Vince Cable defends Royal Mail pricing

Royal Mail delivery trolleyVince Cable has written to his Labour shadow, Chuka Umunna, stating that the sale price for the Royal Mail “reflects the fact the business brings risks, as well as assets such as property”.

When interviewed by the BBC yesterday, Umunna had listed a number of objections to the Government’s valuation at £3.3billion, claiming that it could have been sold for £1billion more.

In his response, Vince Cable said:

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.

Today is the final day for applications, although it is now too late to apply by post. The Telegraph has some advice if you still want to purchase shares today. It looks as though the offer has already been substantially oversubscribed.

* Mary Reid is a contributing editor on Lib Dem Voice. She was a councillor in Kingston upon Thames, where she is still very active with the local party, and is the Hon President of Kingston Lib Dems.

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  • Martin Lowe 8th Oct '13 - 11:56am

    We’re back to the days of mass privatisation, where ‘success’ in selling off State assets is measured by the demand for shares and a subsequent increase in share price.

    As opposed to defining ‘success’ as setting the correct price in the first instance.

  • Michael Fallon has revealed that the government could reduce Royal Mail’s six-day-a-week delivery requirement with a Statutory Instrument. It seems absurd that I knew this, but the Minister had to admit to Labour MP Tom Blenkinsop that had been wrong to state in Parliament on 12 September that the six-day service could not be changed through a Statutory Instrument. Do Ministers not read their legislation? This coalition are clearly selling Royal Mail on the cheap and taxpayers are being mislead, as admitted already, and short-changed.

  • The State keeps the pension liabilities; the Mail keeps the prime London development sites.

    We should be ashamed to be associated wit this manoeuvre.

  • Richard Dean 8th Oct '13 - 2:25pm

    In the context of an imminent sale, it seems highly irresponsible for Vince to emphasise risk in this way.

    Perhaps his comments are simply his way of trying to save face – after all, if “the offer has already been substantially oversubscribed”, then this is a strong indication that he and his advisers have undervalued the company, and that they are therefore guilty of what Roy suggests.

    But potential purchasers can alternatively interpret his comments as indicating a real risk that they have not accounted for. This would be likely to adversely affect the sale and the post-sale market . This again is probably the wrong action as far as maximizing taxpayer value is concerned.

  • @David
    Good point, I was unawre of this level of detail, yes it would of made sense for the prime locations to have been made pension scheme assets and hence retained by the state, particularly considering the government valuation of the business… So there may be some mileage in Chuka Umunna’s suggestion that the business has been under valued.

  • Michael Parsons 11th Oct '13 - 3:53pm

    The true scandal is we are being asked to pay any price at all forshares in a business we already, as citizens, own. Individual shareholdings are then scattered and never carry the day at annual meetings – effectigvely voting control is being transferred to Big Money ( probably foreign?) especially given the Coalition’s timidity in operating firms (like banks) at any thing but ‘arm’s length’ even if it owns them almost outright.
    The whole sale is a disgrace, handing profits and power to Cable’s old Estalishment chums and it would seem robbing the already austerity-strapped citizenry of theirproperty for a song. Since as “busines secretary” he as failed to establish State-owned Public Banks, making us dependent on borrowing from HSBC etc and denying the int erest on public debt to the Treasury, the sooner he is removed from the governance of our great nation the better.

  • Richard Dean 11th Oct '13 - 4:12pm

    “The true scandal is we are being asked to pay any price at all for shares in a business we already, as citizens, own.”

    Not a scandal at all.

    We as citizens are benefitting from the sale in terms of the income to the treasury, which income reduces the taxes we would otherwise need to pay. In exchange for this benefit, we are relinquishing the treasury’s future income stream from surpluses made by the company.

    On the other side of the exchange, buyers are relinquishing their present holdings of some money, and are receiving rights to vote at shareholders’ meeting and receive a future income stream from dividends.

  • Michael Parsons 13th Oct '13 - 1:06pm

    Surely the “share votes system” you speak of is anti-demcratic because voting weighted overwhelmngly in favour of a wealthy few, who then at will then disadvantage the users of the service ( us) for their private gain. The income stream is lost forever to the public purse, and transferred private gain; and when set against the surplus about to be generated fort speculative hedge funds etc. and future price-hikes , and the limitations Cable imposed on s mall private purchses, must make these claims to to a public advantage wishful thinkibg at best. As to “having to pay taxes instead of selling” that just dodges the issue of Public Banking and getting an answer as to why our devious politicians have handed Treasury funding over to the private banks, doesn’t it? so that interest on public borrowing goes again to the private purse? It is a scandal, and like with the curent invasion of privacy the even greater scandal is why more questions are not asked. Perhaps the eagerness with which our MP’s seek to stifle investigative jornalism and now also non-party campagns provides an answer. The public are being removed ever further from power and decision making and reciprocal benefit.

  • Michael Parsons 14th Oct '13 - 1:30pm

    @ Richjard Dean
    We really do need to look at these supposed “flows” again: what is the net present value of the stream of saved future taxatioin the citizens are supposed to gain? against what they are paying/sacrificing to gain it? They are sellng something for £3.5 billion minus the billions of pen sioin liabilities they have taken on, to gain what? in current cash terms the discouned value of future tax outflows? result must be less than zero,so our sale must be contra-indictated as a ratioinal move don’t you think? Make realistic rate assumptions and work it out for yourself! Others have: if they did not stand to benefit by a positive income flow the “investors”(purchasers) would not have bid so eagerly. The Government should be adding that income to the Treasury by retaining the Royal Mail and investing into it- that would be a tax-saving!

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