By Richard Johnstone | 11 July 2014
Business Secretary Vince Cable has announced a review into the process for government privatisations to examine options for reform following the controversial sell-off of the Royal Mail.
Cable said yesterday an ‘informal review’ into the process for initial public offerings of state assets would be undertaken by former Labour minister Lord Myners.
Prior to a sell-off of state-owned enterprises, the government uses a process known as ‘bookbuilding’ to assess the demand and how much the market would be willing to pay.
However, this process was criticised following the part-privatisation of the Royal Mail after the National Audit Office concluded taxpayers lost out after the government set an overly cautious share price in a bid to ensure it went ahead. The NAO report called for the Department for Business, Innovation and Skills to review the sale process so lessons could inform future asset sales.
Lord Myners will now chair a panel of experts that will examine alternative methods of privatisation, as well as whether there are ways to improve the current bookbuilding process for government sales, or change it completely.
‘I have asked Lord Myners to conduct this review, following the recommendations of the National Audit Office, to help me assess whether changes are needed to the current system government operates for the sale of its assets,’ Cable stated.
The examination comes as the business, innovation and skills committee today reiterated concerns raised by the NAO that although the government achieved its aim of floating Royal Mail, the low issue price of shares means taxpayers look like missing out on significant value.
Committee chair Adrian Bailey said: ‘It’s not at all clear that the government’s sale of Royal Mail has brought an adequate and appropriate return for taxpayers. The basic facts are that the offer price was 330p per share, the price has risen as high as 618p per share, and now stands around 473p.
‘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.’
