
The government's desperation to sell Royal Mail cost taxpayers £750m in a single day, the National Audit Office has said in a scathing report into the privatisation of the 500-year-old national institution. The public spending watchdog says the business secretary Vince Cable ploughed ahead with plans to float Royal Mail at a maximum price of 330p-a-share despite repeated warnings from City experts that  the government had vastly undervalued the company. The audit office said in a report today that Cable chose not to heed the warnings and increase the flotation price from the 260-330p range because of fears it could put off institutional investors and jeopardise the flotation as postal workers were preparing for nationwide strike action. The watchdog said the business department's keen desire to achieve a successful sale of Royal Mail within this parliament "resulted in the shares being priced at a level substantially below that at which they started trading". Royal Mail's shares spiked 38% on their debut on the stock market on 11 October - the biggest one-day rise in a privatisation since British Airways in 1987 - as investors tried to buy up more than 23 times the number of shares available. The audit office said the government could have made an additional £750m for taxpayers if it had priced the sale at the first day closing price of 455p rather than the maximum 330p starting price. Achieving an additional £750m from the sale could have covered the annual salaries of an additional 34,000 NHS nurses. The early jump in the share price, dismissed by Cable as "froth and speculation" was followed by a continued rise to a peak of 618p in January. The shares closed at 563p yesterday, still 70% higher than the float price. Amyas Morse, head of the audit office, said: "The department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer." Cable said: "Achieving the highest price possible at any cost and whatever the risk was never the aim of the sale. The report concludes there was a real risk of a failed sale attached to pushing the price too high. And a failed sale would have been the worst outcome for taxpayers and jeopardised the operation of Royal Mail." The audit office said the government's pricing decision was largely influenced by Cable's desire for "long-term, blue chip" institutional investors to buy and hold large chunks of Royal Mail shares. Despite overwhelming public demand for the shares (the public ordered enough to own the whole of the postal service but were cut down to just £750 per person), Cable allowed 16 long-term investors, mostly pension funds, priority access to the shares. The audit office said this was part of the government's "expectation that they would form part of a stable long-term and supportive shareholder base". At the time, Cable said: "We wanted to make sure that the company started its new life with a core of high quality investors who would be there in good times and bad, interested in Royal Mail and the universal service it provides for consumers over the long term." However, the audit office said six of the 16 "priority investors" selected by Cable had sold all of their allocation within weeks of the float, at a substantial profit. The watchdog said that by the end of January 2014 just 12% of the company's shares were held by the "priority investors". A large proportion of their shares were gobbled up by hedge funds, which Cable has repeatedly attacked for being short term investors, describing them as "spivs and gamblers". Within a fortnight of the float, a London hedge fund whose boss was memorably described as a "locust" by German politicians, bought up so many shares that it became Royal Mail's second-biggest investor after the government, which retained a 30% stake. The Children's Investment Fund, which is run by billionaire Chris Hohn, bought up 5.8% of the shares. It has since cut its stake down below 5%. The audit office also criticised the government for relying too heavily on its advisers, predominately the investment bank Lazard. The watchdog said the government gave Lazard an incentive "solely to complete a transaction" – not to achieve the maximum value for taxpayers. "The taxpayer interest was not clearly prioritised within the structure of the independent adviser's role," the audit office said in its report. And it revealed that the government asked its advisers if it should increase the offer price in the days before the float. The department's banking advisers said the top of the price range could be increased by 20p to 350p - which would have made an extra £120m for taxpayers. However, Lazards and the banks advised against increasing the price for fear it could have put off investors. This was despite some of the banking syndicate's analysts valuing the shares as high as 510p, with no one reckoning they were worth less than 300p. Lazards advised selling the shares at between 212-262p. Lazard was paid £1.5m for its advice. The government spent a total of £12.7m on fees to bankers, including UBS, Goldman Sachs, Barclays and Merrill Lynch, accountants, lawyers and PR advisers. Margaret Hodge, chair of the public accounts committee, said the department for business made a "critical error by incentivising its private advisers to sell the shares on time at the expense of price". She said the 70% rise in Royal Mail's share price since flotation shows that the department "had no clue what it was doing". Hodge said she was looking forward to "discussing this second class performance" when the department gives evidence to the committee in May. Chuka Umunna, the shadow business secretary, said the audit office's report was a "damning verdict on the Tory-led government's botched Royal Mail fire sale, leaving the taxpayer disgracefully short changed by hundreds of millions of pounds". Billy Hayes, general secretary of the Communication Workers Union that represents postmen and women, said the report "finds the government guilty"of overseeing a "get rich quick" scheme which offered no value to taxpayers. Unite national officer Brian Scott said: "This report is startling proof that the government sold off the country's family silver on the cheap." 

