Taxpayers' misery as Lloyds shares fall

Published on Thursday 7 May 2009 09:44

THE taxpayer took more pain today as shares in Lloyds Banking Group suffered on news of a sharp rise in bad debts.

Combined with its investment in ailing Royal Bank of Scotland, the public sector is sitting on losses of nearly 5 billion.

The Treasury currently owns a 43.4 per cent stake in the combined group after spending 13 billion on new shares to prop up Lloyds TSB and HBOS last autumn at an average of about 120p.

But shares in Lloyds Banking Group fell to 95p at one point today, 21 per cent below this mark – leaving the Government about 2.7 billion out of pocket on paper.

The Government also owns 70.3 per cent of Royal Bank of Scotland, after pumping in 15 billion last October then converting a further 5 billion in preference shares into normal shares.

Based on Wednesday's closing price, the taxpayer is 4.5 billion down on the shares it bought at 65.5p, but 2.2 billion up on the 5 billion preference shares it agreed to buy at 31.75p in January – giving a paper loss of 2.3 billion.

Chancellor Alistair Darling estimated in April's Budget that overall interventions in the financial sector would leave the taxpayer with losses of about 50 billion in total – 3.5 per cent of the UK's economic output.