Royal Bank of Scotland shareholders have agreed to a plan that allows it to buy up to £1.5bn worth of shares from the government, hours after Labour said it would halt such a move if it came to power.

At a general meeting, 98.7 per cent of investors backed the proposal designed to speed up the privatisation of the bank which is still 62 per cent owned by the state after after a £45bn bailout in the 2008 financial crisis.

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The proposed scheme would see RBS able to buy shares back from the Treasury at a rate of 4.99 per cent a year if it is approved by the Bank of England.

Chairman Howard Davies said: “This is something that the board has carefully considered. The bank has a sufficiently strong capital position.”

Chancellor Philip Hammond said the government intends to cease ownership of the bank by 2024 in his Autumn budget, and the Conservative government has already conducted two share sales.

Labour shadow banking minister Jonathan Reynolds said the party would put a stop to the privatisation of the bank if it was voted in, in party down to the heavy losses sustained by British taxpayers on RBS shares that have dropped steeply in value since the bailout.

“If RBS is now paying dividends, and the price of the shares is under what was paid, we cannot see the rationale for selling more shares,” he said.

The party has rowed back in previous suggestions of fully nationalising the lender. “We don’t have a policy of day-to-day control of RBS,” he said. “But there is clearly unmet demand in lending and a problem with financial inclusion.”

One shareholder in the meeting said the plan showed the bank was “running scared” from the prospect of a Labour government. He added it was “abhorrent,” saying the money should instead be used to pay compensation for potential legal settlements.

The shares bought from the government are set to be cancelled, which would drive up the value of the remaining stock.

The buyback could take place via three methods. The first is to buy back shares as part of a wider placement by the Treasury, where the price paid would be the same as that achieved through the open-market bookbuilding process.

The second would be a bilateral deal where the bank buys a certain number of shares at the relevant market price agreed with the Treasury and independent of any larger placement of shares.

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And the third is a ‘trading programme’ where the bank and Treasury each nominate a broker to oversee the daily purchase of shares at the prevailing market price. This would continue for a fixed time period or until a pre-determined value of shares has been bought by the bank.

None of the methods are mutually exclusive, the bank said in a statement. RBS is set to announce full-year results on 15 February.