public.
Asked whether there were any circumstances in which the stakes in RBS and Lloyds Banking Group could be sold at a loss, the prime minister said: "On RBS I think the important thing is to return this bank to health, and there's a strategy underway. It's made some progress of selling down surplus assets and building up positive assets.
"And I keep a very close eye on this and want to make sure that progress is made as fast as possible.
"In terms of returning RBS to the private sector involving people in owning this bank in a genuine way, I'm open to all ideas and proposals. But it seems to me the primary question is getting this bank back into good health, and then obviously there are connections between the ownership and health but step one is to continue the path to health and step two is to think about ways of changing its ownership."
The comment that people could be involved in "owning this bank in a genuine way" suggests the prime minister is open to the suggestion backed by some Liberal Democrats to hand shares to the 45 million adults on the electoral register or an idea expected to be contained in a report next month by Policy Exchange - No 10's favourite thinktank – which is expected to suggest individuals could apply for shares that could not be sold until the share prices rise.
There is also speculation that the chancellor might consider a British Gas-style privatisation, where the public was able to buy shares rather than get free handouts.
At Wednesday night's's share prices, the taxpayer stakes in both banks were worth £24bn less than the £65bn paid for them during the 2008 bank bailout. RBS is 81% state-owned and Lloyds, 39%.
Cameron's remarks may be seen as the latest attempt by the government to prepare the ground to sell the banks off at a loss. Sources close to George Osborne recently blamed Alistair Darling for paying too much in the bailout of the banks, although the former chancellor has since written in the Financial Times that Osborne should avoid playing politics when it comes to selling off the banks.The clearest signal that the government is preparing the banks for sale came in March the Treasury linked the bonus for the Lloyds boss António Horta-Osório to selling off a third of the 39% taxpayer stake above 61p.
This is considerably lower than the average price of 73.6p but is the stock market price of the Lloyds shares when the government bought them rather than the actual price that the government paid. The Lloyds share price almost touched 61p on Wednesday before closing at 59.3p. RBS shares closed at 307p, below the 502p average price the taxpayer paid for them.
Horta-Osório will be at Lloyds's annual general meeting on Thursday (thurs) where he may face questions about a potential privatisation of the bank.
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