The return of a 6 per cent chunk of Lloyds Banking Group to the private sector resulted in a loss of at least £230 million to the taxpayer, according to a National Audit Office (NAO) report.
The figure, which takes into account the cost of borrowing money to fund the £20 billion bank bail-out in 2009, appears to undermine a claim at the time by Chancellor George Osborne that the share sale in September represented “a profit for taxpayers”.
It would suggest that the overall loss on the £20 billion bailout for the bank could be nearly £1.5 billion if the rest of the taxpayer stake is sold off at a similar price - though the NAO report itself did not make such a calculation.
Mr Osborne trumpeted in the autumn that the £6.2 billion Lloyds share sale had resulted in the national debt being reduced by more than half a billion pounds, a claim that was later backed in data from the Office for National Statistics.
This £586 million figure represented the difference between the value for accounting purposes of the shares on the Treasury’s books - at 61p - and the 75p sale price.
The Treasury acknowledged at the time of the sell-off that the cash profit was far less, at £61 million.
Today’s report by the spending watchdog does not dispute these calculations but does take into account the effective interest paid by the Government to make the original investments in the bail-out.
It also recommends that the Treasury should consider these financing costs when analysing the value to the taxpayer of any future sale.
The report finds that the average rate paid for the shares by the Government of 73.6p was effectively reduced to 72.2p by the fact that it had been paid back some of the money by Lloyds in fees - producing a cash profit of just under £120 million.
But it says that if the cost of financing is taken into account, the sale resulted in a shortfall of £230 million.
However the report, which is broadly positive about the handling of the sale, said: “This shortfall should be seen as part of the cost of securing the benefits of stability during the financial crisis, rather than any reflection on the sale process.”
The Government acquired a 39 per cent chunk of Lloyds Banking Group in 2009, in the wake of the financial crisis after it swallowed up troubled Halifax Bank of Scotland.
It returned a 6 per cent portion of the bank to the private sector with a share sale to institutional investors earlier this year.