THE BLOG

Royal Mail Privatisation - Let the Feasting Commence

07/06/2013 15:43 BST | Updated 06/08/2013 10:12 BST

The government, in the shape of the Business Minister Michael Fallon has confirmed that the banks Goldman Sachs and RBS will handle the upcoming Royal Mail privatisation.

For this they will receive tens of millions of pounds. Exactly how much we do not know. In fact according to the Minister, they are practically cutting their own throats to do this:

"These banks will receive a tiny percentage of the amount raised in the share offering" - Guardian letter 30th May 2013

But hang on. A "tiny percentage" sounds, well, small. But believe me it is not. A tiny percentage of a small sum of money is a very small sum of money. A tiny percentage of billions of pounds is a great sum of money.

So how much is the tiny percentage Mr Fallon? It cannot be lower than 1% but let's be conservative and take that figure. So how much is the float? Again let's be conservative and say Royal Mail is worth £3bn (analysts say anywhere between £2bn and £6bn).

So 1% of £3bn is, just let me grab my calculator, er, yes, got it now £30m!

When confronted with that figure Mr Fallon has said it is "misleading". His department has said the £30m is "speculative." I would point out here that speculative is not necessarily wrong.

Two banks raking in £30m is of course, chickenfeed compared to the riches that await the new owner of Royal Mail. Having just posted a £440m year-end profit in the public sector and acting as a public service business it's no surprise that private equity owners are emerging as the favourites to snap up the Royal Mail.

Without so much as licking a stamp, the new owner will inherit a business providing an annual return of some £440 million, and that's before cost cutting, price rises and cut backs in loss making rural services.

These Croesus like riches do not appear from thin air though. Someone has to pay. Someone always has to pay. Unfortunately that's where the public come in....

Mario Dunn is Campaign Director of saveourroyalmail.org