Nick Clegg pushes for public shares in bailed-out banks

Preliminary-stage plans to give the public shares in bailed-out banks are being backed by Clegg and

Proposals to give the public shares in part-nationalised banks RBS and Lloyds have been backed by Nick Clegg.

If implemented, 45 million people on the electorate roll would receive free shares in the Royal Bank of Scotland and Lloyds Banking Group.

The Deputy Prime Minister feels that British citizens should reap some of the rewards that their money that was used to keep the banking system running has yielded.

While people would be given free shares, the shares would have no value above a set floor price. The floor price would equal what the government paid, ensuring the Treasury would not lose money.

The floor price is predicted to be 51p per share for RBS and 74p for Lloyds.

The idea originated with City firm Portman Capital and was supported by the Lib Dems' Treasury Parliamentary Committee and its chairman Stephen Williams.

Williams says this plan is the fairest way to ensure taxpayers can share in the gains of the banks they helped bail-out in 2008. He feels this will help restore people's faith in state financial institutions.

"Psychologically it is immensely important that the British people feel they have not just been overlooked and ignored," Clegg said during a speech in Brazil. "Their money has been used to the tune of billions to keep the British banking system on a life-support machine and they have absolutely no say at all in what happens when normality is restored. I think, in a sense, as a society we are condemned to take an interest in our banking system."

Clegg has appealed to Chancellor George Osborne to support of the proposal.

Osborne expressed an openness to discussing ideas, but he added, "We want to exit from our shareholdings in RBS and Lloyds in due course, but we do not judge now to be the right time."

The Treasury is considering several possible plans, and some believe this one would be difficult to implement.

Clegg admits there is "a huge amount of detail still to be worked on".

There is speculation that the plan could cost hundreds millions of pounds to employ, but Williams insists it would be less expensive than privatisation.

"If you privatise a huge utility, like BT or British Gas, all the merchant banks get involved, stock brokers get involved... huge fees will be clocked up by the Treasury," Williams said.

Williams also argued that privatisation would allow those with surplus cash to buy shares, but millions of less affluent citizens who still "felt the pain of contributing" to the bailout would be unable to do so.

Business Secretary Vince Cable said proposals are at a "preliminary" stage and that banks are in no position to return to the private sector any time soon. Cable believes this plan would be a way for the banks to prove his accusations of their privatising profits and socialising losses wrong.

Taxpayers have owned 83 per cent of RBS and 41 per cent of Lloyds since the government invested £65.8bn in 2008 at the peak of the banking crisis.