	[richardbj]
	And will anyone be sacked for incompetency and wasting public (yours and mine) money? Of course not. Why not? The rest of us would be in our working. What a society. And the bankers... Well, say no more. Totally immune from prosecution as we have seen from the banking crisis. We are a corrupt society and we need to start cleansing our own Augean stables before we go meddling in other countries affairs...

		[questionandfreedom]
		No one thinks that the tories will ever get back into government again, and Cameron knows that he has led the tory party into a political graveyard.

		[WaterloggedGlitch]
		richardbj 01 April 2014 8:37am:    wasting public (yours and mine) money   And from the headline:    Undervaluing Royal Mail shares costs taxpayer £750m   This isn't the correct way to look at things. The scandal isn't that taxpayers are losing out, in some technical accounting error. It's that privatisation has succeeded in transferring wealth from the less well-off to the better-off. That's the whole purpose of privatisation, and it worked well in this case, with £750 million in effect being transferred upwards.

		[teacuprider]
		How could anyone think of re electing this appalling rouge government?

		[gondrin]
		No one thinks that the tories will ever get back into government again, and Cameron knows that he has led the tory party into a political graveyard.  But that really doesn't matter, does it? The money is flowing the right way - upwards - and no future government seems likely to change that. I would say - on their terms - they have done a good job. The rich are considerably richer and the poor are suitably punished and crushed. I am not that confident that they will not get in again, given the lack of any coherent strategy from the opposition.

	[billybuzz53]
	This privatisation is bad news anyway. The speculators will clean up , already have actually but watch the mail prices shoot up , they already have too , what am I saying . We , the tax payers , have been badly conned yet again. Bad for jobs too.

		[GoddessOFblah]
		contemptuously ignored .  every party does this. i want to know which mainstream party works for the people?

		[TheTorysAreEvil]
		Not a single one buddy.......

		[MaltnHops]
		We , the tax payers , have been badly conned yet again.  But we haven't, have we? Plenty of us were opposed to this privatisation and were pointing out the obvious consequences of it loudly and clearly. We weren't conned at all but simply and contemptuously ignored .

	[Galaxina]
	Most Tory supporters won't care.. they'll have got their dirty little profit from this. Remember, it's only a scandal against taxpayers when they're not in on the scam.

		[GoddessOFblah]
		Galaxina - I wish you'd replace Miliband and became the Labour leader. I'd vote for you

	[SimpleOldSailor]
	The sale was not bungled it resulted in lovely scrumptious huge profits for a few and it is just coincidence that those who benefited the most happened to be from that sector of society most closely associated with top bankers, finance houses and politicians.

		[teacuprider]
		Yes, by a government who knows the price of everything and the value of nothing, but only when they want to benefit their friends.

		[onepairofhands]
		Spot on SimpleOldSailor If anything the Government would much prefer us to think it was 'bungled' by Vince Cable as opposed to 'deliberately manipulated to ensure their pals and the companies to which they will head for their directorships when they tire of politics made a mint at the expense of the little people' which is a lot closer to the truth.

	[OFFMYBACK]
	The tax payer stuffed yet again as we have been every time a national asset has been given away .I will vote for any party which stands on a platform of re nationalising these companies of national interest.

		[stfcbob]
		&quot; For no compensation too, they have profiteered out of what was our common property and wealth &quot;  Except those that have really profiteered have already flogged their shares making giant profits for nil work.  This is presumably what the government means by wealth creators.......unfortunately it is wealth that goes into their (offshore ?) bank accounts at the expense of the taxpayer.  Shafted .

		[alex13]
		For no compensation too, they have profiteered out of what was our common property and wealth. Oh and how about time inside for those that flogged it off for pennies on the pound too.

