MPs To Fuel Royal Mail Sale Row In New Report
The controversy over the £3.3bn privatisation of Royal Mail will be reignited this week when MPs criticise Vince Cable and the body responsible for state-owned assets over their handling of the sale.
Sky News has learnt the Business, Innovation and Skills (BIS) Select Committee has agreed a hard-hitting report which endorses a finding by the National Audit Office (NAO) that taxpayers were left short-changed by Royal Mail's flotation.
The Committee intends to publish its report on the sell-off on Friday, according to insiders.
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.
Lazard acted as the independent adviser to the Government, receiving a fee of £1.5m for its work.
Mr Cable faced criticism in April when it emerged that the investment bank's asset management unit had been among a group of so-called priority investors which were given outsized allocations of shares when they were sold for 330p last October.
The fund management arm, which is segregated from Lazard's advisory business, then sold its entire holding within days of the flotation, banking a substantial profit for clients.
The post-flotation surge in Royal Mail's share price, which included a rise of more than 35% on the first day of trading, sparked criticism that the stock had been undervalued at a cost to taxpayers of at least £750m.
Other major shareholders at the time of the initial public offering (IPO) included sovereign wealth funds owned by the Kuwait and Singapore governments as well as leading City institutions.
Sources said that the MPs' report would be critical of Mr Cable's remarks in the wake of the flotation that the increase was "froth" which would subside within six months.
Although the shares have retreated from their post-privatisation peak, they were trading on Wednesday at around 473p, roughly 45% higher than the price at which they were sold by the Government.
Mr Cable 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 such as the Land Registry and Urenco, the uranium processor.
MPs are said to have concluded that the Shareholder Executive "shirked its responsibility" by not providing clearer guidance about its expectations of the value of Royal Mail ahead of the sale.
The report will also say that taxpayers will miss out on prospective increases in the value of Royal Mail-owned property assets, such as the former mail centre site at Nine Elms in Vauxhall, central London.
Committee members are understood to be critical of the fact that there is no provision for taxpayers to benefit from future disposals of those sites.
The report does not include a formal recommendation about whether the banks which worked on the privatisation should receive several million pounds of discretionary fees, although Mr Cable is considered unlikely to provoke further anger by handing over the money.
A Whitehall source said on Wednesday that the MPs' report was unexpectedly critical given the number of Conservative and Liberal Democrat committee members.
Since last autumn's sale, Royal Mail has become embroiled in a public row with Ofcom, the industry regulator, over the ability of rivals to cherry-pick the postal services they offer.
Moya Greene, the company's chief executive, has argued that its ability to deliver its Universal Service Obligation, which guarantees delivery to every UK address for the price of a stamp, could be jeopardised by the regulatory regime and has called for an urgent review.
The Government still owns 30% of Royal Mail and could decide to sell its remaining stake ahead of next year's General Election.
The row over Royal Mail's sell-off is unlikely to diminish in the wake of this week's report.
The Public Accounts Committee is also drafting a report on the privatisation, which is expected to be published soon.
A BIS Committee spokesman declined to comment.