Government denies plans to nationalise Lloyds TSB

Published on Monday 16 February 2009 09:21

DOWNING Street insisted today that there were no plans for the outright nationalisation of Lloyds Banking Group as shares in the company continued to struggle.

Amid growing concern about the group's position, Gordon Brown's spokesman also dismissed any suggestion that the Prime Minister regretted the Lloyds-HBOS merger.

Alarm spread after a shock warning of 10 billion in annual losses at HBOS before the weekend.

The two banks are 43 per cent owned by the state after receiving 17 billion in bailout cash, but the market value of the group is now less than 10 billion.

Lord Turner of Ecchinswell, chairman of the Financial Services Authority, suggested yesterday that HBOS could have been saved without the need for a takeover.

Tory leader David Cameron said the merger was now looking like a "bad decision".

The Prime Minister's spokesman said today that Mr Brown had no regrets "at all" – but stressed that the proposal came from the banks themselves and was supported by opposition parties.

"The idea of the merger originally came from the companies involved who approached the Government to ask us to change competition legislation in order to let it happen," he said.

"We are glad that we did that, and we did that with cross-party support at the time.

"The Prime Minister remains of the view that the merger is in the wider interest of the stability of the UK financial system and I think you have to ask yourself what would the alternative have been had Lloyds not taken over HBOS at the time.

"It would have been almost certainly that HBOS would have found it very difficult to continue. That would have meant the Government and the taxpayer intervening to support the totality of HBOS."

Asked whether the full-blown nationalisation of Lloyds was in prospect, he added: "While of course nothing is ruled out, there is no active consideration being given to the nationalisation of Lloyds."