Private Eye on the Failure of the Government’s Privatisation of the Royal Mail

In its edition for last night fortnight, 12th -25th June 2015, Private Eye ran this piece about Cameron’s latest privatisation of the Royal Mail. It pointed out that the rationale for the sale of its last remaining shares in Britain’s oldest state enterprise actually contradicts the previous announcements about how transferring it all to private ownership would somehow improve service. The article states very plainly that this shows what a fraud and shambles the sell-off of the Royal Mail really is. Here it is.

Royally Screwed

George Osborne’s decision to sell the taxpayer’s remaining 30 percent share in Royal Mail defies the whole purpose of the privatisation and confirms what a rip-off the original sale was.

When the leader of the government body that ran the original privatisation in October 2013, Shareholder Executive boss Mark Russell, was questioned by a parliamentary committee a few weeks later, he explained that “one of the main reasons that we are pursuing this policy of bringing in private sector capital is we expected private sector disciplines to come in on the back of the private sector capital”, which in turn would increase the value of the company. So “the very reason we were maintaining the 30 percent shareholding was because we anticipated that over time there would be some movement of share price, and we wanted the taxpayer to gain from that.”

In fact the Royal Mail share price shot up simply because the sell-off was undervalued at 330p per share. The price hit 600p within weeks and after a year of supposed “private sector discipline” now stands at around 500p.

The further sale now is either an admission that “private sector discipline” does not work magic and there isn’t much more upside for the taxpayer to expect on his 30 percent, or a desperate grab for cash by the chancellor. Or possibly both.

PS. The same Shareholder Executive that was criticised by the National Audit Office as selling Royal Mail shares with “deep caution, the price of which was borne by the taxpayer” has now acquired UK Financial Investments, the arm of the Treasury that will soon be selling billions of pounds’ worth of bank shares – an unlikely empire expansion that the taxpayer might come to regret.

In other words, the Tories’ final privatisation of the Royal Mail is pretty much like most of the other privatisations: it is purely driven by free-market ideology and the express intention of further enriching the private investors and wealthy Tory donors, who are expected to buy into the sale. For the public, it hasn’t led to any improvement in service. In fact, if previous privatisations are any guide, we can look forward to worse service coupled with a vast increase in prices in order to finance grossly inflated pay rises for the board of directors. And, as with all such privatisations, it’s also been grossly undervalued so that the taxpayer has not seen a proper return for the sale.

It is, as Private Eye has said, a rip-off.

It’s also another privatisation that I don’t think anybody wants. I can remember when the Royal Mail’s privatisation was first mooted back in the 1990s. I’m fairly certain my next-door neighbour’s at the time were working class Tories. I can recall them being absolutely horrified by the proposal, and stating very clearly that they did not vote in the election so it could be sold off.

Public opinion, however, means nothing to this government, nor indeed to much of the political class in general. They continue to remain absolutely convinced of the rectitude of free market ideology, despite its manifest failure to provide jobs, improve quality of service, or indeed give cheaper service. Privatisation – not just of the Royal Mail, but also of the rest of the utilities, including and especially the power companies and trains – is a massive, exploitative failure and should be reversed.

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4 Responses to “Private Eye on the Failure of the Government’s Privatisation of the Royal Mail”

  1. jbw31 Says:

    Reblogged this on jbw31.

  2. stilloaks Says:

    Reblogged this on DWPExamination..

  3. sdbast Says:

    Reblogged this on sdbast.

  4. A6er Says:

    Reblogged this on Britain Isn't Eating.

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