The Real Value

Grahame Morris writes:

The Royal Mail served the nation for over 500 years; however a Government fire sale not only privatised this prize asset but also short changed the public.

Last week, the National Audit Office (NAO) delivered a damning report showing that the Government’s rush to privatise the Royal Mail cost the taxpayer £1.4 billion.

In fact, following the first day spike in the share price, the NAO found the Government could have made an additional £750 million if it had priced the sale at the first day closing price of 445p rather than 330p.

Business Secretary Vince Cable dismissed the first day rise as “froth and speculation”, however, since then the share price rose to a peak of 618p in January, and today still remains 70% higher than the flotation price.

Royal Mail privatisation was a policy that nobody voted for, and nobody except those in the City wanted.

A third share went to 16 priority investors with an agreement they would be long term investors.

Prior to the flotation these priority investors warned they would not buy shares at any more than 330p, however, once the price range was set, city institutions scrambled for these shares, with the offer being 24 times oversubscribed, clearly showing the Government had undervalued the Royal Mail.

Throughout the privatisation process the Government repeatedly promised that the Royal Mail would be owned by long term share holders rather than hedge funds.

However, within weeks, the “long term investors” broke their agreement, selling almost half of the shares allocated to them, and within the first month seven had sold their entire allocation, banking profits of between £10 and £36 million.

These profiteers are now being protected by the NAO and the Government, who are refusing to name the companies that short changed the taxpayer, and allowed the Royal Mail to be left at the mercy of hedge funds that have significantly increased their holdings.

The taxpayer not only lost out on the sale price, stamp prices are due to rise with first and second-class stamps going up to 62p and 53p respectively, and 1300 job losses have also been announced.

Fears remain that the universal delivery obligation will be threatened sooner or later.

Even if the Government had achieved the real value of the Royal Mail, privatisation would have still been wrong.

The Coalition Government is ideologically blinkered and they could not accept that Royal Mail could succeed in public hands.

This is despite the Royal Mail trebling profits last year and returning £440 million to the taxpayer prior to privatisation.

The private is best mantra has failed to deliver results when it comes to our public services.

The public are right to question how successful privatisation and competition have been when looking at rising energy prices, or commuters paying thousands of pounds a year to use the rail network.

We now see the Royal Mail following a similar path.

Whether it is energy, rail or mail, these are vital public services that should be run in the best interests of public, not private profit.