"I am today announcing that the Government will begin selling the remaining 30 per cent shareholding we have in the Royal Mail," Chancellor of the Exchequer George Osborne announced in the House of Commons.
"There is no reason we should hold a minority stake," he said. The sell-off will start later this year.
Osborne said the privatisation of the Royal Mail, which began in October 2013, was part of a 4.5 billion pound package of cuts to bring down debt.
"Further savings in departments this year - and selling our stake in the Royal Mail," he said.
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"Getting on with what we promised. Reducing the deficit - that is how you deliver lasting economic security for working people.
The chancellor said the shares - currently valued at 1.5 billion pounds - would be sold when ministers could be sure they would get value for money.
The British government holds a 30 per cent stake in the Royal Mail, with the remaining 70 per cent held by a combination of employees and private investors.
Shares in Royal Mail were initially floated at 330p per share, and were trading at 526p at market close yesterday but fell 2.5 per cent on Osborne's announcement, the BBC reported.
Osborne said 3 billion pounds in efficiency savings had been achieved by belt-tightening in non-protected government departments and asset sales, including publicly-owned land around King's Cross station in London.
The Treasury has said that each ministry must find savings amounting to 3 billion pounds or more before the Budget on July 8.