Lord Mandelson has warned that Lloyds TSB and HBOS will not get their £17bn rescue package unless the planned merger goes ahead, increasing Government pressure on shareholders to vote in favour of the deal.

The tie-up between Lloyds TSB and HBOS has been thrown into doubt by the steep fall in the share price of both banks this month.

But Lord Mandelson, the new Secretary of State for Business, Enterprise and Regulatory Reform, said the £5.5bn for Lloyds TSB and £11.5bn for HBOS is conditional on the deal.

'The recapitalisation that we’ve offered is based on the merger of the two banks,' he said. 'If it didn’t go ahead that would completely change the proposition, but I haven’t heard that they are thinking of demerging before they have come together.'

Daily Telegraph