Vince Cable will appear before a powerful committee of MPs for an urgent hearing, following growing concerns that the coalition has privatised Royal Mail on the cheap.
The Liberal Democrat Business Secretary will again face members of the Business, Innovation and Skills Committee after they felt he had given "incredibly superficial" answers over the pricing of Royal Mail shares.
Mr Cable will be questioned about suggestions that the 497-year-old postal service was undervalued by as much as 50 per cent. It emerged this weekend that two of the banks that pitched to advise on the privatisation in May told the Government that shares should be initially sold at 500p on the London Stock Exchange, which would have valued Royal Mail at around £5bn on its stock market debut.
But shares started trading at 330p on 11 October. Such was the rush to buy the stock that the price closed at 502.5p on Friday – allowing many to make quick a profit on initial acquisitions.
Katy Clark, the Labour MP for North Ayrshire and Arran who sits on the committee, told The IoS that she wanted to know the names of the banks that suggested the higher valuation and to see more information on the conversations that took place.
"I was underwhelmed by [Mr Cable's] responses at the committee hearing. I felt they were incredibly superficial," she said. "I would like to know how he came to a considered view [over the flotation price]." Ann McKechin, a fellow committee member and Labour MP for Glasgow North, added that the committee would meet privately on Tuesday to "determine where and when we will meet the minister again – it's not a matter of if, but when".
Mr Cable has argued that the price was reached following "a combination of rigorous market testing and extensive analysis of comparable companies". In a letter to the committee on Friday he claimed that "delivering value for money is about more than just the level of proceeds received on day one".
Mr Cable also blamed the threat of impending strike action as one reason for a depressed valuation. A ballot of around 115,000 Royal Mail employees ended in a vote in favour of a 24-hour strike, which will take place on 4 November. The Communication Workers' Union wants pay and working condition guarantees in the light of privatisation.
A Whitehall source said yesterday that the MPs now had "more ammunition". Mr Cable "wasn't able to substantiate a lot of what he said last time", added the source.
More than 20 banks pitched to advise Royal Mail on the flotation, with Goldman Sachs and UBS eventually appointed to lead the sale.Reuse content