12 Jul 2014

A 2nd Class Price for a 1st Class Business

Yesterday morning the Department for Business, Innovation and Skills gave its preliminary report on the Royal Mail IPO. The report found that the under-pricing of Royal Mail led to the taxpayer losing out on £1 billion – that’s enough money to build the Olympic Park again, and again!

The finding that the under-pricing of the sale meant the taxpayer lost out on a mind-boggling amount of money is not shocking – our reaction to the report would have been the same whether it was one Olympic Park or two. But, what is shocking is that every time the IPO is investigated the story gets uglier. In April the report was that the IPO had been 750 000 under-priced. Somehow that figure, based on the same time period and information, has gone up by half an Olympic Stadium in less than three months. How much more squirming is there to come?

Now one of the other things I find frustrating about this story is the role of the banks. Banks, by definition, are inanimate money making machines. Further, I highly doubt that as an analyst at Goldman or UBS sits at his desk in the morning he is thinking ‘how will I help the taxpayer today’ – more likely ‘I wonder how my offshore bank account is doing today’. Reports that the likes of Goldman and UBS are partially responsible for making rich people richer and taking from the taxpayer is hardly breaking news.

What is shocking about the report’s findings and the role of the banks is that the finger is being pointed at them for the taxpayer’s £1 billion loss. Obviously they provided their expert opinions on the share price of Royal Mail but the decision did not belong to the banks. It was a government decision. Is the person employed to run our economy unable to come to his own conclusions? The last thing we need is to give more power to the banks.

The Royal Mail fiasco is a shameful example of the country being run as a business, with success measured by (quick) profit rather than by the quality of life of the people. A few made millions from the sale, namely, the Chancellor’s Best Man, the hedge-fund owner dubbed the ‘Locust’, who owns 5% of the shares, and business owners in Abu Dhabi, Kuwait and Singapore. As for Royal Mail it too is able to increase profits – again not good news for the taxpaying Postman who is deemed unnecessary.

I give you Capitalism in all its splendour.

For now I’ll leave you to breathe a sigh of relief over the government’s decision to abandon its plan to privatise the Land Registry. Phew.

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