Ian Murray MP: NAO report a damning verdict on Royal Mail sell-off

Shadow Business Minister Ian Murray MP says today's report from the National Audit Office is the 'final nail in the coffin' for the Government's defence of its Royal Mail sell-off. The National Audit Office’s (NAO) report today shows Ministers botched the privatisation of one of our country’s prized national assets, a move which has left the taxpayer short-changed to the tune of hundreds of millions of pounds. We now know definitively that better value could have been achieved had Ministers adopted a different timetable for the sale. As the report concludes: “The Department could have achieved better value for the taxpayer”. In particular, the NAO is critical of the handling of Royal Mail’s property portfolio. Labour raised concerns that ministers had failed to take account of Royal Mail's valuable assets, including prime sites in central London, and that these had not been properly reflected in the government's valuation. Our warnings were either ignored or treated with customary disdain by Ministers. Today’s NAO report confirms they were wrong to dismiss our concerns. From the outset, Labour opposed the wholesale privatisation of the Royal Mail. We have always backed having a majority taxpayer stake in Royal Mail, which gives the taxpayer an interest in the maintenance of the universal service obligation (USO). Historically there has been a strong link between the Post Office network and Royal Mail – but this has been put at risk by privatisation. We are clear that we would act to repair this link when the current 10-year business agreement between the two – put in place at Labour’s insistence- comes to an end. The link with Royal Mail is vital for the Post Office too. In November last year, Royal Mail reported that its profits had doubled in the first half of 2013 before privatisation took place. This demolished the Government’s case for its fire sale of Royal Mail in the first place, which rested on a claim it couldn’t succeed in public hands and needed to be privatised for investment to take place. It is now clear that it was thriving in public ownership and the profits the investment required for modernisation could have been met by profits from the business. The NAO report also focuses on the role the banks played in the Royal Mail fire sale. We now know that, despite other banks valuing Royal Mail far higher, those which advised the initial public offering which went so badly wrong have already received £16.9 million between them in fees. They could get their hands on a further £4.2 million – an optional bonus that the Government made available to them with ministers to decide whether they receive it or not. Time and time again, Labour has asked the Business Secretary, Vince Cable, to come clean on the criteria he will use to make a judgement on whether this money should be handed over to the banks and when that decision will be made. It will strike taxpayers as deeply unfair if these banks are allowed to cash in on this bonus, given the money that has already been lost through this misjudged and botched sale, whilst families struggle daily with the cost-of-living crisis. In light of today’s report, it is now abundantly clear that the banks should not receive this discretionary bonus and Vince Cable must explain urgently what he plans to do. When Royal Mail shares began trading in October, Vince Cable dismissed fears of undervaluation in light of the huge rise in its share price in the first hours of trading, claiming: “It’s of absolutely no significance, this is froth and speculation -what really matters in terms of value, is what it looks like in three months’, six months’ time.” The six-month anniversary is now fast approaching and share price is still trading at more than 70 per cent above the level at which the public stake was sold. By his own criteria, the Business Secretary has failed. Vince Cable claimed the government’s approach to privatisation had prioritised long-term investors, but the NAO has found that ‘priority investors’ who were given the bulk of Royal Mail shares sold almost half their allocation within a few weeks. In other words, the beneficiaries of the sale were City speculators out to make a fast buck, while the public lost out. This report is a truly damning verdict on the government’s Royal Mail privatisation and the final nail in the coffin on ministers’ desperate claims in defence of it. People will rue this ideological fire sale for years to come, and wonder how ministers got this so wrong and why they short changed the taxpayer by hundreds of millions of pounds. Ian Murray MP is Labour’s Shadow Minister for Trade and Investment