Financial News

  • 10 July 2014, 22:33

Cable Orders Mail Sale Review After 'Blunder'

The Business Secretary has ordered a review of how Governments handle privatisations ahead of a stinging review which is set to criticise his handling of the Royal Mail sale.

Sky News revealed on Wednesday how the the Business, Innovation and Skills (BIS) Select Committee had agreed a hard-hitting report, to be released on Friday, which endorsed the view that taxpayers were left short-changed by Royal Mail's £3.3bn flotation.

Its recommendations will include a ban on independent City advisers to the Government being allowed to buy shares during future asset sales, as well as the way future flotations are marketed to investors.

But it emerged hours later that Vince Cable had called in the former Labour City minister Lord Myners to head an inquiry that would help establish new rules for future sales, in a move seen as an attempt to head off criticism in the MPs' report.

Following the Royal Mail privatisation last year, an earlier study by the National Audit Office accused the Government of losing £750m of taxpayers' money by under-valuing the sale.

Sources told Sky's City Editor Mark Kleinman that the MPs' report would be critical of Mr Cable's remarks in the wake of the flotation that the 35% increase in its share price on day one was "froth" which would subside within six months.

He appeared before MPs on several occasions during the course of their inquiry, defending the Government against their assertion that the privatisation was botched.

A source familiar with the report said that it would also be critical of the Shareholder Executive, the body responsible for managing state-owned businesses, accusing it of not providing clearer guidance about its expectations of the value of Royal Mail ahead of the sale.

Announcing the inquiry, Mr Cable said: "I have asked Lord Myners to conduct this review, following the recommendations of the National Audit Office, to help me assess whether changes are needed to the current system Government operates for the sale of its assets.

"Lord Myners is uniquely qualified to carry out this work - with a background in Government and the City.

"I look forward to reviewing his findings and recommendations in due course".

BIS added that it was in the process of appointing a panel to support Lord Myners over the summer.

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