Taking large chunks of the banking system into public ownership was always going to leave the Government in an uncomfortable position, torn between different objectives. On the one hand, it is vital that banks keep up the flow of lending, the lifeblood of any economy. On the other, it is essential that the Government transfers its stakes back to the private sector as soon as possible and for as high a price as possible. These objectives can conflict. In the short term, the quickest way for the banks to boost profits and rebuild their capital cushions is to focus on the most profitable new lending. This can mean turning away perfectly creditworthy customers, with obvious impact on the economy.

Then there is the issue of jobs. Watching thousands of jobs go at a government-owned company is painful for politicians facing an election next year. Yet Lloyds has huge scope for cuts after the takeover of HBOS — and the objective of maximising the company’s value demands deep cost reductions.

These conflicts were the reason the Government decided to put its stakes into a separate bucket — UK Financial Investments, headed by John Kingman, a senior Treasury official. This is designed to insulate the management of the taxpayers’ assets from the day-to-day political pressures on ministers.

The Government recognised the tension between volume of lending and profitability when it forced RBS and Lloyds to agree lending targets when they signed up for the scheme to insure their toxic assets.

The tensions between the objectives can be seen most clearly in the case of Northern Rock, where the Government has completely reversed the bank's strategy — twice. When it was nationalised last year, Alistair Darling ordered the bank to stop lending, shed borrowers and repay its loans from the Government as quickly as possible. A year later Mr Darling abruptly changed course, telling the bank to provide £14 billion of loans to homebuyers.

Now the Government is looking at a possible sale of Northern Rock in the autumn. Ministers would be able to portray it as evidence of the success of its efforts to rescue the banking system and a useful contribution to the strained public finances. It is less clear whether it would help to boost the anaemic growth in mortgage finance, which hit a record low in May.

There are also tensions over the timing of sales of the Government’s stakes in RBS and Lloyds. Mr Kingman is said to favour waiting to get the best possible price though there is believed to have been pressure from the Prime Minister for early disposals to show progress before the election.

Treasury insiders say that the European Commission's investigation into the state aid provided to RBS and Lloyds would make it very difficult for the Government to sell any of its stakes in the near future, even if it decided it could get a good price.

Taking over the banks was the easy bit. Selling them again turns out to be much trickier.

Times Recommends

• Times Christmas appeal: Letter from the Editor
• Conferences — what a waste of money
• Schools supremo learns a painful lesson