Conservative MP grills bank officials over the Royal Mail sale

A Conservative MP attacked banks involved in the Government’s controversial privatisation of Royal Mail, claiming the deal had cost taxpayers money

Royal Mail
Royal Mail

A Conservative MP attacked banks involved in the Government’s controversial privatisation of Royal Mail, claiming the deal had cost taxpayers money.

Officials from Goldman Sachs and UBS, which ran the flotation last month, were given a grilling by MPs on the Business Select Committee amid continuing complaints that the company was undervalued.

Brian Binley (Conservative Northampton South) told James Robertson, managing director of UBS, and Richard Cormack, managing director of Goldman Sachs, that he questioned the two banks’ intelligence gathering operations.

The share price was set at 330p, valuing Royal Mail at £3.3 billion, but the shares jumped by over a third on the first day of trading and broke through the 550p mark within a week.

“All the advice you gave turned out not to be helpful for the taxpayer.

Right from the beginning, the Secretary of State was advised it would not go above 330p. Somebody somewhere has misled the taxpayer and cost the taxpayer. Why do you have confidence in your intelligence gathering mechanism to suggest to the Secretary of State that you were right, when you were wrong?

“Or did the Secretary of State decide for political reasons to keep the price at the lower level in order to have a successful sale?”

Mr Binley asked whether taxpayers would be entitled to believe that the banks “were not very clever” in their job, given how much they were paid.

Mr Cormack replied that it was a large, complicated sale, against the backdrop of a threatened strike by members of the Communication Workers Union.

“This was a well executive transaction,” he said.

The CWU has said any further payments should be withheld on the basis that banks undervalued the company. General secretary Billy Hayes said: “Hundreds of millions of pounds of taxpayers’ money have been lost because of the failure of the Government and its advisers to accurately value the company. In other situations this would be gross incompetence or even theft. Private shareholders have lined their pockets at the expense of the taxpayer following the huge leap in the share price. At the very least the institutions which advised the Government should not receive any further payments - which are discretionary. Serious consideration should be given to claiming back fees paid for shoddy advice which has left the client - the taxpayer - out of pocket.”

After an hour of exchanges between MPs and the bankers, Mr Binley said: “I thought this might have been a political plan to keep the price down and ensure an effective, successful sale. The more I hear, I am beginning to suspect your intelligence gathering operation.”

Committee chairman Adrian Bailey (Labour, West Bromwich West), said that from a lay person’s point of view, it would appear that either the banks were misled by the organisations they consulted prior to the sale of shares, or they misled the Government. Mr Robertson said it was clear to the banks advising the Government that investors would not pay more than 330p per share, especially as there were 600 million shares to be sold.

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