RBS and Lloyds stake sale 'should benefit taxpayer' 10 June 2013 Last updated at 00:01 No-risk shares should be offered to millions of taxpayers when the government sells its stakes in RBS and Lloyds, according to a report. The right-leaning think tank, Policy Exchange, is recommending that most of the state-owned bank shares are offered to all British residents at no initial cost. The shares would only have to be paid for when they were sold. If the price fell, the government would retain them and bear the loss. The Treasury is widely expected to set out privatisation plans next week. It owns 81% of RBS and 39% of Lloyds after the banks were bailed out during the financial crisis. Policy Exchange proposes that anyone aged over 18, with a National Insurance number and registered to vote, would be able to apply for the shares. That represents some 48 million people. The BBC's Joe Lynam says it would be the largest public share issue since British Gas and British Telecom were sold off in the 1980s. "Any privatisation has to be done in a way that will strengthen the banks and allows them to compete on a fully commercial basis when back in private hands," said James Barty, author of the report. In our view that means finding a solution that moves the banks quickly from the public to the private sector, while at the same time generating a stable share price and an opportunity for the banks to raise capital. It is also key that the taxpayer still benefits from any further rise in the share price. Policy Exchange proposal 50-55% of RBS shares and 30% of Lloyds shares to be distributed to taxpayers at no initial cost If the share price rises, the taxpayer can sell and pocket the difference If the share price falls, they are returned to government ownership This proposal will create a whole new generation of shareholders. No downside Under the proposed scheme, the new shareholder would only have to pay for the shares once the price went above the flotation price. They would then pocket the difference. If the share price fell, the plan suggests that after 10 years they be returned to government ownership. This would mean no downside or upfront cost to the taxpayer the report says. Anyone not wanting to manage the account themselves, could choose an automated option, so that the shares were sold for them at, say, 20% above the flotation price. The Policy Exchange recommends that up to £34bn of the government's £48bn stake would be sold off in this manner. The rest would be sold to institutional and retail investors, which it estimates would raise up to £18bn for the Treasury. Ridiculous idea However some are sceptical about the plan. Justin Urquhart Stewart from the investment firm 7 Investment Management described it as a 'ridiculous idea'. "This will do nothing to convince people that share ownership is about long term investment," he said. People will get shares and try to sell them the next day. This has happened with all the other privatisations and will send out totally the wrong signals about financial investments. It would also be practically difficult to administer. A Treasury spokesman said: "The Government's policy remains that RBS and Lloyds continue to become stronger and safer banks that support the British economy, which in time can be returned to full private ownership when it's in the interests of the taxpayer to do so." As the chancellor has said, we need functioning banks supporting the real economy instead of nursing their wounds, and we will set out the way ahead once the Parliamentary Banking Commission has completed its work. The Banking Commission was set up by the government last July in the wake of the Barclays scandal, in which it was found to be rigging a key interest rate. It will reportedly debate the future of the state-owned banks on Monday and Tuesday.