Taxpayers have lost £1 billion over the privatisation of Royal Mail because the UK Government underestimated demand for shares, a committee of MPs has reported.
Ministers were accused of being afraid to fail over the controversial sell-off last year, and of taking “poor quality” advice.
The business select committee said taxpayers were missing out on “significant value.”
In a hard-hitting report, the committee also expressed concern that the government had failed to get an adequate return on privatised Royal Mail assets, such as multi-million-pound sites in London.
The MPs concluded that the advice ministers received on the sale was not up to standard.
The committee found Lazard, the government’s financial adviser, and UBS and Goldman Sachs – the government’s global coordinators – failed to gauge demand at higher price levels and did not give appropriate consideration to maximising value for money.
Committee chairman Adrian Bailey said: “It’s not at all clear that the government’s sale of Royal Mail has brought an adequate and appropriate return for taxpayers. The basic facts are that the offer price was 330p per share, the price has risen as high as 618p per share, and now stands around 473p.
“The government cannot blithely dismiss as ‘froth’ our committee’s concern that the low issue price of this prime public asset has cost the taxpayer around a billion pounds.”
The committee said it was “disturbed” the government may have failed to reap the benefits of assets included at sale, including three sites in London valued by the Business Department at around £200 million but said by the National Audit Office (NAO) to have a “hidden value” of £330m to £830m.
The committee found the government ignored established NAO recommendations that these assets should either be removed from the privatisation process or that claw-back provisions be inserted on the future sale of the properties. Mr Bailey added: “The government’s inclusion of Royal Mail’s ‘surplus’ assets in the sell-off, without the prospect of clawing back future proceeds, may also mean the taxpayer losing out once again”.
The MPs found that many priority investors “bought cheaply and sold quickly” at a profit, adding that the current ownership of Royal Mail by long-term investors had “little to do” with the actions of Business Secretary Vince Cable.
The government was urged to publish a list of “preferred investors”, and the committee recommended that firms advising on share issues should be excluded from becoming a preferred investor in future.
A review has been launched into the process for selling government assets following controversy over the privatisation.
Former City minister Lord Myners will chair a panel of experts to look at alternatives to the initial public offerings as well as looking into so-called “book building” used ahead of a share sale to gauge investor demand. The review, launched by the Business Department earlier this week, was one of the recommendations made by the NAO in its report into the sale last November.
The department said it will inform future decision-making in the disposal of shares owned by government.
Ian Murray, shadow trade minister, said: “By launching an inquiry into the Royal Mail fire sale this week, ministers have admitted what everyone else has known for months on the huge failings there have been. David Cameron’s government still has serious questions to answer.”