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Royal Mail sell-off: Guardian gets it right

11th October 2013

Royal Mail sell-off: Guardian gets it right

Royal Mail: your cheque is in the post

A basket-case operation became an investment proposition that promises ‘a royal return on your money’

Editorial The Guardian, Friday 11 October 2013

Over long years, a self-hating public sector has applied tremendous institutional pressure on itself to do what it is finally doing on Friday, and flog off the Royal Mail.

It is a generation since Whitehall in general, and the business department in particular, gave any credence to the possibility of successful public enterprise. During this time there have been two abortive attempts to make the sale, and – in between these – a public corporation that existed to provide a service was turned into a state-owned PLC, which legislation dictated had to be run on narrow commercial lines. Investment was withheld, disruptive European regulations were adopted before they had to be, and a marketopian regulator was installed. In the early noughties, this regulator kept regular stamp prices artificially low and bulk-mail prices artificially high, a combination that hampered a company saddled with sacking birthday cards from St Austell to Stornaway, and emboldened cherry-picking competitors. The state’s “shareholding” was entrusted to a shady team of City secondees, handsomely paid for managing a portfolio that they openly stated the government had no business in owning. This self-imposed situation was entirely unsustainable.

Then, miraculously, once the privatisation policy was stitched together, the Treasury signalled sudden willingness to shoulder the Mail’s crippling pension debts, and “the business” acquired a free hand on stamp prices, which it duly put up 30% overnight. Thus fattened for market, a basket-case operation became an investment proposition which – in the words of one London stockbroker – promises “a royal return on your money”. The ideological roots of this sale are stark, but at least privatisation enthusiasts have an ideological argument. What ought to be beyond argument is that a cash-strapped exchequer should be sweating every last pound out of its assets, and yet the signs – including massive over-subscription – are that the Mail is being sold off too cheap. Massive property assets were not adequately factored into the prospectus, only one reason why “conditional” trading of shares could today confirm under-valuation.

The row rumbling through today concerned the caps on large investments, and reserved shares for small investors. This is a great distraction. If the experience of the 1980s are any guide, the great bulk of the equity will soon be sold on to giant City funds. Every investor has at least £750 to play with, and if the government hands them a windfall then – in current circumstances – that is a disgrace. Britain cannot, apparently, afford to keep disabled people in their homes, or maintain the dole in line with inflation. And yet, it seems, the resources are still there to parcel up a gift – for those with money to spare.