Public shortchanged by Royal Mail sell-off

THE taxpayer should have gained much more money from the controversial sale of Royal Mail, an official report will say today.

MPs said taxpayers may have lost up to 1 billion in potential proceeds from the sale. Picture: TSPL

But the figure would still be well wide of the £1 billion being bandied around at the time by opponents of the sell-off.

Former City minister Lord Myners – who was asked to look into the controversial sell-off – will present his findings in a written report published today.

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Labour had described the sell-off as being “botched” because the government would have realised more cash had it set the share price higher than the initial 330p it chose.

The National Audit Office also criticised the flotation earlier this year.

However, Lord Myners is expected to say that if shares had been priced 20p-30p higher, up to £180 million extra could have been netted for the taxpayer.

The government sold 60 per cent of Royal Mail, raising nearly £2bn. But ministers faced criticism after shares increased by 38 per cent on the first day of trading and peaked at 615p before falling.


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MPs have said that taxpayers may have lost up to £1bn in potential proceeds from the sale, but this is believed to have been rejected by Lord Myners.

Providing some comfort for the coalition government, he is also widely expected to say he understood the reasoning behind the move.

Pricing shares higher would have been risky, an argument constantly put forward by Business Secretary Vince Cable, he will agree.

Mr Cable has defended the sale process and once described the share price rise as “froth”.

However, Mr Myners will also say he supports a wider review of so-called initial public offerings and the way the Shareholder Executive – which manages state-owned assets – handled the Royal Mail privatisation.

His report will highlight some so-called inadequacies in the way the sell-off was dealt with, particularly with regard to setting the share sale price.

This will focus on the allocation of shares to so-called priority investors in a process known as pilot-fishing, which is used to see what kind of appetite there is for stock before a flotation.

And it is thought he will use data to question the behaviour of some investors and their buying activities during the initial public offering.

His report, which was commissioned as an inquiry in the summer, was assisted by tax experts and prominent City figures in part because of its complexity.

It is expected to see a series of recommendations made which could have far-reaching implications for future flotations.

The report will suggest having a wider pool of analysts to publish research on firms, much earlier publication of prospectuses and a review of so-called blackout periods – all aimed at providing access to as much information as early as possible.

Other technical improvements to the system are also likely to feature.

A priority for future sell-offs should be to ensure they are debated much more thoroughly, with a suggestion that government sales of this kind should be done in tranches to aid transparency


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