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Taxpayers lost out on £1bn in sell-off of Royal Mail

TAXPAYERS have lost £1 billion in the "botched" sell-off of Royal Mail because the UK Government underestimated the demand for shares, according to a damning new report.

The Commons Business Committee also said ministers received poor-­quality advice and failed to get a good enough return on the sale of some assets, such as multimillion-pound sites in London.

Chairman Adrian Bailey MP said: "It's not at all clear the Government's sale of Royal Mail has brought an adequate and appropriate return for taxpayers."

Last October the initial offer price was 330p per share, which raised nearly £2bn. But since then the price has risen as high as 618p per share. This increase was dismissed by the Government as "froth" that would subside. The price now stands around 473p.

Mr Bailey noted: "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."

Just 48 hours before the committee published its report, Business ­Secretary Vince Cable announced a review of the sell-off of state assets.

During the next few years, ministers are looking at another potential sale of £20bn worth of assets, including stakes in RBS and Lloyds Banking Group, its remaining 40 per cent share in Royal Mail and its stake in Eurostar.

The committee said it was "disturbed" the Government might have failed to reap the benefits of the sale of Royal Mail assets included at privatisation such as three sites in London valued by the Business Department at about £200m but reported by the National Audit Office (NAO), the value-for-money watchdog, to have a "hidden value" of up to £830m.

The MPs found the Coalition had ignored established NAO recommendations that these assets should either be removed from the privatisation process or that clawback provisions be inserted on the future sale of the properties.

Mr Bailey said: "This was the most significant privatisation in years. Fear of failure and poor-quality advice led to a significant underestimate of the demand for Royal Mail shares. 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 committee also found many priority investors "bought cheaply and sold quickly" at a profit, adding the current ownership of Royal Mail by long-term investors had "little to do" with the actions of Mr Cable.

Ian Murray, the Shadow Trade ­Minister, decried how ministers pressed ahead with their "unnecessary and botched fire sale" of Royal Mail in spite of widespread opposition and warnings.

He said: "As a result, taxpayers have been short-changed by hundreds of millions of pounds while the Government's 'priority' City investors made a killing at the public's expense."

The Edinburgh MP added: "By launching an inquiry into the Royal Mail fire sale this week, ministers have admitted what everyone else has known for months about the huge failings there have been. David Cameron's government still has serious questions to answer."

Billy Hayes, General Secretary of the Communication Workers Union, was equally scathing, saying: "The committee's damning report shows the extent of the Government's incompetence in the privatisation of Royal Mail."

The Coalition review on asset ­sell-offs was, he insisted, a "cynical attempt at damage limitation".

Mr Hayes added: "Surely the botched job the Government did on the privatisation of Royal Mail is a lesson in itself; leave the family silver where it is instead of pawning it off."

The Business Department underlined how the committee report acknowledged it had achieved its objectives for the Royal Mail sale: protecting the universal postal service; removing the need for any more taxpayer support; raising almost £2bn; creating a FTSE 100 company and allowing members of the public to buy shares in the company.

A spokesman said: "The committee's views on the share price are based on hindsight and ignore that we were selling 600 million shares. They found no evidence the department or its advisers missed vital information prior to sale.

"The share price remains very ­volatile to this day, as the Business Secretary told the committee, and has dropped 25 per cent from its high point."

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