Labour Steps Up Pressure On Royal Mail Fees

Labour is intensifying the pressure on Vince Cable to clarify whether millions of pounds of public money will be paid to bankers who worked on the controversial privatisation of Royal Mail.

Chuka Umunna, the shadow business secretary, has told Sky News that paying more than £4m in discretionary fees to City advisers would "add insult to injury" after a parliamentary report accused the Government last week of costing taxpayers £1bn by undervaluing the postal operator.

Mr Cable has the ability to award the fees, according to Royal Mail's privatisation prospectus issued last autumn, although doing so would further stoke the controversy over the sell-off.

People close to the Business Secretary insisted that no decision had been formally taken about the fees, although one conceded that criticisms by the Business, Innovation and Skills Select Committee "offered an ideal chance to lay the issue to rest".

Royal Mail was floated on the stock market nine months ago, valuing it at £3.3bn, but an instant surge in its share price prompted accusations that it had been undervalued.

Last week, Mr Cable commissioned an "informal review" of the sell-off to assess whether publicly-owned assets should be sold using alternative means in future.

"Despite launching an inquiry into the failings of the Royal Mail fire sale, and seeking to shift blame for their mistakes onto advisers, ministers have still not confirmed whether or not the banks advising the sale will be receiving discretionary fees," Mr Umunna said.

"Given taxpayers have already been short-changed by hundreds of millions of pounds and the government’s "priority" investors have been laughing all the way to the bank, it would add insult to injury for even more money to be given away from the public purse in the form of discretionary fees when ministers have botched the privatisation so badly.”

Last week's BIS Committee report said Mr Cable had been wrong to label the instant post-privatisation surge in Royal Mail's share price as "froth".

"The Secretary of State's initial use of the term referred to the 'immediate aftermath' of the flotation," the report said.

"This was subsequently extended to months and then possibly years.

"As a result we do not find the argument of 'froth' as a credible response to the significant increase in the share price."

The MPs added that the Government had been served poorly by its City advisers, who they argued had made insufficient effort to maximise Royal Mail's value during the privatisation process.

And they said taxpayers would miss out on future increases in the value of potentially lucrative property assets.

Lazard, the Government's independent adviser, was paid a flat fee of £1.5m, although its asset management arm also made a significant profit by selling shares that it was allocated as a so-called priority investor in Royal Mail.