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* New plan enables gradual sale of shares to market
* UK says step towards taxpayers getting money back
* Shares will not be sold below government buy-in price
* UK could sell shares worth around 3 bln stg -sources
* Morgan Stanley will manage sale process (Adds further details on method of sale, background)
By Matt Scuffham
LONDON, Dec 17 (Reuters) - Britain will sell more shares inLloyds Banking Group over the next six months, movingthe bailed-out bank another step towards a full return toprivate ownership and recouping more taxpayer cash.
Britain's finance ministry and UK Financial Investments(UKFI), which manages the Lloyds' stake, said on Wednesday theshares would be sold by Morgan Stanley through a"pre-arranged trading plan".
"It is another step in reducing our national debt and ingetting taxpayers' money back," Britain's Finance MinisterGeorge Osborne said in a statement.
Britain pumped 20.5 billion pounds into Lloyds to rescue itduring the 2007-2009 financial crisis, leaving it with a 40percent stake in the bank. It currently holds a 25 percentstake, having raised 7.4 billion pounds through two share salesin September last year and March this year.
Banking sources said UKFI could sell around 3 billion poundsworth of shares under the plan, based on average trading volumesover the past 6 months. That would take the government's stakedown to around 19.5 percent.
Lloyds on Tuesday passed a new annual health check ofBritish banks, strengthening its chances of paying a dividendnext year and making it easier for the government to sell offits remaining shares.
The process for selling the shares will be different fromthe two previous sales made by UKFI, in which shares were soldovernight to institutions via a process known as an acceleratedbookbuild.
That method limited UKFI's options for selling the shares asthere were only a few windows during the year when this waspossible. It could only sell during periods immediately aftertrading updates and at times of the year when institutions werewilling to buy large chunks of shares.
The new process, known as a dribble-out offer, gives thegovernment greater flexibility in the size and timing of sales.It was used by the U.S. Treasury to sell most of its stake inCitigroup in 2010, which was also handled by MorganStanley.
The Treasury said the new plan would enable Morgan Stanleyto sell shares gradually in the market over time in an orderlyand measured way. It confirmed that the shares would not be soldat a price below the average the previous government paid forthem, which was 73.6 pence each.
The first two sales of shares in the bank by the governmentwere priced at 75 pence and 75.5 pence respectively.
UKFI said the sale of Lloyds' shares might not begin untilthe New Year and would be completed no later than June 2015.
Lloyds' shares were down 1.1 percent to 76 pence by 1535GMT. (Additional repoting by Steve Slater. Editing by Jane Merriman)