	[Tim Eslip]
	The privatisation of profit and the nationalisation of debt, in this case the Royal Mails £9billion pension liability, is a thieves charter enabled by the collusion of state government and international banking interests. Also, in this case the company was for around half of its value with Lazards and Goldman Sachs pocketing the difference. It's grand theft, we've been robbed again.

	[baerchen]
	Vince Cable in &quot;blithering idiot out of his depth&quot; shocker

		[arnosvale]
		Surely you mean politician?

		[chevychase]
		yes, who is the SPIV now ??

	[milkador]
	In a time when we have to make tough choices on spending, throwing away £750 million is no laughing matter. Every dog in the street knew that the Royal Mail was being sold off on the cheap, as evinced by the fact that the sale was massively oversubscribed. The arrogance of the man to describe the first day increase as &quot;market froth&quot; and not accept that he'd thrown taxpayer money away is unbelievable.

		[gandrew]
		The whole debacle gives a new meaning to &quot;convincing&quot;.

	[paritywarrior]
	#750 million in one day? That would have been enough to pay up-rated pensions to frozen pensioners in the Commonwealth for a year and a half (see www.parity-warrior.com). But then, we know that this Coalition government are only interested in channelling more money to the fat cats - bankers and hedge funds.

		[MelKelly]
		Any party stating a bill which can be retrospectively appkied as charges being brought against politicians who acted against the publuc interest will get me vote - get vince in court - all shares suspended and abyone who made gains must refund public purse wgen it is renationalised any oroperty sakes and redundancies reversed

	[bateleur]
	This is all part of a process, which started back in Tudor times, called 'Enclosure'. In those days it was land. And the rich and powerful stole it off the poor and weak, without any compensation. All the poor were left with were a few bits of scrubby common land that was good for nothing. Now the rich and powerful can't steal in quite the same way, but steal they still do. And rather than land, which has all gone, it is now commonly-owned assets/enterprises/industry. The railways, telecommunications, energy, water, Royal Mail, they have all been stolen from you. Oh ... sure ... ordinary people could buy a minuscule few shares. But the rich and powerful knew that the public aren't really into buying and selling shares. They knew that the public would sell their tiny holdings for a quick buck a little while down the line, leaving the R&P holding the property. They could bide their time to make a killing. And that's what they've done/are doing. Enclosure, in whatever form, has had a profound effect on British society. And not a good one.

		[paulee]
		We need a revolution! Or we need an alternative political system. This capitalism is rotten to the core.

		[Satrodniki]
		Well this would make sense if (a) governments knew how to run businesses - they don't and never will, as this story ironically underlines, and (b) that 'nationalised' companies actually belonged to - in any real sense - the people. The nationalized companies were run effectively on behalf of the people who worked for them, not the public - much as the NHS is run today. Since their managements were notoriously inefficient 'the people' were actually paying through the nose for their upkeep - a double whammy since they covered inefficiencies twice: through above market pricing and through higher taxes. If you translate a public monopoly into a private one you get rid of the latter but not of course the former. The principle of privatization is 100% sound; the execution of the concept has I agree been flawed but it is entirely disingenuous to then use this as an argument for 'nationalisation'.

	[chevychase]
	Cable needs to retire, maybe he should be sold off at the lowest possible price

		[questionandfreedom]
		Cable has already sold his soul for a place in the treasury.

		[GoddessOFblah]
		the whole of the lib dems need to retire - traitors

		[worried]
		...could he be given...would he be taken ?  Answer from Grauniad lovers to the second part is yes...by those he 'helped'. Just like like all the others of left right and middle persuasion...or persuadability.

	[CountOfPithy]
	It's all well and good for Chuka Umunna to come out swinging about how it was sold off on the cheap, but it would even better if he, and others, came out and started kicking off about how it should never have been sold in the first place.  Thirty five plus years of this unchallenged free market shit and nobody in the Labour party wants to take a swing at it despite no end of empirical evidence that proves it's many cheerleaders are talking unmitigated fucking bollocks.

	[Captain_Smartypants]
	The “economically competent” government indeed!

	[Sickofpoliticians]
	It wasn't sold off it was given away so more get rich quick types in the city could make oodles of profit on the deal at the expense of the majority just like every other public service and utility. If anyone can tell me WTF we're all paying so much taxation and council taxes for with a rational argument to back it up I'd really like to hear one because none of this makes much sense to me.

