Margareta Pagano: Goldman's role in the Royal Mail sell-off is a red rag to the unions
The CWU should be negotiating hard to get as many shares as it can for its workers
Margareta Pagano is a former business editor of the Independent on Sunday who now writes columns and business interviews for a range of publications, including the Independent, Independent on Sunday and London Evening Standard.
Sunday 02 June 2013
Selling off the Royal Mail is controversial enough without the Government throwing yet more petrol bombs through its letterbox. But that's what ministers have done by selecting three banks most associated with the worst excesses of the financial crash – Goldman Sachs, UBS and Barclays – to handle the forthcoming privatisation.
You can understand why the union – the Communication Workers Union, which is already incensed by plans for the £3bn sell-off – has reacted so furiously; talk about waving a red rag at a bull.
If Michael Fallon, the business minister, had wanted to smooth things over with the unions, he might have been a little sharper and bypassed Goldman Sachs.
Apparently, Goldman Sachs was chosen because it gave the best presentation at the pitches which is no surprise since its team has been working on this for two years.
Sadly, the reality is that ministers don't have many banks to choose from as the big six investment banks – mainly US ones – have the syndication game sewn up between them.
In any other market, it would be called an oligopoly. Would JP Morgan, Citigroup or Morgan Stanley have gone down any better with the unions? Doubt it.
At least Mr Fallon has beaten the banks down over fees. They are 1 per cent rather than the usual 2.5 per cent – which means total fees will be around £25m.
It's easy to see why the banks are prepared to be cut-price; they are being cut-throat and hope that by being lean on this they will have earned brownie points for the next sales coming up such as Nats air traffic control, Eurostar, Channel 4, RBS and Lloyds. Just watch fees start edging back up.
What is more intriguing is why the Government appears so desperate to get Royal Mail off the balance sheet so quickly. The huge, £10bn pension deficit has already been transferred to the state – at a cost of £1.3bn in the first year alone – saving Royal Mail £300m a year.
If you add that saving back in, and then add in profits earned for higher stamp prices, these are the main reasons why Royal Mail's boss Moya Greene, pictured, has achieved such a remarkable turnaround.
It's also why the CWU – and other critics – are able to ask why the Royal Mail should be privatised at all as it's doing rather well in public hands.
To date, ministers have not been persuasive enough, arguing that an IPO is the only way to keep the six-day-a week obligation for universal service going and the best way to attract outside capital.
Both claims are dubious. The way post is delivered is changing so fast that such contracts are probably unnecessary while the Royal Mail could easily tap the bond markets as it is.
Yet most commercial activities are better off privately owned. Even so, the Government needs to convince potential investors that underneath all this fattening up, there is a viable business that can survive without more state subsidies.
With the CWU still threatening to strike, Royal Mail chairman Donald Brydon, and Greene, also need to work closer with the unions to demonstrate why its 140,000 postal workers have a more secure future in private hands than state ones.
For its part, the CWU should be negotiating hard to get as many shares as it can for its workers because, whatever happens, jobs will be lost. It's going to be a hard sell – no wonder Goldman Sachs has been chosen. No one ever got fired for hiring them.
The Bard could have penned a tragedy about Petraeus
In Shakespeare's great tragedy, Coriolanus, the victorious general Caius Marcius, is banished from Rome because he is seen as a traitor.
Seeking revenge, Marcius gets together with his former enemy, Tullus Aufidius, general of the Volscian army, to wage war against the Romans.
But Marcius is persuaded by his mother to make peace; which he does, knowing that he will be slain by the Volscians to whom he is now the traitor. Yet the eponymous hero goes to his death with his head held high.
Instead of slipping away with honour or spending more time in their gardens, today's generals, and indeed politicians, move into private equity.
The latest to do so is General David Petraeus, the four-star US general who served in Iraq before becoming director of the CIA, who is joining KKR as chairman of a new Global Institute.
How tragic. If only The Noble Bard were alive to pen the story of Petraeus for us; the shame of his taking the shilling might deter others who hold such high public office from doing so.
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