Royal Mail privatisation fiasco bad for sell-offs

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SIMON WATKINS: Royal Mail privatisation fiasco bad for sell-offs

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In a damning verdict on the privatisation of Royal Mail, the Business Select Committee stated baldly that the Government lost out on as much as £1 billion.

This and the fact that City advisers helping to set the price cashed in on the sudden rise in value leave a very sour taste.

Crucially the verdict may cast a shadow over future sell-offs by the Government.

As The Mail on Sunday reported last month, the Department of Business has quietly decided against selling the Land Registry. It now seems as though that plan may have been shelved in anticipation of the brutally critical MPs’ report into Royal Mail.

There is a risk that privatisations are being seen solely as a game of maximising returns. It is shameful for a government and its advisers to sell off public assets on the cheap. Nothing could be a clearer waste of public money. But the case for or against selling must stem from more profound debate.

The Government’s stakes in Royal Bank of Scotland and Lloyds are a case in point. It would be a disaster if the return of these bank stakes to the market becomes embroiled in a row about how much money we get back.

The stakes were acquired as part of a national rescue plan to save the nation from meltdown, not as a punt aimed at a future profit. Their return to private ownership should be aimed at freeing them from Government interference and letting them play a full part in the recovery.

The real damage from the Royal Mail mess would be if it leaves Ministers timidly watching their backs when it comes to selling the bank stakes, when those decisions need to be driven by bigger issues linked to the economy and banking stability.

The sudden jump in Britain’s trade deficit revealed in official figures last week could be a blip. The figures were due largely to a rise in the amount of imported goods bought by Britons rather than a decline in exports.

Looking ahead, the prospects for exports are not improving. A fresh flurry of banking panic over Portuguese bank Espirito Santo raised fears of a return of the Eurozone crisis.

Such fears are overdone, but there can be no doubt that Espirito Santo will do nothing to boost confidence of consumers and companies on the Continent. Nor will it do much for the value of the euro.

The strength of the pound against the euro and the dollar will pose significant headwinds to exporters from the UK. With predictions that the pound will continue to strengthen, the challenge facing our exporters is not going to get any easier.