Royal Mail
Debate between Viscount Younger of Leckie and Lord Donoughue
Viscount Younger of Leckie
The occasion will not arise for those advisers to be used, but I am pretty sure that we would use them again. Again, much work was done with those well chosen advisers. On the fees, which my noble friend raised, the investment banking syndicate fees were split into a success fee of 0.9% and a discretionary bonus of 0.3%. However, I hasten to add that that particular aspect is under review, and no decision has been made on it. There are always lessons to be learnt from these IPOs. I reiterate that this is one of the largest IPOs that has been handled for many years. One of the lessons that we should take on board—again, it is right that we should deal with it in this way—is the question of the book-building process. That is very much the traditional way in which one can build up shares in an IPO. There are other, novel ways of doing it, but we believe that it would have been too risky for such an important IPO to have taken that course.
Lord Donoughue (Lab)
My Lords, this is a devastating report for the Government, as it makes it clear that this was pure underpricing. In future privatisations, will the interest of the public taxpayer be a priority, and not just achieving a successful fire sale? Will the Minister also concede that while those City advisers were apparently impressively sharp, the Government, the department, the Ministers and the officials were, in the word used by the chairman of the Public Accounts Committee, clueless?
Viscount Younger of Leckie
First, I do not agree with the first comment that the noble Lord made. He also made reference to a fire sale. I think it was said at the time, in October—I think by me—that this would be the longest fire sale in history, because my noble friend Lord Heseltine had mooted the idea of an IPO of Royal Mail many years ago. Indeed, the Benches opposite will know of the input into this from the noble Lord, Lord Mandelson. The National Audit Office report was not devastating but said that many of the decisions that we took were good; it said that we were right to be cautious and that it would have been wrong to take risks with such an important public asset as Royal Mail, or even to take risks with taxpayers’ money that would have been needed to support the company in continued public ownership. Had we adopted a more aggressive approach to pricing, there was a real risk that the deal would have failed. As the NAO says, the Royal Mail under public ownership would be worth much less than the sale proceeds.