Labour attacks 'botched' privatisation of Royal Mail

[TrueBlueTerrier]

http://www.theguardian.com/uk-news/2014 ... hare-price" onclick="window.open(this.href);return false;

After three months, share price is 70% higher than at time of market flotation, says business spokesman Chuka Umunna

Labour has accused the government of botching the privatisation of Royal Mail, saying taxpayers have been short-changed by hundreds of millions of pounds.

Three months after the flotation, the opposition said the postal group's share price was more than 70% higher than the 330p at the time of privatisation in October.

The price has remained above 500p, "dramatically" higher than the figure set by the coalition, said Labour, adding that business secretary Vince Cable had maintained that judgment should be passed on the sale price of Royal Mail after three months.

Shadow business secretary Chuka Umunna, said: "On the day the Royal Mail fire sale went ahead Vince Cable was clear that the Tory-led government should be judged on the basis of the price of Royal Mail shares after three months.

"Three months later, the business secretary's dismissal of the sharp rise in share price as 'froth' has been demolished and increasingly it looks like the taxpayer has been left short-changed at a time when services are being cut and families are struggling with David Cameron's cost of living crisis.

"We know that Vince Cable considered, then rejected, the option of floating Royal Mail at a higher price which would have brought in more cash for taxpayers. He still has serious outstanding questions to answer on the price he could have received three months ago in respect of what increasingly looks like a botched privatisation."

[TrueBlueTerrier]

Government ‘short-changed’ taxpayers on Royal Mail float

http://www.publicfinance.co.uk/news/201 ... ail-float/" onclick="window.open(this.href);return false;?

Labour has reiterated claims that the government’s privatisation of the Royal Mail short-changed taxpayers by hundreds of millions of pounds after the share price for the company rose by more than 70% following the sell-off.


Marking three months since the shares were first offered, shadow business secretary Chuka Umunna said today the value of shares – which stood at 562p at market close on Wednesday – showed the firm had been undervalued. Shares were sold at 330p each at privatisation on October 11, but climbed above 500p later that month and has not fallen below that mark since.

Umunna highlighted that in interviews at the time of the sale, Business Secretary Vince Cable said the sale price should not be judged until three months on from the flotation.

‘Three months later, the business secretary’s dismissal of the sharp rise in share price as “froth” has been demolished and increasingly it looks like the taxpayer has been left short changed at a time when services are being cut and families are struggling with David Cameron’s cost of living crisis,’ Umunna said.

‘He still has serious outstanding questions to answer on the price he could have received three months ago in respect of what increasingly looks like a botched privatisation.’

Umunna has already written to both the National Audit Office and the Public Accounts Committee asking them to examine the deal.

[TrueBlueTerrier]

Ian Murray MP: Royal Mail was sold on the cheap

http://centrallobby.politicshome.com/la ... the-cheap/" onclick="window.open(this.href);return false;

Labour’s Shadow Minister for Trade and Investment, Ian Murray MP argues that Vince Cable should be judged by his own criteria: three months on it’s confirmed: Royal Mail was sold on the cheap.

On October 11, the day of the flotation of Royal Mail on the London Stock Exchange, Business Secretary Vince Cable was asked on the Today programme directly about the immediate jump in the share price to 450p, indicating that the Government had severely undervalued it. In a dismissive response, he said: “It’s of absolutely no significance, this is forth and speculation...what really matters in terms of value, is what it looks like in three months’, six months’ time.”

Well, we have now reached that milestone - it is three months since the UK’s prized national postal provider, the Royal Mail, was privatised for £3.3bn. The rise in Royal Mail’s share price since the flotation has been huge and it closed yesterday above at 560p, over 70 per cent higher than the330p price at which the government sold the taxpayer’s stake. The price has remained well above 500p since October. It’s hardly surprising given that the initial offering was oversubscribed by some 20 times – adding to concerns that ministers priced the company far below where they could, leaving the taxpayer short changed at a time when services are being cut and when families are struggling with a cost of living crisis.

Major banks including Citibank and JPMorgan, alongside analysts Panmure Gordon, valued Royal Mail significantly above the price at which it was sold, suggesting valuations as high as £4.5 and £10bn. The Business Secretary has said that taxpayer value was ‘central’ to the government’s strategy in selling Royal Mail but given the extensive consultation with institutional investors and banks which took place, both he and the Prime Minister have serious questions to answer given that we know they considered – and rejected - increasing the offer price at the eleventh hour.

As ministers pushed ahead with an ideologically-motivated fire sale to fill the black hole left by George Osborne’s failure – he will be borrowing almost £200bn more than planned as a result of his failure on growth and living standards – it appears value for money for the taxpayer was an afterthought. The banks involved in the biggest privatisation in the UK for decades shared a fee of 1.2% of the institutional proceeds, equivalent to a massive £16.9 million. That is why I have written to the Business Secretary today, asking him to make clear what his plans are for the further discretionary bonus, worth up to £4.2 million, for the underwriters. Given the potential losses suffered by the taxpayer and that Royal Mail may have been so significantly undervalued many will question whether they are deserving of a bonus.

In November, Royal Mail reported that its profits had doubled in the first half of 2013 before privatisation took place. This demolished the Government’s case for its fire sale of Royal Mail in the first place, which rested on a claim it couldn’t succeed in public hands and needed to be privatised for investment to take place. It is now clear that it was thriving in the public sector and profits could more than cover the investment required for modernisation.

In the longer term, the concern will be for services, particularly for rural areas and our small and medium-sized businesses, who rely heavily on its six-day a week, one-price-goes-anywhere service. Ofcom’s finding at the end of last year that Royal Mail is failing to deliver the post on time to a third of Britain’s postcodes, despite charging more than ever for a first class stamp is concerning. It is crucial that we don’t see a shift in focus away from service delivery to maximising shareholder value leading to a poorer service.

On this minimum service standard - the Universal Service Obligation - the Shareholder Executive’s Chief Executive, Mark Russell, said in an interview with the Telegraph that “The key objective of protecting the universal service obligation has been kept...f anything happened to that business [Royal Mail], we’d have to step in...”. The Business Secretary needs to be clear on the circumstances where the Government would step in to protect the service. We warned that the universal service was at risk with privatisation and we still believe that to be the case. That is why Labour would guarantee the Universal Service Obligation, strengthen the relationship with the now separate Post Office and ensure that other postal service operators are subject by the regulator to the same high performance and service quality standards as Royal Mail.

Vince Cable and David Cameron are in denial about their handling of the Royal Mail sell-off. By their own success criteria, it’s time they admitted they got it wrong and apologise.

Ian Murray is MP for Edinburgh South and Labour’s Shadow Minister for Trade and Investment