Vince Cable keen to speed up RM privatisation process

[TrueBlueTerrier]

Vince Cable keen to speed up Royal Mail privatisation process

http://www.guardian.co.uk/business/2010 ... vatisation" onclick="window.open(this.href);return false;

The government is attempting to sell an asset where it cannot hope to have a reasonable idea of good value

Roll up, roll up: the Royal Mail could soon be for sale. The postal services bill received a second reading today and Vince Cable, the business secretary, said he hopes to announce the start of the privatisation process in the first half of this parliament. "The government is the wrong shareholder for this company," he said.

OK, but how do you hope to establish a fair price for Royal Mail while running at breakneck speed? The government is trying to do three things at once – remove the company's pension deficit, set a new regulatory regime and introduce private capital.

By contrast, the utility privatisations of the 1980s followed a simpler formula. A regulatory regime was established and refined; companies were given time to adapt and modernise, and only then did privatisation happen. The process took a lot longer than half a parliament.

Of course, the feeling that "something must be done" about Royal Mail is understandable. There have been false starts over the years (notably Labour's abandoned plan to sell a 49% stake) and the sense of crisis around Royal Mail has intensified. But the experience of the 1980s suggests success relies on getting things done in the right order – and sorting out the regulation comes first.

A complication in this case is Royal Mail's pension fund. The government proposes to tow away both the assets of the scheme (£26bn) and the liabilities (£34bn) to allow the company to start from scratch on pensions. In itself, this is sensible: the pensioners get a stronger guarantee, Royal Mail is released from £300m-a-year of top-up payments and an issue that has dominated the company's affairs is resolved.

But what happens if the European commission deems the manoeuvre to be state aid? Disposals, as with Royal Bank of Scotland and Lloyds, would be one remedy. But almost the only slices that could be carved off Royal Mail are GLS and Parcelforce, the two parcels businesses. They are the juiciest pieces in the eyes of the private sector. If either were to go, Royal Mail would be a different company. Its ability to protect a universal postal service, which is one of the twin aims of the bill, would surely be impaired.

The regulatory issue is even more fundamental. It doesn't matter that Ofcom will be taking over from the soon to be abolished Postcomm. The critical point is that the regulator has the ability, to a large degree, to determine Royal Mail's profits. It can set prices, address the "skimming off" of profits by rivals and dictate Royal Mail's freedom to introduce new services. The current "suffocating regulatory approach", as Royal Mail's chief executive, Moya Greene puts it, is the critical issue.

Cable pledges a "level playing field" on regulation. Yes, but let's see it work reliably before trying to put a price tag on Royal Mail. This is a market where today's level pitch can look tilted in no time; letter volumes are forecast to fall 25% to 40% in the next five years.

Against that backdrop, today's £1.3bn of funding for the Post Office – which is to be separated from the Royal Mail and "mutualised" – is welcome. But the absurdity of attempting to value Royal Mail itself in its current form was illustrated by corporate advisory firm Trova Consulting's stab at an answer – £700m to £5.7bn, it said. What a range! The government is attempting to sell an asset where it cannot hope to have a reasonable idea of good value.

Given the risks, would-be buyers (private equity firm CVC, Deutsche Post and Dutch firm TNT are the usual suspects) are likely to bite only if they smell an outright bargain. UK taxpayers risk being short-changed in this rush to privatise. It would be better to fix the regulation before deciding whether to sell.

[Wessex]

When a druggie commits a burglary the first thing they do is sell the gear, ,often to a fence,at a knock-down price and as quick as possible.The real money is made by the next guy as he sells on at a profit.I don't know if it's an appropriate analogy but it's worrying why he wants to move on this so quickly. Act in (post) haste repent at leisure perhaps.

[walksyo]

When a druggie commits a burglary the first thing they do is sell the gear, ,often to a fence,at a knock-down price and as quick as possible.The real money is made by the next guy as he sells on at a profit.I don't know if it's an appropriate analogy but it's worrying why he wants to move on this so quickly. Act in (post) haste repent at leisure perhaps.

My opinion as to why they want to sell it on so quick is because they don't want it fresh in the voters mind when it comes to the next general election...privatising us is a sure vote looser (not that the Liberals could possible loose any more votes).. :cfo

[BELIAL]

In itself, this is sensible: the pensioners get a stronger guarantee,

Call me picky ,but since this is the keystone of this dollop of reporting, can anyone explain the logic of this "statement". I just ask cos our sole shareholder is also the guarantor of the pension guarantee scheme.
How much stronger can a guarantee get if a guarantor gets to guarantee a guaranteed scheme that the guarantor already guarantees as guaranteed

[fishtank]

In itself, this is sensible: the pensioners get a stronger guarantee,

Call me picky ,but since this is the keystone of this dollop of reporting, can anyone explain the logic of this "statement". I just ask cos our sole shareholder is also the guarantor of the pension guarantee scheme.
How much stronger can a guarantee get if a guarantor gets to guarantee a guaranteed scheme that the guarantor already guarantees as guaranteed

You just have to look at the BT Crown Guarantee and the 20 years of successive goverment backsliding to see just what a Guarantee means to a bunch of weaselling politicians.
Even when the courts agree that the Goverment is liable...still they squirm and try to avoid their obligations..

A Department for Business, Innovation and Skills statement said:.."We are currently taking legal advice based on this judgment and will decide next steps in due course."...which basically means "we'll try to drag this out until we bankrupt the Plaintiff"



.

[essjayar]

I think we've lost the battle against privitisation.

I'd much rather a stock market flotation, with a better than the promised 10% of shares to us, and a good share-buy scheme for us posties.

I don't think this government will give up on getting rid of royal mail - and if they just sell us off, to say TNT or Deutchse Mail - they won't get a good price.

Maybe if there's a parlimentary vote the Labour Party, along with some independents and some lib-dems and even Conservatives back-benchers, could defeat the bill. But I fear this wouldn't happen.

PS. Haven't been here in a long time. Catching up on interesting posts!