MP Warns Cable Over Royal Mail Bank Jackpot
Vince Cable, the Business Secretary, is under pressure to cancel millions of pounds of fees to the investment banks which oversaw the privatisation of Royal Mail.
Adrian Bailey, the Labour MP who chairs the Business Innovation and Skills (BIS) Select Committee, told Sky News that paying approximately £4m in discretionary payments to the syndicate of banks would be a "reward for ripping off the taxpayer".
Under the terms of ministers' agreement with the seven banks The privatisation prospectus disclosed that Mr Cable would have the discretion to award 0.3% of the sum raised from institutional investors during the flotation in additional fees to the banks.
The looming row over bankers' fees, which are relatively low by City standards but still run to tens of millions of pounds, came as it emerged that Royal Mail workers had voted as expected in favour of industrial action, with a one-day strike likely to take place next month.
Including the so-called 'greenshoe' option, which is expected to involve a further 8% of Royal Mail being sold to institutional investors during the next few weeks, as much as £4.3m could be paid to the banks, with their earning potential dependent upon their underwriting quota.
Sources said the decision about whether to award the fees would also be based on whether the fund managers they had placed the shares with at 330p had held onto the stock or sold to make a quick profit.
Mr Cable has said repeatedly that the bulk of Royal Mail's shares were sold to long-term investors, meaning that any decision about the fees is unlikely for several months.
"It is too early to consider paying discretionary fees," a BIS spokeswoman said.
The discretionary fee component is commonplace in company flotations, and is typically exercised when there has been a healthy share price performance in the aftermath of a listing.
However, Mr Cable has been criticised for undervaluing Royal Mail following the near-50% surge in its share price in its first three trading sessions as a public company.
"My advice would be that paying the additional fees would be seen by the public as rewarding those that have ripped off the taxpayers: don't do it," Mr Bailey said.
Sky News revealed on Monday that the BIS Committee is to summon some of the bankers who worked on the deal to an evidence session in November.