Lies, damned bank bailouts and statistics...

A week ago today, George Osborne announced the government had sold a 6% share in Lloyds Banking Group at 75p per share, raising a cool £3.2billion. As the shares were bought by the previous government in 2008 at a price of 73.6p, we are told this represents a profit to the taxpayer of £61million.

Not bad you might think.

However, as demonstrated on the Ripped-off Britons website (an official Guardian blog), and as one might expect from a chancellor who couldn't lie straight in bed, the truth is predictably altogether very different.

Firstly, Osborne's claim failed to take inflation in to account.

We all know, and as the graph below illustrates, inflation has been running well above the 2% target for most of the past 5 years (We also know inflation has been running higher than average pay rises in every month bar one since Osborne entered Number 11, but more on that another time).

The Office National Statistics data shows inflation between 2008 and 2013 has totalled approximately 15%. This means the value 73.6p in 2008 taking into account inflation is approximately 84.6p in 2013.

Suddenly a sale price of 75p is not looking to be such a good deal. But that's not the end of it.

As a consequence of the previous decade of profligacy by Labour, the government didn't have the money in the kitty to buy the Lloyds Bank shares; they had to borrow it. And that comes at a price.

On 13 October 2008, when the terms of the bailout were announced, the UK government gilt yield (ie the cost of government borrowing) ranged from 4.15% for 5-year bonds to 4.50% for 30-year bonds.

What that means is the cost to the government of borrowing 73.6p per share between 2008 and 2013 would be somewhere in the region of 15.2p and 16.6p.

Therefore, just to break even in real terms the government would need to sell its holding in Lloyds Banking Group at a price in the region of 99.8p (84.6p + 15.2p), perhaps more. Furthermore, this real-terms break-even price will increase with every year that passes.

Far from the £61million profit George Osborne claims to have made from the sale, it is clear from the figures above that this most slippery of MPs couldn't be further from the truth. And this is just the tip of the iceberg - even after the sale the government still owns 32.7% of Lloyds Banking Group.

Only time will tell if the loss inflicted on the government by bailing out Lloyds will rival Gordon Brown's catastrophic sale of the country's gold reserves at rock-bottom prices in 1999.

What we do know, however, is that with the government still saddled with an 81% stake in RBS too, the total loss to the taxpayer of the bank bailouts is likely to be colossal - the RBS shares were bought at an average price of 502p; at the time of writing they are worth 362p.