	[WakeUpArgh]
	Stroke of genius from Osborne. Cable is the face of selling of Royal Mail, and forever will be.

	[mathnawi]
	Funny how quiet the Tory Central Office trolls are this morning.

	[traineeanarchist]
	Well Vince what you did was either gross incompetence, willful neglect or by intention.....which one is it?Whatever the reason you should resign immediately or be sacked as you are not fit for office.Having said that I must say that you are in appropriate company with those who demonstrate the same incompetence and outright bias towards a 'business' sector of which the Kray's would be proud.

		[danihan]
		Don't forget the part the inept expenses cheat Fallon played in this debacle.

	[BearWitness]
	Thick cigar smoke hangs in the air of a leather- panelled gentleman’s club, somewhere off The Strand. A retired Colonel sleeps fitfully by the fire. Two men are talking in hushed tones nearby;  “So George, we’ll buy into your little proposition, but you’ll have to make it profitable. As you know my associates’ minimum margin is 20%. It simply isn’t worth our while otherwise, and you know how the market talks, George…” “I’ll see what I can do, Vitaly, but getting this past the treasury will take some doing.” “Oh, don’t worry about that old boy, There’s a very nice little directorship that’s about to become available in one of my subsidiary holdings.” Both men smile broadly, as the brandy arrives.

		[Peter Balchin]
		&quot;....Thick cigar smoke hangs in the air of a leather- panelled gentleman’s club, somewhere off The Strand. ..&quot; The Strand? Where?

	[Liam Burns]
	There should had been a criminal investigation from the start! Under sell a company by 2/3 of its price then nationalize the debt, if this would have been any other company there would be police all over it, same old toffs and their shady mates getting away with daylight robbery!

	[DJT1Million]
	The Independent are reporting an additional development in this story: 'Royal Mail float: How banks broke promises and raked in a £323m fortune – and lost taxpayers £1bn. The full scale of how City banks short-changed taxpayers in the £3.3bn flotation of Royal Mail was laid bare last night as it emerged that big investors who were offered extra shares in a “gentleman’s agreement” to stay in for the long term sold them almost instantly at a vast profit' http://www.independent.co.uk/news/uk/royal-mail-float-how-banks-broke-promises-and-raked-in-a-323m-fortune--and-lost-taxpayers-1bn-9226885.html The words 'gentleman's agreement' and The City are no longer appropriate, trust in The City and our Banking & Financial Services institutions is at an all time low. All they seem fit for is managing tax haven goodies, money laundering, fraudulent behaviour and oligarchs ill gotten gains. Yet again, proper reform is desperately needed if we are to retain this important industry. …..not letting the government off the hook here by the way. Westminster and The City are way too close too each other with too many living in each others pockets. the Coalition has screwed up badly here, Vince Cable has screwed up badly and we, the electorate have been screwed. Again.

		[blairsnemesis]
		Interesting, though not surprising with this lot of charlatans, of course. Let's hear you Miliband - so much to get your teeth in to here. Get your finger out.  In a civilised society, many of the people involved in this cack-handed, bargain-bucket sale would be facing long jail terms for screwing us for the benefit of their friends.  I'd welcome a violent revolution that takes these people out.

	[WellMexico]
	Goldman Sachs told the Government that 330p was a fair price to sell RM off at, and ONE WEEK LATER told its clients that the long term expected price was 610p. Where are the Serious Fraud Office and Financial Conduct Authority in all this? If this isn't wholesale fraud, I don't know what is. http://www.ibtimes.co.uk/royal-mail-share-price-goldman-sachs-ipo-525890

	[Runesmith]
	Anyone who calls this a mistake is naive. It did exactly what it was intended to do.

	[HeadsGone]
	And so this awful Government just ignores the criticism and carries on regardless This is incompetence and Cable should resign, the press and the BBC just let it go - Why? Oh well they can cut a few more benefits and make the disabled pay for it! The important thing is the City boys are well pleased

	[MileySoorpuss]
	Poor Vince - he once had props. Now just another Tory lackey. He (under)sold his soul years ago.

	[TedSmithAndSon]
	The government. Lying thieving useless bastards.

	[classm]
	Sadly not an April fool's joke - this was for real. The real fraud of selling off cheap.
