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
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

Where the spooks get their coffee fix: The busiest Starbucks in the US is also the most secretive

The secret CIA Starbucks

The coffee shop is deep inside the agency's forested Virginia compound
Revealed: How the Establishment closed ranks over fallout from Loch Ness Monster 'sighting'

How the Establishment closed ranks over fallout from Nessie 'sighting'

The Natural History Museum's chief scientist was dismissed for declaring he had found the monster
One million Britons using food banks, according to Trussell Trust

One million Britons using food banks

Huge surge in number of families dependent on emergency food aid
Excavation at Italian cafe to fix rising damp unearths 2,500 years of history in 3,000 amazing objects

2,500 years of history in 3,000 amazing objects

Excavation at Italian cafe to fix rising damp unearths trove
The Hubble Space Telescope's amazing journey, 25 years on

The Hubble Space Telescope's amazing journey 25 years on

The space telescope was seen as a costly flop on its first release
Did Conservative peer Lord Ashcroft quit the House of Lords to become a non-dom?

Did Lord Ashcroft quit the House of Lords to become a non-dom?

A document seen by The Independent shows that a week after he resigned from the Lords he sold 350,000 shares in an American company - netting him $11.2m
Apple's ethnic emojis are being used to make racist comments on social media

Ethnic emojis used in racist comments

They were intended to promote harmony, but have achieved the opposite
Sir Kenneth Branagh interview: 'My bones are in the theatre'

Sir Kenneth Branagh: 'My bones are in the theatre'

The actor-turned-director’s new company will stage five plays from October – including works by Shakespeare and John Osborne
The sloth is now the face (and furry body) of three big advertising campaigns

The sloth is the face of three ad campaigns

Priya Elan discovers why slow and sleepy wins the race for brands in need of a new image
How to run a restaurant: As two newbies discovered, there's more to it than good food

How to run a restaurant

As two newbies discovered, there's more to it than good food
Record Store Day: Remembering an era when buying and selling discs were labours of love

Record Store Day: The vinyl countdown

For Lois Pryce, working in a record shop was a dream job - until the bean counters ruined it
Usher, Mary J Blige and Will.i.am to give free concert as part of the Global Poverty Project

Mary J Blige and Will.i.am to give free concert

The concert in Washington is part of the Global Citizen project, which aims to encourage young people to donate to charity
10 best tote bags

Accessorise with a stylish shopper this spring: 10 best tote bags

We find carriers with room for all your essentials (and a bit more)
Paul Scholes column: I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England

Paul Scholes column

I hear Manchester City are closing on Pep Guardiola for next summer – but I'd also love to see Jürgen Klopp managing in England
Jessica Ennis-Hill: 'I just want to give it my best shot'

Jessica Ennis-Hill: 'I just want to give it my best shot'

The heptathlete has gone from the toast of the nation to being a sleep-deprived mum - but she’s ready to compete again. She just doesn't know how well she'll do...