The Chancellor said the decision was backed by Nathaniel Rothschild who was commissioned by the Treasury to review a potential sell-off of the bank.
Osborne said: “In the coming months we will begin to sell our stake in RBS. It’s the right thing to do for British businesses and British taxpayers.
“Yes, we may get a lower price than that was paid for it – but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay.
“And when you take the banks in total, we’re making sure taxpayers get back billions more than they were forced to put in.”
Rothschild’s review recommended that a small disposal of shares would improve the marketability of the government’s remaining holding and said: “Sending a strong signal that RBS is on the road to normality may also bring further benefits to the bank and to the government as a shareholder.”
Bank of England governor Mark Carney also backed the move in a letter to Osborne published last night.
He wrote: “[It is] in the public interest for the government to begin to return RBS to private ownership”.
The government’s stake in the bank is currently £32bn, well below the £45bn bailout Gordon Brown’s Labour government paid in 2008.
Rothschild’s report shows that if the government sold all its remaining shares in the banks including RBS at the share price as at 5 June 2015 – and taking into account the fees and other proceeds received from the banks as a result of the taxpayer’s support during the financial crisis - taxpayers would get back over £14bn more than they put in.
That contrasts with government estimates at the time of the interventions in 2009 that losses could be between £20bn and £50bn.
An estimated loss of £7.2bn to the taxpayer from RBS, if the government sold its remaining shares in the bank in one go at the share price as at 5 June, would be offset by proceeds from other interventions, for example on shares in Lloyds.
Osborne also revealed government proposals to treat bankers who fraudulently manipulate markets as criminals following the publication of the Fair and Effective Markets Review yesterday.
The review is centred on four principles. First, individuals must be held to account for their own conduct. Second, firms must take greater collective responsibility for market practices. Third, regulators should close gaps in regulatory coverage and broaden the regime holding senior management to account. And, fourth, given the global nature of these markets, coordinated international action should be taken wherever possible to improve fairness and effectiveness.
Osborne said: “The public rightly asks why it is that after so many scandals, and such cost to the country, so few individuals have faced punishment in the courts. In any other walk of life those who committed these offences would be in prison.
“The governor and I agree: individuals who fraudulently manipulate markets and commit financial crime should be treated like the criminals they are – and they will be.
“For let us be clear: there is no trade-off between high standards of conduct and competitiveness. Far from it. Implementing the reforms set out in this review will ensure trust in our markets and strengthen London’s global leadership position.”