POLITICS

Vince Cable 'Foolish' Over Royal Mail Sale Process, Warns Tory MP

02/04/2014 12:30 BST | Updated 02/04/2014 17:59 BST
Rui Vieira/PA Wire
Royal Mail staff sort Christmas post at Nottingham Mail Centre, Beeston, Nottingham, as they work to ensure post arrives in time for December 25. PRESS ASSOCIATION Photo. Picture date: Tuesday December 17, 2013. Photo credit should read: Rui Vieira/PA Wire

Vince Cable was "foolish" to dismiss Royal Mail's high price post-privatisation as "froth" as ministers failed to stop a "City cabal" from making a "killing" by cashing in on their shares, a Tory MP warned.

Speaking to the Huffington Post UK, Brian Binley, a member of the business select committee, branded last October's "unethical and immoral" flotation process a "debacle".

Binley savaged Cable and his deputy, business minister Michael Fallon, for failing to have a firm grip on their officials during the Royal Mail privatisation process.

"The real lesson is that politicians have got to learn that they have got to be the decision makers and not the civil servants, if that leads to a more robust attitude towards managing civil servants then that is what is leads to."

The Tory MP criticised the business department for following the advice of investment banks Goldman Sachs and UBS, who advised on setting the 330p-a-share valuation for Royal Mail.

"It's not surprising that when they talked to all their friends in the City, that no-one would pay more than 330p-a-share. Of course those City traders made a killing," he said.

"Whether the taxpayer got as good deal as they may have had is in dispute. Whether there was a cabal in the City that created the opportunity to make money for themselves, I personally think is not in dispute. That is what happened and we have to think about how we ensure that it doesn't happen again."

Binley suggested that the business secretary would regret dismissing warnings that Royal Mail's high price on the stock market post privatisation as proof that it had been sold too cheaply as "froth" and "speculation". Binley said: "I don't think there's any doubt about that. I think it was a foolish thing to say."

Royal Mail's shares soared by over a third on their stock market debut last October as demand among investors exceeded the supply of shares many times over. Royal Mail's share price continued to rise to 619p in January, with the shares closing off at 563p yesterday, still 70% higher than the opening price.

Binley's attack comes as Ed Miliband accused David Cameron at Prime Minister's Questions of selling Royal Mail "to his friends in the City".

The Labour leader said the prime minister was "not so much the Wolf of Wall Street but the Dunce of Downing Street". And he drew laughter from Labour MPs when he joked that the prime minister had turned "red as a post box" in face of the accusations.

The mounting criticism comes after the National Audit Office concluded that Royal Mail's privatisation left taxpayers short changed by £750 million as ministers were "too cautious" in their pricing of the business.

NAO head Amyas Morse, said: "The department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer."

Shadow business secretary Chuka Umunna said the NAO's findings were a "damning verdict on the Tory-led government's botched Royal Mail fire sale, leaving the taxpayer disgracefully short changed by hundreds of millions of pounds".

Binley suggested that Cable's deputy, Michael Fallon, "would have been more astute in dealing with the City if he had been involved". However, he claimed that the postal affairs minister was "not technically responsible" for the process and so the committee "has not really cross-examined him on it".

Other Tories have been less sympathetic towards Fallon. One told the Spectator: "He’s been AWOL in recent months, and today the National Audit Office has holed Fallon below the waterline. This Royal Mail story will badly damage him."

See also: 4 Shocking Things The Newly-Privatised Royal Mail Has Done

Shocking Things The Newly Privatised Royal Mail Has Done