Postal Services Bill
Debate between Lord Christopher and Baroness Kramer
Lord Christopher
My Lords, I do not understand what has just been said. However it is done, someone somewhere in Government has to decide whether the Royal Mail is worth X. The issue in front of us is how to arrive at X. I am very sceptical about whether Royal Mail knows what it owns.
To take a trite example, there are some valuable stamp collections in this country: Her Majesty has one, the Board of Inland Revenue has another and, I understand, the Post Office has one. The Revenue’s collection used to be displayed in cases as you walked into Somerset House. A representative of Stanley Gibbons walked in to ask the chairman, “Do you know what you have in those glass cases?”—there were three big ones. The answer was that it was worth well over £1 million. I think that the Post Office has a stamp collection, but I am pretty sure that no one there knows what it is worth. The outfit could well be sold lock, stock and barrel and then someone opens a safe one day and finds all those stamps.
There should be a proper valuation of all the assets of Royal Mail and the Post Office, because it will be divided up. Until that is done, we cannot satisfy the British people that we are asking a fair price. I do not complain about a modest discount, but we should have a clear idea of what assets we have. I will use my mythical Oxford sorting office as an example. What is it worth? An acre of land in most parts of the country is worth £5,000. With planning permission, it is worth nearly £1 million. Unless we explore the assets and ensure that we have an objective valuation of what is there, we will never feel that we have sold the Royal Mail properly.
Others have mentioned previous experiences. There have been two relatively recent ones, one by us of a company whose name I can never get my tongue around— QinetiQ—where people have walked away with millions. I have talked to many Members opposite who would never have privatised our railways in the way they did. Over the first two or three years, people walked away with very large sums of money. We have to avoid that. We cannot value the company in the way that companies are generally valued. Price/earnings ratios and so on have no relevance in that context. We must be sure that when we say to the British company, “We are trying to sell this for X”, that X is a reasonable, accurate figure.
Baroness Kramer
My Lords, I fully understand the concern of the noble Lord, Lord Christopher, that Royal Mail fully assesses the value of what it is, what it owns and what it has to offer, so that it understands its full value in the marketplace. That is an important process. I agree that that has not always been done when public entities have been sold. Indeed, there has often been an anxiety to achieve a sale quickly. I think that Governments have sometimes been seduced by investment bankers who would like a cheap, easy deal rather than trying to ensure that they get the maximum for the seller—in this case, the public. I hope that those lessons can be learnt. I agree that internal due diligence is critical.
However, I must say to the noble Lord that, although I care a great deal about transparency and openness, the day that this House or the Government put a value—£700 million or £800 million—on the asset, no bidder will offer a penny more. The art in a negotiation when you are selling a property is to get the buyer on the other side to decide what value he will bring to the table and give up some of that value to the seller. The goal is not just to achieve the value of the assets as they stand in some neutral and abstract form but to extract further value because of the benefits that a particular buyer sees because of their business plan and goals.
All of that disappears the day that the Government come out and publicly say, “This is what it is worth. You will not get X plus a penny, you will only ever get X”. I think that that is unadvisable for the taxpayer.
Lord Christopher
How would the noble Baroness value it? How would she put a price on it?
Baroness Kramer
Internally, due diligence is critical. The specifications and the instructions to the investment bankers, accountants and others engaged in the valuation have to be tough and in the monitoring and examination rigour should be applied to the response that they come back with. However, it still has to be in an internal setting, not a public setting. People will have many opinions across this House, but this will be a highly complex process with a great deal of detail. While this House has the ability to understand all that, there may be a subset of people who might be interested in being part of the consultation process by taking a look at that on behalf of the House. However, to me, it certainly would not be possible to do it in a public setting without giving the buyer the most impossible leverage.