By Emma Rumney
LONDON (Reuters) - The British government has set out its exit strategy from its biggest taxpayer-funded bailout of the financial crisis, announcing plans to sell all of its shares in Royal Bank of Scotland
The government owns 62.4 percent of RBS, Britain's fourth-biggest bank by market value, which it rescued in 2008 with a 45.5 billion pound capital injection.
The Office for Budget Responsibility, Britain's budget watchdog, said in a document published on Monday that the government planned no further sales this year but would raise 20.6 billion pounds by selling its remaining shares over the next five years.
"We consider it reasonable this plan can be achieved," the document said, adding that RBS had made good progress in turning itself around and drawing a line under crisis-era legal problems.
The Conservative government, which is largely opposed to public ownership of companies, has been eager to reduce its stake, but its room for manoeuvre has been limited by RBS's falling share price and fines for the bank's past misconduct.
This year it has sold a stake worth 2.5 billion pounds. While a welcome boost to Finance Minister Philip Hammond's coffers, the budget document also increased the estimated loss Britain is expected to make on the rescue to 28.5 billion pounds.
The loss stood at 26.9 billion pounds when the previous official forecast was made public in March. However, RBS's share price has fallen by about 10 percent since then, like other UK banks that have been hit by the uncertainty surrounding Britain's looming departure from the European Union.
Opposition politicians and campaigners have criticised the government for selling the bank's shares, crystalising the loss for taxpayers rather than holding out for a higher share price.
The document said the government plans to sell 3.6 billion pounds of RBS shares in the 2019-20 financial year, followed by 2.5 billion pounds in 2020-21, 3.8 billion pounds in 2021-22, 4.7 billion pounds in 2022-23 and 6 billion pounds in 2023-24.
It said it was expecting the total raised to be higher than the current market value of the government's stake -- 18.7 billion pounds -- because it expects the share price to rise with the bank's gradual reprivatisation and as it increases returns to shareholders and the economy improves.
(Reporting by Emma Rumney; Editing by Silvia Aloisi and David Goodman)