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Cable insists he won't apologise

Under-fire Business Secretary Vince Cable has insisted the last thing he will do is apologise for the controversial privatisation of Royal Mail after Labour likened the sell-off to an April Fool's joke.

Mr Cable's shadow Chuka Umunna described the privatisation as a "first class disaster" that has seen taxpayers "short changed" out of hundreds of millions while people the Business Secretary once referred to as "spivs and gamblers" are "laughing all the way to the bank".

The pair clashed in the Commons after the National Audit Office (NAO) found that most investors given priority to buy shares sold them shortly afterwards for a profit.

Asking an urgent question about the privatisation in the Commons, Mr Umunna said: " You know it's April Fool's Day when a report is published by the National Audit Office saying 'the department could have achieved better value for the taxpayer' and then ministers go out on to the media and then come to this House and then declare their privatisation a success.

"They must think we're all fools.

"What planet are they living on? There are no two ways about it - this report delivers a damaging verdict on the Government's botched privatisation and it has left taxpayers disgracefully short-changed to the tune of hundreds of millions of pounds."

The shadow business secretary went on: "You dismissed claims that this cherished national institution was sold off on the cheap as 'froth'.

"The truth is this has been a first-class disaster for the taxpayer, and those you once referred to as spivs and gamblers are laughing all the way to the bank.

"The very least you can do today is apologise."

Mr Cable replied : "The last thing I intend to do is apologise. What I do intend to do is to refer to what the report actually said as opposed to the spinning and the froth that is being generated around me."

In an earlier reply to Mr Umunna's question, the Business Secretary said a more aggressive approach on pricing Royal Mail shares in the sell-off would have "significantly" increased the risk of a failed privatisation.

He said: "A more aggressive approach to pricing would have introduced significantly greater risk and the advice that we received in this respect was unambiguous.

"There was no confidence that a sufficient number of buyers would offer a significantly higher price, a failed transaction and retention of the Royal Mail in public ownership would have been a very poor outcome for the taxpayer as the NAO report confirms."

Mr Cable said the Government had achieved its key objectives by delivering short and long-term benefits, including £2 billion from the sale, 690,000 shares owned by the public, and the largest employee share scheme in more than 30 years.

In the long term, he said the "ongoing risk to the taxpayer" had been reduced by the privatisation.

The Business Secretary said the cost of a failed floatation would have been £2.5 billion as the valuation of Royal Mail if it remained in public ownership would be £1 billion.

Instead, the sale raised £2 billion in cash and £1.5 billion "in continued value of the retained sale".

Mr Cable said: "So we had a choice between the £3.5 billion which resulted from the privatisation and the £1 billion had this failed so it is absolutely right and sensible that we were cautious."

But Mr Umunna criticised ministers for hiding behind advice from bankers who have profited from the deal and were operating in inflexible constraints set by a Government who wanted a sell-off in this Parliament.

He said ministers could have achieved a better price if it had waited for the market to settle.

The shadow business secretary also asked Mr Cable to confirm that hedge funds now make up a large part of the shareholder list.

Mr Umunna said: "You have sought to hide behind the advice you received from the bankers who received millions out of this deal but will you confirm that those advisers acted within inflexible constraints set by ministers to achieve a sale as soon as possible in this Parliament.

"Had you waited for the market to settle, had you waited for further years' profits to be delivered, you could have achieved a better price."

He added: "Of course we were promised that you would secure a long-term and supportive shareholder base when the opposite has turned out to be true.

"Will you confirm that, of the 17 supposed long-term investors you prioritised, they had sold almost half the shares allocated within weeks and the hedge funds now make up a large number of the shareholder list?"

Mr Cable said it should be "blindingly obvious" that making an initial sale of 600 million shares was a very different proposition to the daily trading of two to three million.

He said: "That explains why the price has varied since the flotation. I have said and I continue to say there is a great deal of froth in the valuation. That is how equity markets operate.

"This particular share is surrounded by a great deal of volatility and there are two main reasons for that - the first is a great deal of uncertainty over the industrial relations in a company that has had a very troubled industrial relations history.

"The second key point... in looking at the volatility of shares is this is a company which is exposed to considerable levels of competition as a result of the actions of regulators beyond the Government's control.

"The estimate has been made that a 1% fall in sales is the equivalent of a 17% fall in profits for this company. Now, we do hope and have every reason to be optimistic that with the very good management of the company, with the cooperation of the workforce and with the investment the privatisation makes possible, we shall have a positive outcome in terms of competitiveness, but there is a great deal of uncertainty."

Tory Brian Binley (Northampton South) criticised the method of the sale and the valuations obtained in advance.

He said: "Can we be assured such a debacle will not happen again, that system will be changed and we will have a fairer deal for the taxpayer rather than this unethical and quite frankly immoral procedure that happened in this particular example?"

Mr Cable replied: "I think you misunderstand the basis on which the valuation was made. It was made on the basis of sampling 5,000 potential buyers amongst institutional investors and based on a comparison with other privatisations of a similar kind, such as the Belgian post office."

Labour MP Ben Bradshaw (Exeter) challenged Mr Cable to say whether he had "considered his position".

Mr Cable said: "Absolutely not. It was a successful operation and the NAO confirms that."

Steve McCabe, Labour MP for Selly Oak, asked whether Mr Cable considered the sale of Royal Mail shares to be a "personal political triumph".

Mr Cable responded: "Yes, it was certainly a success."


From Belfast Telegraph