This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.bbc.co.uk/news/business-28250963

The article has changed 7 times. There is an RSS feed of changes available.

Version 2 Version 3
Taxpayers 'lost £1bn' on Royal Mail sale, MPs say Taxpayers 'lost £1bn' on Royal Mail sale, MPs say
(35 minutes later)
Taxpayers may have lost out on around £1bn from the undervaluing of Royal Mail, a committee of MPs has said.Taxpayers may have lost out on around £1bn from the undervaluing of Royal Mail, a committee of MPs has said.
The government feared failure and acted on bad advice over the Royal Mail stock market flotation, reports the Business, Innovation and Skills select committee.The government feared failure and acted on bad advice over the Royal Mail stock market flotation, reports the Business, Innovation and Skills select committee.
The Department for Business said the MPs' report contained "factual errors and misunderstandings".The Department for Business said the MPs' report contained "factual errors and misunderstandings".
Royal Mail shares were priced at 330p, but jumped as high as 618p per share, and now stand around 473p.Royal Mail shares were priced at 330p, but jumped as high as 618p per share, and now stand around 473p.
Business Secretary Vince Cable said: "We sold at a price that was regarded as the best that could be achieved in the context in which we sold it."Business Secretary Vince Cable said: "We sold at a price that was regarded as the best that could be achieved in the context in which we sold it."
He added: "The point we have stressed, and I've stressed over and again, that the price of shares is very, very volatile - these things go up and down and we've seen in the last few weeks the price of Royal Mail shares actually falling like a stone."He added: "The point we have stressed, and I've stressed over and again, that the price of shares is very, very volatile - these things go up and down and we've seen in the last few weeks the price of Royal Mail shares actually falling like a stone."
His department pointed out that taxpayers had made £2bn from the deal.His department pointed out that taxpayers had made £2bn from the deal.
'Significant underestimate''Significant underestimate'
But in its scathing report the select committee said the shares had been undervalued and property owned by the Royal Mail had been mispriced.But in its scathing report the select committee said the shares had been undervalued and property owned by the Royal Mail had been mispriced.
"We believe that fear of failure and poor quality advice led to a significant underestimate of the demand for Royal Mail shares," said Labour MP and committee chair Adrian Bailey."We believe that fear of failure and poor quality advice led to a significant underestimate of the demand for Royal Mail shares," said Labour MP and committee chair Adrian Bailey.
The committee added that the advice the government received from companies also "wasn't up to standard".The committee added that the advice the government received from companies also "wasn't up to standard".
External adviser Lazard, plus coordinators UBS and Goldman Sachs, "failed to gauge demand at higher price levels and didn't give appropriate consideration to maximising value for money for the taxpayer", the committee said.External adviser Lazard, plus coordinators UBS and Goldman Sachs, "failed to gauge demand at higher price levels and didn't give appropriate consideration to maximising value for money for the taxpayer", the committee said.
After the shares floated, Mr Cable described the sharp appreciation as "froth".After the shares floated, Mr Cable described the sharp appreciation as "froth".
But Mr Bailey said: "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 £1bn."But Mr Bailey said: "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 £1bn."
In its defence, the department said: "The committee's views on the share price are based entirely on hindsight and ignore that we were selling 600 million shares.In its defence, the department said: "The committee's views on the share price are based entirely on hindsight and ignore that we were selling 600 million shares.
"They found no evidence that the department or its advisers missed vital information prior to sale.""They found no evidence that the department or its advisers missed vital information prior to sale."
Future proceedsFuture proceeds
The committee also said it was "disturbed" that the taxpayer may not have benefited from valuable assets included in the privatisation.The committee also said it was "disturbed" that the taxpayer may not have benefited from valuable assets included in the privatisation.
In particular it highlighted three sites in London which the National Audit Office (NAO) said had a hidden value of up to £830m.In particular it highlighted three sites in London which the National Audit Office (NAO) said had a hidden value of up to £830m.
According to the select committee, the NAO recommended that those assets should not be included in the privatisation or an arrangement should be made to claw back proceeds of any future sale of those properties.According to the select committee, the NAO recommended that those assets should not be included in the privatisation or an arrangement should be made to claw back proceeds of any future sale of those properties.
"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," Mr Bailey said."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," Mr Bailey said.
The committee also expressed concern about so-called preferred investors who received large blocks of shares, prior to the flotation.The committee also expressed concern about so-called preferred investors who received large blocks of shares, prior to the flotation.
Some were also advisers to the government over the share sale.Some were also advisers to the government over the share sale.
The committee added that in future, "any perception of financial advantage must be removed from the privatisation process".The committee added that in future, "any perception of financial advantage must be removed from the privatisation process".
Lazard, UBS and Goldman Sachs all had Royal Mail shares allocated to separate parts of their businesses. Lazard and the banks made millions of pounds on the sale on behalf of clients.Lazard, UBS and Goldman Sachs all had Royal Mail shares allocated to separate parts of their businesses. Lazard and the banks made millions of pounds on the sale on behalf of clients.
"We recommend that the department give serious consideration to excluding any company involved in the selection of preferred investors, as a preferred investor, even if the appropriate 'Chinese walls' remain intact," the committee said."We recommend that the department give serious consideration to excluding any company involved in the selection of preferred investors, as a preferred investor, even if the appropriate 'Chinese walls' remain intact," the committee said.
'No evidence''No evidence'
Lazard & Co was paid £1.5m for advising the government. Lazard Asset Management (LAM), which was selected as one of the preferred bidders, made £8.4m for clients by selling shares shortly after the flotation. LAM itself made a profit of around £40,000 from the share sale.Lazard & Co was paid £1.5m for advising the government. Lazard Asset Management (LAM), which was selected as one of the preferred bidders, made £8.4m for clients by selling shares shortly after the flotation. LAM itself made a profit of around £40,000 from the share sale.
However the Department for Business said: "There is no evidence that the government's independent adviser, Lazard, or any other bank involved in the sale, breached the Chinese walls that existed between different and unrelated parts of the business."However the Department for Business said: "There is no evidence that the government's independent adviser, Lazard, or any other bank involved in the sale, breached the Chinese walls that existed between different and unrelated parts of the business."
Ian Murray MP, Labour's shadow minister for trade and industry, said: "Ministers pressed ahead with their unnecessary and botched fire sale of Royal Mail, despite widespread opposition and warnings. Labour shadow business secretary Chuka Umunna said: "The business department did not attach appropriate value to Royal Mail when they were selling it and what this has resulted in is a first-class short-changing of the taxpayer to the tune of hundreds of millions of pounds.
"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." "This is staggering incompetence on a grand scale by ministers."
On Wednesday, the government announced there would be a review, led by former City minister Lord Myners, of how it handled stock market flotations.On Wednesday, the government announced there would be a review, led by former City minister Lord Myners, of how it handled stock market flotations.
Mr Murray added: "By launching an inquiry into the Royal Mail fire sale this week, ministers have admitted what everyone else has known for months on the huge failings there have been. David Cameron's government still has serious questions to answer."Mr Murray added: "By launching an inquiry into the Royal Mail fire sale this week, ministers have admitted what everyone else has known for months on the huge failings there have been. David Cameron's government still has serious questions to answer."
The committee's report is the latest in a series of official criticisms of the sale, including by the National Audit Office and the Public Accounts Committee.The committee's report is the latest in a series of official criticisms of the sale, including by the National Audit Office and the Public Accounts Committee.