* Then-Labour govt rescued bank at height of crisis
* Conservatives say public to get discount
* Main parties neck-and-neck before election (Adds Business Secretary comment to Sky News, background)
By David Milliken
LONDON, April 19 (Reuters) - British finance minister GeorgeOsborne said on Sunday that he intends to sell billions ofpounds of government shares in Lloyds Banking Group tosmall investors if his Conservative Party wins the May 7election.
Britain's government put more than 20 billion pounds ($30billion) of public money into Lloyds at the height of thefinancial crisis in 2008 and 2009, buying 43 percent of thebank, and has since sold almost half of this back to largeinvestors.
Osborne already intended to sell a further 9 billion poundsof the government's stake before April 2016, and on Sunday hesaid some of this would be sold to the public at a discount.
"Not only are we getting taxpayers their money back, we aregoing to do it in a way that gives many more people a stake inour economy and encourages a culture of long-term shareownership," Osborne wrote in the Sunday Telegraph newspaper.
The move harks back to the privatisation of Britain's statetelecoms and gas monopolies in the 1980s under former PrimeMinister Margaret Thatcher, which aimed to encourage ordinaryBritons to invest in the stock market.
Opinion polls published overnight showed the oppositionLabour Party level with the Conservatives, who are likely topromote the planned exit from Lloyds as a symbol of Britain'srecovery from the financial crisis.
However, Business Secretary Vince Cable, a member of theConservatives' coalition partners, the Liberal Democrats, cautioned that the sale could be undermined by an inquiry intothe banking industry by the Competition and Markets Authority(CMA), Sky News reported on Sunday.(http://bit.ly/1HI9GFH)
CMA is investigating the market for personal currentaccounts and small business banking services and will decidewhat measures must be taken by May 2016.
Although Britain was the fastest-growing major advancedeconomy last year, wage growth has been slow and Labour leaderEd Miliband says Cameron and Osborne have presided over arecovery that has benefited rich rather than average Britons.
The Conservatives said investors would be able to buybetween 250 pounds and 10,000 pounds of Lloyds shares, withpriority going to orders of up to 1,000 pounds.
Shares will be sold at a 5 percent discount to market value,and investors who hold their shares for a year would receive anextra 10 percent, up to a value of 200 pounds.
A similar long-term incentive was offered at the sale ofinsurance company Saga and when TSB bank wasspun out of Lloyds last year, the Conservatives said.
Last year a cross-party group of lawmakers criticised thegovernment for selling some of the government's stake in RoyalMail Group too cheaply.
As with previous Lloyds sales, shares will only be sold at aprice of at least 73.6 pence, the price paid during the bailout,and the proceeds will be used to reduce Britain's national debt.
The Sunday Telegraph said the government aimed to raise 2billion to 3 billion pounds by selling Lloyds shares to at least200,000 individual investors. ($1 = 0.6685 pounds) (Reporting by David Milliken; Editing by Guy Faulconbridge,Jonathan Oatis and Mark Trevelyan)