How
Royal Mail was sold on the cheap?
Press.tv 12/7/2014
A committee of MPs has run its ruler over the numbers and reached a
conclusion on the Royal Mail sale – “the department underestimated the market
value.” In other words, a cheque that should have been written out to the
taxpayer disappeared in the post.
For a business secretary, Vince Cable, who has railed against casino
capitalism, allowing a quick buck to be made at public expense is embarrassing. For a government defined by the claim that the community
cannot afford the social protections of the past, the charge of showering
investors with free money is shaming. This much is easy to say. But to
avoid a rerun the next time a public asset is sold, the important question is
why it happened. Was it simply bad luck – a reflection of the reality that
share prices can go down as well as up? Or is there something awry with the way
that the state sets about selling?
Every bubble demonstrates that the market can
misvalue firms, yet trying to price one in isolation from the herd is very
tough. For anyone – whether a corporation or a department of state – flogging
shares for which there is no established price involves a leap in the dark.
This known unknown provides Mr Cable's best defence against the charge,
levelled by official privatisation historian David Parker, that the Royal Mail
sale represents the worst sell-off for the taxpayer in history.
So was it mere misfortune? No. Whitehall could have sold a small slither
of shares in the first instance so that a market price was established before
it sold a bigger stake, but it wanted to offload a majority fast. While it is
true that the day-one lift in value was sometimes higher during the notoriously
under-priced sales of the Tell Sid years, back then subscribers bought shares
in tranches, so some were purchased at higher prices later. The total windfall
– up to £2.5bn, Professor Parker reckons – thus worked out proportionately
bigger this time.
The stampede to sale reflects many things, including Whitehall's general
itch to get things finished, and its obsession with
flattering the deficit figures. But there are more specific biases too.
Royal Mail shares are held through the government's “shareholder executive,” a
team of officials largely seconded from the sort of City institutions which do
well out of privatisations. Having been bent on
selling the Mail for years, the executive turned to Lazard, UBS and Goldman for
advice about the price. They all said that investors could be put off by
anything exceeding the £3.30 eventually charged. Well, one is tempted to say,
they would, wouldn't they? Sadly, a British state that long ago gave up on the
very possibility of public enterprise remains wide-eyed about the City.
MOS/HSN
Sinn Féin
Mountmellick – Serving The Community
A UK report has criticized the British government's privatization
of the Royal Mail, saying taxpayers lost one billion pounds (USD 1.7
billion) in the sell-off.
The Business Select Committee report which was published on Friday
revealed that taxpayers missed out on ‘significant value’ when the government
privatized the Royal Mail.
The British government privatized the country's postal service last
October, when it sold 60 percent of its holding at 330 pence a share. The
price, however, rose as high as 618 pence per share and currently costs around
473 pence.
The committee said that a number of priority investors bought the shares
"cheaply and sold quickly” at a profit and called for the government to
release a list of the preferred investors and information on which investors
sold their shares of Royal Mail.
Furthermore, the committee voiced concerns over the sale of
some of the Royal Mail’s assets, including three sites in London, saying the
government ignored recommendations by the country’s National Audit Office
(NAO).
“What is more disturbing is that the government
ignored established NAO recommendations either to remove such assets
from the privatization process or to insert clawback provisions on the future
sale of the properties,” the committee said.
This is the second report criticizing the government's privatization of
the Royal Mail. In April, NAO released a report saying the government pressed
ahead with plans to sell-off Royal Mail at a price of 330 pence a share even though
there had been warnings that it was undervalued. Prior to the sell-off, banks
had estimated that the government could receive up to 867 pence per share.
CAH/AB
Sinn Féin
Mountmellick – Serving The Community
