UK Conservatives aim to sell Lloyds shares to small investors

(Adds Osborne comments, detail and context)

By David Milliken

LONDON, April 19 (Reuters) - British finance minister George Osborne said on Sunday that he intends to sell billions of pounds of government shares in Lloyds Banking Group to small investors if his Conservative Party wins the May 7 election.

Britain's government put more than 20 billion pounds ($30 billion) of public money into Lloyds at the height of the financial crisis in 2008 and 2009 - buying 43 percent of the bank - and has since sold almost half of this back to large investors.

Osborne already intended to sell a further 9 billion pounds of the government's stake before April 2016, and on Sunday he said some of this would be sold to the public at a discount.

"Not only are we getting taxpayers their money back, we are going to do it in a way that gives many more people a stake in our economy and encourages a culture of long-term share ownership," Osborne wrote in the Sunday Telegraph newspaper.

The move harks back to the privatisation of Britain's state telecoms and gas monopolies in the 1980s under former Prime Minister Margaret Thatcher, which aimed to encourage ordinary Britons to invest in the stock market.

With opinion polls published overnight showing the opposition Labour Party level with the Conservatives, Prime Minister David Cameron is expected later on Sunday to promote the planned sale as a sign of Britain's recovery from the financial crisis.

Although Britain was the fastest growing major advanced economy last year, wage growth has been slow and Labour leader Ed Miliband says Cameron and Osborne have presided over a recovery that has benefited rich rather than average Britons.

The Conservatives said investors would be able to buy between 250 pounds and 10,000 pounds of Lloyds shares, with priority going to orders of up to 1,000 pounds.

Shares (Berlin: DI6.BE - news) will be sold at a 5 percent discount to market value, and investors who hold their shares for a year would receive an extra 10 percent, up to a value of 200 pounds.

A similar long-term incentive was offered at the sale of insurance company Saga (LSE: SAGA.L - news) and when TSB bank was spun out of Lloyds last year, the Conservatives said.

Last year a cross-party group of lawmakers criticised the government for selling some of the government's stake in Royal Mail Group too cheaply.

As with previous Lloyds sales, shares will only be sold at a price of at least 73.6 pence, the price paid during the bailout, and the proceeds will be used to reduce Britain's national debt.

The Sunday Telegraph said the government aimed to raise 2 billion to 3 billion pounds by selling Lloyds shares to at least 200,000 individual investors. ($1 = 0.6685 pounds) (Reporting by David Milliken; Editing by Guy Faulconbridge and Jonathan Oatis)