Royal Mail sell-off: taxpayer short changed…according to Vince Cable

The taxpayer may have been shortchanged to the tune of hundreds of millions of pounds by the sale of the Royal Mail, according to markers laid down by Vince Cable back in October.

The taxpayer may have been shortchanged to the tune of hundreds of millions of pounds by the sale of the Royal Mail, according to markers laid down by Vince Cable back in October.

The government had previously warned that it was too early to make a judgement as to whether shares in the company have been flogged too cheaply.

However back in October business secretary Vince Cable claimed that judgements about the Royal Mail sell off could be made after three months had passed.

Interviewed by the Today Programme on 11 October, Mr Cable said:

“You get an enormous amount of froth and speculation in the aftermath of a big IPO of this kind. It is of absolutely no significance whatever. What matters is where the price eventually settles and if we look back at this in three months’, six months’ time, or indeed years to come, that’s what we’re really interested in.”

On Wednesday, three months after the business secretary’s comments, Royal Mail’s share price closed at 562p – more than 70 per cent higher than the 330p at which the government sold the taxpayer’s stake in the company.

The taxpayer made around £2bn from the sell off of the company. However if the shares had been sold at 610p, the price mega banks Goldman Sachs believes the price will settle at in a year’s time, it is thought the exchequer would have brought in around £3.66bn.

In other words, taxpayers may have been short-changed to the sum of hundreds of millions of pounds because of the government undervaluing of the company.

In October shadow business secretary Chuka Umunna wrote to the National Audit Office and the chair of the Public Accounts Committee highlighting concerns that taxpayers could be short-changed.

Commenting on the news, Mr Umunna called the sell off a “botched privatisation”.

“On the day the Royal Mail fire sale went ahead Vince Cable was clear that the Tory-led Government should be judged on the basis of the price of Royal Mail shares after three months.

“Three months later, the Business Secretary’s dismissal of the sharp rise in share price as ‘froth’ has been demolished and increasingly it looks like the taxpayer has been left short changed at a time when services are being cut and families are struggling with David Cameron’s cost of living crisis.

“We know that Vince Cable considered, then rejected, the option of floating Royal Mail at a higher price which would have brought in more cash for taxpayers. He still has serious outstanding questions to answer on the price he could have received three months ago in respect of what increasingly looks like a botched privatisation.”

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