Financial News

  • 2 April 2014, 12:29

PM: 'Royal Mail Sell-Off Good For Taxpayers'

The Prime Minister has defended the Royal Mail sell-off, claiming it has been good for the taxpayer, despite a report saying the public purse had lost out.

David Cameron said the sale had benefited the taxpayer in three ways: it had generated money for the country, the Royal Mail was now a "profit-making company paying taxes into the Exchequer" and Britain had a successful business.

The Government has robustly defended the sale against sharp criticism from the National Audit Office, which found that "deep caution" shown by ministers when pricing shares in the Royal Mail last year cost the taxpayer more than £1bn.

Shadow business secretary Chuka Umunna branded the sale a "first-class disaster" and "botched privatisation" before demanding an apology.

Vince Cable responded in the House of Commons by saying the "last thing" he intended to do was apologise for the Government's undervaluation of the Royal Mail.

The Business Secretary said the Government was right to take a "cautious" approach to the sale and had it not done so it would have put taxpayers' interests at risk.

Royal Mail shares were listed at 330p each and on the first day of trading alone, Royal Mail's new shareholders benefited to the tune of £750m - money which could have gone to public funds. Today they were trading at 565p.

Mr Cable said: "The last thing I intend to do is apologise. What I do intend to do is to refer to what the report actually said as opposed to the spinning and the froth that is being generated around me."

He said: "A more aggressive approach to pricing would have introduced significantly greater risk and the advice that we received in this respect was unambiguous.

"There was no confidence that a sufficient number of buyers would offer a significantly higher price, a failed transaction and retention of the Royal Mail in public ownership would have been a very poor outcome for the taxpayer as the NAO report confirms."

The NAO report concluded the Business department should not have relied so heavily on their City advisers, while the Public Accounts Committee chairwoman Margaret Hodge accused Mr Cable's department of being "clueless".

The Government sold £2bn of shares in October, amounting to 60% of the company, and favoured priority investors such as Standard Life, Fidelity and BlackRock hoping they would be long-term investors.

In the event, the 16 priority investors sold all or some of their holdings, making a significant profit, within the first few weeks of trading.

Amyas Morse, head of the NAO, said: "The department was very keen to achieve its objective of selling Royal Mail and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer.

"The Government retained 30% of the company. It could have retained even more and allowed the taxpayer to participate further in the rapidly increasing share price and thus limit the cost to the taxpayer."

The report does, however, say the Business Secretary was right to reject bankers' gold-plated valuations of Royal Mail of more than £9bn.

Critics of the sale have seized on the axing of 1,300 jobs and a hike in stamp prices in recent days as evidence of the folly of privatisation.

Unite national officer Brian Scott said: "This report is startling proof that the Government sold off the country's family silver on the cheap."

Some 10% of Royal Mail was handed free to employees during the privatisation.

Taxpayers were left with a 30% stake that is now worth around £1.6bn.

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