MPs tear into Cable over Royal Mail
MPs have torn into Business Secretary Vince Cable and his ministerial colleague Michael Fallon as they insisted the Royal Mail privatisation had been a success and they had no regrets over the controversial sell-off.
The ministers rejected claims the company had been sold on the cheap at a cost of over £1 billion to taxpayers because the price of shares soared after going on offer.
Business Select Committee chairman Adrian Bailey said it was an "astonishing assertion" to claim the shares were sold for the best price, and Tory MP Brian Binley said the ministers had been let down by experts who advised on the sale.
The Communication Workers Union (CWU) renewe d its call for Mr Cable to resign over the sale as the ministers claimed the threat of strike action by Royal Mail staff had contributed to the decision to price the shares at 330p for the initial public offering (IPO).
Labour committee member Willie Bain said: "I think the public will be flabbergasted that ministers are happy with the advice that has been tendered given that they have foregone hundreds of millions of pounds as a result of this flawed transaction."
He added: "No one put the long-term return to the taxpayer first."
Mr Cable insisted: "We were overwhelmingly concerned with the long-term interests of the taxpayer. That is what drove the whole process."
Mr Fallon added: "Two years ago we had a loss-making Royal Mail. Today we have one of Britain's top 100 companies, with every prospect of a secure future and able to deliver on a sustainable basis the six-day-a-week service that our constituents rely on. That's a success."
The Business Secretary acknowledged that there were lessons to be learned about the way privatisations were handled, but insisted he had nothing to apologise for over the Royal Mail sell-off.
He said: "Hindsight is a wonderful thing, but on the basis of the facts we had, the information we had, the knowledge we had of the company, this was a successful transaction.
"We don't apologise for it and don't regret it."
He added: " The lesson to be learned from this whole exercise is 'is this the best system for getting the maximum value for taxpayer assets?'
"We accept the need to look at different methods and I suspect we may come back to the conclusion that the IPO route was the only one that made any sense."
Mr Fallon told the Business Select Committee that he stuck by the initial share price at the time of last year's flotation even though the value of shares soared by 38% on their first day on offer.
The two ministers said one of the issues affecting the setting of the share price was the threat of industrial action by the CWU, as well as the poor state of the world economy.
Mr Cable said that two weeks of strike action by the CWU would have "wiped out" the company's profits.
Mr Fallon said: "It is the one missing piece of this whole story: had we got a pay deal on time, from April 1 last year, and had a settled industrial relations climate, it is wholly possible that we could have achieved a higher price at the sale."
But Mr Bailey, the committee's Labour chairman, claimed the Government had been too negative in its efforts to sell the firm.
He said: "The whole approach of the ministers I find quite bizarre in terms of selling something. Whilst obviously when you are selling something you need to point out potential problems, there doesn't seem to be any emphasis on the positive cash position, the transformation in the company that had taken place and the value of the assets that were implicit in it.
"I would reasonably expect anybody who was selling something to at least give a balanced approach. The approach of the department seems to have dwelt on the negative, which if you are selling something - and particularly when that something is a public asset that the public were entitled to get money for - seems, quite frankly, utterly ridiculous."
Mr Binley said the level of interest in the shares, which were oversubscribed many times, should have led the Government to consider a higher price.
He asked Mr Fallon: " Are you generally telling me that all of that oversubscription would have fallen away if those shares had been priced at higher than 330p?"
But Mr Fallon told him: "Facebook was oversubscribed by 25 times, it fell 10% on the first day of trading. There is no link between oversubscription and the actual price."
Labour committee member Katy Clark told the ministers: "You were the custodians of a public asset. The impression that's been given is that you were not going to let anything stand in the way of selling off this asset as soon as possible and anything that might cause delay was just going to be swept aside."
Mr Fallon told her: "Hindsight is a wonderful thing, but I'm quite confident we got the best price we could at that particular time bearing in mind all the circumstances."
Mr Bailey told him: "That's absolutely Alice In Wonderland. The fact is that you didn't get the best price because on the day of sale the share prices soared. That's just an astonishing assertion."
The minister responded: "That was on a small number of shares. There is no evidence that people would have paid more than 330p for 600 million shares, whatever they were prepared to pay for a handful of shares on the day."
CWU general secretary Billy Hayes said: "For Cable and Fallon to continue to claim industrial action was the main reason they sold Royal Mail at a low share price is utterly ridiculous.
"The Committee heard that 'relatively few days had been lost to industrial action'. The shares were 24 times oversubscribed so for the Government to say they wouldn't have been able to get a good deal for the taxpayer is wrong.
"To compare the sale of Royal Mail, a publicly-owned institution, to Facebook, which is a private technology company demonstrates, that the Government had no understanding of how much the British people cared about their postal service nor did they understand that they were selling a public service.
"I agree with the select committee that all 'right-minded people' know Cable made a massive error when sanctioning the sale of Royal Mail at the price he did. It shows either that he's completely incapable or was downright careless with this public institution.
"It's clear Cable needs to go - this is a man who lost the taxpayer a billion pounds. A postal worker who lost a valuable item would be sacked and the same standard needs to apply to Mr Cable - he can't carry on as Secretary of State.
"It's beyond belief that the Government see nothing wrong with the sell-off and that shows the fundamental difference between them and Britain.
"People don't think it's right that the banks involved were able to sell shares to their investment arms and we need answers on why that was allowed to happen from the people in charge. We didn't get that today and it's simply not good enough."
Unite national officer Brian Scott said: "Money that should be flowing into the Treasury for schools and hospitals ended up in the hands of City funds and rapacious investors. Why on earth did Vince Cable believe that the 'priority investors' would act as stable, long-term investors in the privatised Royal Mail?
"The taxpayer has a right to know the circumstances surrounding the botched privatisation of Royal Mail. Who were the priority investors it gave 'mates' rates' to, why were they picked and what guarantees did the Government seek to secure long term investors for the Royal Mail?
"If the Department for Business does not come clean at the earliest opportunity then there must be a proper independent investigation."