Osborne abandons Lloyds share sale

The Chancellor has postponed the sale of the Government's final stake in Lloyds Banking Group, saying the global turmoil in the markets and slowing growth had sparked the delay.

George Osborne told me that he would not give the go-ahead until the markets had calmed, saying that "now is not the right time".

He said he still supported encouraging wider share ownership in Britain.

So this looks like a significant delay rather than a cancellation.

The sale of the final part of the government's stake in Lloyds was a general election pledge made by David Cameron.

It was expected to raise £2bn, making it one of the largest privatisations since the 1980s when BT and British Gas were sold, raising £3.9bn and £5.6bn respectively.

Mr Osborne announced the details of the Lloyds sale to hundreds of thousands of small investors last October.

It was thought the sale would take place in the spring.

But since then Lloyds' share price has fallen and the trading environment for banks has become tougher.

Low interest rates also make profits harder to come by across the sector.

In October, Lloyds share price was 78p, above the 74p considered to be the "in price" the government paid to rescue the bank during the financial crisis - when it used billions of pounds of tax-payers money to shore up the financial system.

That share price is now down at 64p, so the government would be selling the shares to the public at a considerable loss.

Yesterday, the Royal Bank of Scotland announced billions of pounds of new provisions to pay for fines and legal actions connected to the financial crisis.

Its share price has also fallen.

The government owns 73% of RBS and just under 10% of Lloyds. It doesn't look like it will be selling either stake any time soon.