Cable Warns Of CMA Threat To Tory Lloyds Sale

Conservative plans to sell billions of pounds of Lloyds Banking Group shares to the general public by May 2016 could be undermined by a competition inquiry into the industry, the Business Secretary warned on Sunday.

Speaking exclusively to Sky News, the Liberal Democrats' Vince Cable said that proposals unveiled on Sunday by David Cameron and George Osborne to offer discounted Lloyds shares while delivering a profit to taxpayers risked falling foul of a Competition and Markets Authority (CMA) investigation.

The CMA, which has wide-ranging powers to impose market share reductions and other remedies, is due to publish its final report on the personal current accounts and small business banking markets in April 2016, according to a published timetable.

While its provisional findings will be outlined by this autumn, the scope for measures that would adversely affect Lloyds – Britain's biggest high street lender – is significant, according to analysts.

Mr Cable added fuel to that argument on Sunday, saying that if the CMA recommended that Lloyds should divest additional parts of its business or another sanction, the bank's value would inevitably be affected.

"If that happened, it would be very difficult [for the Conservatives] to implement their plan," he said.

"Mr Osborne probably didn't think about the implications of the CMA inquiry before announcing it."

Under the Tory plans, a £4bn retail offering echoing Margaret Thatcher's 1980s privatisations would take place within 12 months of the General Election.

Lloyds shares would not be sold for less than the taxpayer's break-even price of 73.6p, but they would be offered at a discount of around 5% to the prevailing market price at the time of the sale, the Conservatives said.

Although Lloyds shares are trading above that break-even price – closing on Friday at 78.75p – the spread between the two figures remains relatively narrow.

Mr Cameron's attempt to invoke the spirit of the major sell-offs of three decades ago was designed, he said, to encourage a culture of long-term saving, and to ensure that the fruits of Britain’s economic recovery were shared widely.

Ordinary shareholders would be able to apply for anything between £250 and £10,000-worth of Lloyds shares, with priority given to those seeking less than £1000 of the bank's stock.

Investors who held onto their shares for at least a year would receive a free bonus share for every ten that they owned.

The retail offering would be accompanied by a public information drive which would echo the 'Tell Sid' advertising campaigns of the 1980s.

Mr Cameron said: "The £20 billion bail-out of Lloyds by the last Labour government became a symbol of the crisis that engulfed the British economy under Labour. After the public bailed it out, people feared they wouldn’t see their money returned. Today they are.

"Today's announcement marks another step in the long journey we have been making repairing our banks, turning our economy around and reducing our national debt, only made possible by our long-term economic plan."

The Coalition Government sold more than £9bn-worth of Lloyds shares to institutional investors during the last parliament, leaving the taxpayer with a 22% stake in the bank, worth more than £12bn at the current share price.

Mr Cable added that he had no problem with "the principle of a public distribution" but said he objected to a discounted sale, "which would effectively involve the taxpayer giving a subsidy to a small number of private investors".