The taxpayer should be cheering. It now looks almost certain that in a month's time Lloyds shareholders will have bought back £4 billion of preference shares owned by the Treasury.

It's the first really good news for the taxpayer since the Government thrust him forward to bailout the doomed merger of Lloyds TSB and Halifax and Bank of Scotland owner HBOS last October.

The merger was agreed (or announced) just three days after the collapse of Lehman Brothers. Little surprise, then, that a month later the UK Government had to come up with a £17 billion rescue package.

That came in the form of £13 billion worth of ordinary shares and £4 billion of preference shares paying a 12% coupon.

Today, those ordinary shares are worth £6.8 billion, meaning the taxpayer is sitting on a paper loss of £6.2 billion.

But the preference shares look as if they will be bought back just five months after they were issued. In fact, they will be paid back at a modest premium of 101% of their issue price. So the Treasury will have collected £240 million in preference dividends and the premium.

But in the meantime, the taxpayer has been called upon again. This time, the Treasury is underwriting £260 billion on the worst loans most of which came through Bank of Scotland.

It's a complex deal but if everything went pear-shaped, the taxpayer could end up footing the bill for £235 billion of dud assets.

In return, Lloyds is paying the Treasury £15.6 billion in new B shares. These will pay interest at 7%, which is much better than the 12% being paid on the preference shares. The Government can also convert them into ordinary share in the future.

That could raise its final stake in Lloyds just above 50%. In return for this asset-protection scheme, Lloyds has promised to increase its business and mortgage lending by £14 billion this year to try to free up the lending market.