Royal Mail sale: Taxpayers lost out on £1bn, says MPs' committee

Select committee criticises 'not credible' Vince Cable and his department for relying too much on its City adviser, Lazard

Deputy Business Editor

MPs have slammed the Business Secretary Vince Cable over the Royal Mail privatisation, declaring that some of his claims for the success of the float had not been “credible” and concluding that the postal service was sold too cheaply.

They say taxpayers lost out on about a billion pounds as the shares surged by 38 per cent on their first day of trading, and continued to rise.

Earlier this week, the Government ordered a review into how privatisations could be handled better in future, hiring Lord Myners, the former City minister, to investigate.

Yesterday, a select committee said Mr Cable’s claims that Royal Mail’s high share price was based on “froth” – a temporary rise – was not “a credible response” to that increase.

Adrian Bailey, the Labour MP who chairs the Business, Innovation and Skills Committee, said: “The Government cannot blithely dismiss as ‘froth’ our committee’s concern that the low issue price of this prime public asset has cost the taxpayer around a billion pounds.”

The committee criticised Mr Cable and his department for relying too much on its City adviser, Lazard, which it said gave poor guidance to the Government and was too focused on getting the share sale done and not enough on gaining maximum value for the taxpayer.

Video: Evening Standard's City correspondent discusses the sale

The MPs appeared irritated at the “blanket refusal” of Mr Cable, City advisers and the Conservative minister Michael Fallon, who was charged with handling the float, to admit that anything had gone wrong.  Royal Mail’s shares were sold on 10 October at 330p but had hit 615p by mid-January. They have since dipped to 474.3p.

The committee went on to condemn the undervaluing of buildings that the Royal Mail is now likely to sell. These include three sites in London, valued by Mr Cable’s department at £200m, which the National Audit Office put at £330m to £830m. It added: “What is more disturbing is that the Government ignored established NAO recommendations either to remove such assets from the privatisation process or to insert clawback provisions on the future sale of the properties.”

It also had harsh words for Mr Cable for his original refusal to disclose the identities of the “priority” investors recruited as long-term backers to support the flotation. At one select committee meeting, he said he could not give their identities for fear of them suing the Government – only to publish them the next day after criticism in the media.

The names proved critical as they showed that Lazard had also been a big investor through its asset management arm, and was one of the several supposedly long-term backers who sold their shares almost immediately at a huge profit.

The committee acknowledged that it had found no evidence of improper behaviour by the companies advising the Government, but said advisers on share issues should be excluded from becoming preferred investors in future.

A spokeswoman for Mr Cable’s department said the committee’s conclusions contained “factual errors and misunderstandings”.

Start your day with The Independent, sign up for daily news emails
News
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
News
Robert De Niro has walked off the set of Edge of Darkness
news The Godfather Part II actor has an estimated wealth of over $200m
Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade
radio The popular DJ is leaving for 'family and new adventures'
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower