The Prime Minister, David Cameron has said that he is open to ideas on how to manage the sale of the taxpayer stake in the Royal Bank of Scotland (RBS).
Taxpayers could be offered shares within a year even if the share price is below the level the government needs to reach to break even.
A plan being put together by the Policy Exchange think tank is to recommend that between 50 and 70 per cent of the taxpayers share be offered to the public at no upfront cost who would benefit if and when the share price rises.
Taxpayers could apply for shares next year with the shares held in accounts that cannot be accessed until the share price reaches a profit at which time the shares could be sold with the profit shared between the shareholder and the government.
The Financial Times reports that Mr Cameron is considering how to offer shares to up to 45 million people to make them stakeholders on the bank and to offer up some form of financial reward to the taxpayer who provided the bailout funds to the bank at the height of the financial crisis in 2008.
Speaking in New York yesterday, Mr Cameron said he was keeping a "very close eye" on RBS and would like to see a sale "as soon as possible".
Mr Cameron said: "I think the important thing is to return this bank to health, and there’s a strategy underway. I keep a very close eye on this and want to make sure progress is made as fast as possible.
"In terms of returning RBS to the private sector, involving people in owning this bank in a genuine way, I’m open to all ideas and proposals.
"Step one is to continue the path to health, and step two is to think about ways of changing its ownership."
The public would not pay any money for the shares but would stand to gain from any rise in the share price above the base rate and the Treasury would recover the base price when the shares are sold.
Mr Cameron said he is open to the idea of “involving people in owning this bank in a genuine way”.
Meanwhile the Chairman of RBS, Sir Philip Hampton has warned that there could be more job losses at the bank and further financial scandals yet to come to the surface.
RBS, which is 81 per cent owned by the UK taxpayer, has been rocked by involvement on the Libor interbank lending scandal which saw the bank fined £391 million by US and UK regulators.
Additionally the bank was hit by an IT meltdown which meant thousands of customers could not access their bank accounts last summer costing the bank £175 million. It has also had to pay out £1.1 billion in compensation for the misspelling of payment protection insurance (PPI).
All of this has occurred whilst chief executive Stephen Hester has attempted to streamline the bank and get it back into a position where the taxpayers’ £45 billion bailout can be recouped and RBS returned to the private sector. The bank has shed 37,000 jobs since it was bailed out in 2008.
Sir Philip admitted that he could not guarantee that more "skeletons in the cupboard” may not emerge.
He also warned that there may be more job losses to come as Mr Hester continues to repair the bank’s balance sheet and prepare it for a return to the private sector.
Mr Cameron said that he wants the bank to be ready for a sale "as fast as possible", suggesting that a sale is possible as early as next year.
He said: “We have work to do over the coming years to get our business in the right shape to deliver these ambitions, and that could mean further impacts on employees."
Yesterday shareholders met in Edinburgh at the bank’s headquarters and the meeting was dominated by the discussion of past problems.
Sir Philip said: "It is disappointing how many skeletons have come out of the cupboard. These things are very disappointing. That is why we need to go through a significant period of culture change."
However he added: "I think that we are through the worst of all of these things. There is not anything major on the horizon, but I might have made that statement to you two years ago before things that were not on the horizon appeared."
Earlier this month as the bank unveiled an £826 million return to profit in the first quarter, Sir Philip said that the bank could be ready to sell off part of the taxpayer’s stake by the middle of 2014. The bank said that it is up to the government when RBS starts to issue dividend payments again, but if it does it would be a sign that the bank is close to being able to return to the private sector.
RBS Chief Executive Stephen Hester said: "The Government could initiate that conversation at any time if they wanted to, and we would certainly be responsive to anything they did," but he stressed this is more likely to happen in 2014 than 2013.
He said: "It could be earlier. We think the recovery process will be complete in about a year or so's time."
Sir Philip had to answer questions on executive pay from shareholders who suggested that pay levels for all senior staff should be frozen and that the bank should not reward failure through £1 billion of bonuses being paid out in the last few years.
Sir Philip responded by saying: "We have to live in a market. We still have to exist against commercial businesses and we need to be commercial ourselves. We have been pretty tough, we have almost frozen basic pay for top people for a good while."
The bank said 99.3 per cent of its shareholders approved its pay resolution.