Earlier this year we accused Vince Cable, the Lib Dem Business Secretary, of selling the Royal Mail too cheaply.
We can now report that our accusation has been endorsed by the National Audit Office (NAO).

What we said last year. Vince Cable ignored it.
What we said last year. Vince Cable ignored it.

The NAO is a public body charged with scrutinising public spending on behalf of Parliament. Its audit of central government has two main aims.
1. By reporting the results of its audits to Parliament, the NAO holds government departments and bodies to account for the way they use public money, thereby safeguarding the interests of taxpayers.
2. In doing the above it aims to help public service managers improve performance and service delivery.

On 1st April 2014 the NAO, also known as the audit office, published its report ‘The Privatisation of Royal Mail’. Introducing the report, Amyas Morse, head of the National Audit Office, writes:
“The Department (Business, Innovation and Skills) 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. The Government retained 30 per cent of the company. It could have retained even more and allowed the taxpayer to participate further in the rapidly increasing share price and thus limit the cost of to the taxpayer of its cautious approach.”
Behind the dry language of a Parliamentary report lies a devastating critique of Vince Cable, his colleagues and the Lib Dem and Tory coalition as a whole. This is what it means.

Background

Labour did not think the Royal Mail needed to be privatised. It was making a healthy profit and its performance had improved greatly over the past few years. The LibDem/Tory Coalition government claimed that the Royal Mail needed privatising so that it could borrow money on the open market. However, there has never been anything to stop publicly owned organisations borrowing money. It happens frequently in Germany and France.

But, as we have seen countless times, this government never lets the facts get in the way of its right-wing, private-sector-knows-best ideologically driven agenda.

And the result? The NAO says that Mr Cable’s ‘caution’ (we call it incompetence) cost the British taxpayer £750 million in one day. We calculate that over the following weeks this grew to at least £2.8 billion!! This is nearly as much money as it earned from the actual privatisation.

This is how he did it:
– In the lead up to privatisation Mr Cable had to establish the price at which shares in Royal Mail should be set. The government paid Goldman Sachs and UBS £16.9m to manage the process.
– Following their advice, Mr Cable set the sale valuation at 330p. City commentators and Labour were aghast that the valuation had been set so low.
– When shares finally opened for conditional trading, their price jumped to more than 450p. A profit of around 30% for the lucky investors.
– Responding to criticism, Mr Cable said that the initial jump was of ‘absolutely no significance’ and said critics should wait for three months and then make a judgement.

Well, Mr Cable, we waited. The share price by the end of March was 563 pence. This constitutes a rise of about 80% on the original price. Consider yourself judged.

In October last year the government issued a Myth-Buster factsheet that stated baldly, “There’s no way we will sell Royal Mail ‘on the cheap'”.

Well, three months have come and gone and the price of the shares is, as we say, just under 600p each, with a registered high of 610p. This means that the company share sell-off was undervalued by £2.8bn.

Just to put this in context, £2.8 billion is six times the projected saving over the past year by the bedroom tax; six times the amount of money the government hopes to save by the imposition of a levy that is causing misery to thousands of vulnerable people and their carers up and down the country.

So What’s Next?

Chuka Umunna, the shadow business secretary, said the audit office’s report was a “damning verdict on the Tory-led government’s botched Royal Mail fire sale, leaving the taxpayer disgracefully short changed by hundreds of millions of pounds”.

Labour’s Mr Umunna went on to say: “He (Vince Cable) and David Cameron have serious questions to answer on the hundreds of millions of pounds they have lost British taxpayers and cannot duck responsibility for what has happened.”

Mr Umunna is right.

It is also right that Labour demands Vince Cable and David Cameron apologise to the 1600 Royal Mail workers whose redundancies were announced in March.

Britain Will Be Better Than This

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