Vince Cable on the defence over Royal Mail float’s ‘lost millions’

Critics claim taxpayers are out of pocket after sell-off price pitched too low

On the day shares in Royal Mail hit 500p for the first time, Vince Cable, the Business Secretary, tried to defend himself against claims he cost taxpayers hundreds of millions of pounds by undervaluing the privatised  postal operator.

The latest share-price surge means stock in the 500-year-old postal operator is now worth £1.7bn more than the Government received for it, triggering fresh allegations that Mr Cable and the Department of Business had priced Royal Mail too cheaply.

But Mr Cable yesterday wrote to Adrian Bailey, the chairman of the Business, Innovation and Skills Select Committee, claiming that the Communication Workers Union’s threat to strike meant City institutions would not pay any more for the Royal Mail.

He said the union’s talks of industrial action “meant there were some potential investors who stated that they were not willing to invest at all” and others whose mixed sentiment had led to the 330p price decision. Yet the Government’s own details of the float revealed it was 20 times oversubscribed by City investors.

Mr Cable also tried to deflect criticism of the £3.3bn privatisation on to the particular City institutions that the Government hired for advice, Goldman Sachs and UBS, the lead banking advisers, and Lazard, which provided independent guidance to ministers. “Goldman Sachs and UBS recommended [the] price range following an exhaustive process culminating in a final price range recommendation provided ahead of the publication of the prospectus,” Mr Cable wrote.

“Our independent adviser (Lazard) endorsed the price range. In August 2013, as the date of the IPO approached, this list of potential investors was narrowed down to… approximately 20 investors, selected on the basis of feedback gathered during the investor engagement process and, in particular, their understanding of the risks inherent in the company’s industrial relations.”

The Business Secretary has been recalled by MPs to give fresh evidence to the Commons committee on the privatisation of Royal Mail next month, after Mr Bailey, the Labour chairman of the committee, said early evidence of the share price “vindicated” some of the concerns about its valuation. Executives from Lazard will also be hauled before MPs to be questioned.

In his letter to the committee, the Business Secretary also hit back at claims by Chuka Umunna, his Labour counterpart, that Royal Mail’s property portfolio has been undervalued.  Royal Mail owns unusually large sites in prime areas around London and elsewhere in the UK, but its prospectus listed the total value of its freehold properties at £787m and leasehold properties at £318m.

It highlighted three sites in London – Mount Pleasant, Nine Elms and Paddington – as being “surplus” to  requirements. Mr Umunna claims  they are worth between £500m and £1bn each.

Mr Cable responded: “Taking into account the overall position of the surplus portfolio and the relative immaturity of these sites in terms of actual development, a combined value of £330m (as suggested in one of the equity research analyst reports) appears at the top end of any likely range.”

Mr Umunna pointed out that Mr Cable’s letter follows his dismissal last week as “froth” concerns that taxpayers had been short-changed.

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

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat