The business secretary, Vince Cable, has refused to apologise over the government's privatisation of Royal Mail, despite a scathing report from the National Audit Office, which said undervaluing the share sale had cost the taxpayer £750m in a single day.
In a lively debate in the House of Commons, Cable defended the controversial float last October, after coming under fire from the shadow business secretary, Chuka Umunna, and other MPs. "The last thing I intend to do is apologise," Cable said. He insisted that the privatisation had been a success and that there had been a real risk that the flotation could have failed if the shares had been priced higher.
"We've taken a loss-making public enterprise and turned it into a successful public company," he added. He accused Labour itself of selling state assets off on the cheap.
Umunna, who demanded an apology from Cable, hit back by saying taxpayers had been "disgracefully shortchanged to the tune of hundreds of millions of pounds". He added: "Those [Cable] once referred to as spivs and gamblers are laughing all the way to the bank."
Royal Mail shares have soared more than 70%, trading at 565.5p on Tuesday, since their stock market debut at 330p a share in October. Cable said there was still a "great deal of froth" around the share price.
The audit office criticised the government's "deep caution" and accused the government of ignoring repeated warnings from City analysts that its plan to float Royal Mail at a maximum price of 330p a share vastly undervalued the company. The audit office said the government had ploughed ahead with its plans because it was worried that increasing the flotation price from the 260p-330p range could put off institutional investors and jeopardise the float as postal workers were gearing up for a nationwide strike.
Earlier on Tuesday, business minister Michael Fallon said it was "right to be cautious". Speaking on the BBC's Today programme, he said: "We could have got a higher price but we would have taken a bigger risk of people not subscribing to the shares and the Royal Mail share sale collapsing."
Independent analyst Louise Cooper judged the government as "naive at best, incompetent at worst". She tweeted during the Commons debate: "It was Vince Cable's responsibility to make the pricing decision on Royal Mail and he called it very wrong."
In a note, she said: "It is a story of how conflicts of interest can be so damaging. First to blame, according to the NAO, are the politicians who were in so much of a hurry to sell Royal Mail that it was done too cheaply … Seventeen key investors were sought for their comments up to a year ahead of the initial public offering
"These key investors who caused the deal to be struck too cheaply, then were rewarded by better allocations than other investors (which essentially means a larger cheque) but sold half their stock within weeks! It couldn't get worse. Mr Cable you were had."
Royal Mail's shares spiked 38% on their stock market debut on 11 October – the biggest one-day rise in a privatisation since British Airways in 1987 – as investors tried to snap up more than 23 times the number of shares available.
The audit office said the government could have made an additional £750m for taxpayers if it had priced the sale at the first day closing price of 455p rather than the maximum 330p starting price. Achieving an additional £750m from the sale could have covered the annual salaries of 34,000 NHS nurses.
Amyas Morse, head of the audit office, said: "The department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer."
Original Article
Source: theguardian.com/
Author: Julia Kollewe
In a lively debate in the House of Commons, Cable defended the controversial float last October, after coming under fire from the shadow business secretary, Chuka Umunna, and other MPs. "The last thing I intend to do is apologise," Cable said. He insisted that the privatisation had been a success and that there had been a real risk that the flotation could have failed if the shares had been priced higher.
"We've taken a loss-making public enterprise and turned it into a successful public company," he added. He accused Labour itself of selling state assets off on the cheap.
Umunna, who demanded an apology from Cable, hit back by saying taxpayers had been "disgracefully shortchanged to the tune of hundreds of millions of pounds". He added: "Those [Cable] once referred to as spivs and gamblers are laughing all the way to the bank."
Royal Mail shares have soared more than 70%, trading at 565.5p on Tuesday, since their stock market debut at 330p a share in October. Cable said there was still a "great deal of froth" around the share price.
The audit office criticised the government's "deep caution" and accused the government of ignoring repeated warnings from City analysts that its plan to float Royal Mail at a maximum price of 330p a share vastly undervalued the company. The audit office said the government had ploughed ahead with its plans because it was worried that increasing the flotation price from the 260p-330p range could put off institutional investors and jeopardise the float as postal workers were gearing up for a nationwide strike.
Earlier on Tuesday, business minister Michael Fallon said it was "right to be cautious". Speaking on the BBC's Today programme, he said: "We could have got a higher price but we would have taken a bigger risk of people not subscribing to the shares and the Royal Mail share sale collapsing."
Independent analyst Louise Cooper judged the government as "naive at best, incompetent at worst". She tweeted during the Commons debate: "It was Vince Cable's responsibility to make the pricing decision on Royal Mail and he called it very wrong."
In a note, she said: "It is a story of how conflicts of interest can be so damaging. First to blame, according to the NAO, are the politicians who were in so much of a hurry to sell Royal Mail that it was done too cheaply … Seventeen key investors were sought for their comments up to a year ahead of the initial public offering
"These key investors who caused the deal to be struck too cheaply, then were rewarded by better allocations than other investors (which essentially means a larger cheque) but sold half their stock within weeks! It couldn't get worse. Mr Cable you were had."
Royal Mail's shares spiked 38% on their stock market debut on 11 October – the biggest one-day rise in a privatisation since British Airways in 1987 – as investors tried to snap up more than 23 times the number of shares available.
The audit office said the government could have made an additional £750m for taxpayers if it had priced the sale at the first day closing price of 455p rather than the maximum 330p starting price. Achieving an additional £750m from the sale could have covered the annual salaries of 34,000 NHS nurses.
Amyas Morse, head of the audit office, said: "The department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer."
Original Article
Source: theguardian.com/
Author: Julia Kollewe
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