Belfast Telegraph

Sunday 30 August 2015

Labour sale stance 'irresponsible'

Published 07/10/2013

The Government is selling up to 62% of Royal Mail, with a 10% stake being handed for free to employees
The Government is selling up to 62% of Royal Mail, with a 10% stake being handed for free to employees

The Business Secretary has warned Labour its opposition to the controversial privatisation of the Royal Mail was "irresponsible", adding it was "dangerous" to imply there was an easy bargain to be made.

Vince Cable told his Labour counterpart Chuka Umunna he was magnifying a small minority of views which take a "short term view" of the flotation.

His letter deepened controversy over the sale, with critics warning the Government it was selling the company off too cheaply.

Investors have been scrambling to buy shares amid predictions of huge profits from the controversial sell-off.

Mr Umunna said: "It's a dream for City speculators and hedge funds, but it's a nightmare for the taxpayer, who ultimately doesn't want this to happen anyway and is now being hugely short-changed."

Billy Hayes, general secretary of the Communication Workers Union, said: "It's no surprise that the Government has sold the postal service cheap to its friends in the City.

"The public didn't want the service sold and will get a worse service as customers. Now they also know they are getting a bad deal as taxpayers too."

The union is balloting its members on whether to strike over issues linked to privatisation, with voting due to end on October 16.

Any strike could start a week later, crippling postal services in the run-up to the busy Christmas period.

Mr Cable wrote to Mr Umunna, saying that value for money for the taxpayer was an "absolutely key consideration" and adding that Labour's line on the sell off was "irresponsible".

He wrote: "Getting the right price in the transaction is in the interest of taxpayers, consumers and employees alike, as is ensuring that ownership of the Royal Mail moves smoothly to responsible investors able to take a long term, responsible approach to owning the company.

"The approach we are taking encompasses all of these considerations.

"I worry that the line you are taking on the other hand is irresponsible, simply magnifying a small minority of views which take a short term view of the flotation.

"To achieve value for the taxpayer we set the price range based on extensive consultation with investors.

"We have also undertaken a market standard 'book building' exercise during which the management have been communicating to investors the key highlights of the business and its future potential.

"This process should ensure that the price paid by investors appropriately reflects the value of the business, while creating an enduring shareholder base amongst long term institutional investors and positive aftermarket performance over the long term.

"I also feel it is irresponsible to imply that a share offering looks significantly undervalued.

"I think you should consider the risk that you may be influencing the decisions of retail investors. Equity investment always involves risk, particularly when the company in question is new to the market. In the light of this it is dangerous to imply that there is an easy bargain to be made."

The shares have been priced at between £2.60p and £3.30p but are expected to rise in value when the company floats on the stock market.

The company is currently valued at £3.3 billion but analysts at Panmure Gordon say it could be worth as much as £4.5 billion.

Mr Umunna has urged the Government to pull the plug on the privatisation to prevent a "massive bonanza" for City speculators.

In a letter to Mr Cable, he raised concerns that many Royal Mail property assets are in prime locations and could be sold, resulting in a windfall for investors and leaving taxpayers short-changed.

The prospectus highlights sites in London at Mount Pleasant and Nine Elms as being "surplus", with reports saying they are worth between £500 million and £1 billion each, according to Labour.

Royal Mail chief executive Moya Greene has written to employees offering them £300 not to take part in industrial action. Workers have been offered a pay increase of 8.6% over three years, including a £300 lump sum in year one if there is no strike.

The union described the move as "desperate".

The deadline for buying shares is midnight tomorrow, with conditional trading starting on Friday and full trading next Tuesday - a day before the strike ballot result is due.

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