Baroness Kramer
Main Page: Baroness Kramer (Liberal Democrat - Life peer)Postal Services Bill
Baroness Kramer Excerpts
Lord Hoyle
I was not going to rise, but I am going to rise and there may be other occasions when I rise when we hear the eloquence of the noble Lord opposite. I notice that he did not reply to the argument being put forward here about the uncertainty that would rest with Royal Mail unless there is a conclusion date. The question that was being asked was, “Are they going to give it away?”. I know that the Minister is a more reasonable person, and I expect that she will deal with the arguments rather than going round the periphery and talking about what might or might not have been. The pair of us had a little discussion. We did not always agree, although on other subjects in the past we have agreed, so we have something in common, but not on this. I hope the noble Lord will not rise again unless he is going to deal with the arguments in a constructive way and say why we should not have it. The reason is that we cannot allow uncertainty to continue. That will happen. How can management plan ahead if it has to keep asking itself: When will we be selling it off? How will we sell it off? Where are we going to go? No planning can take place in such circumstances. It not only affects the Royal Mail; it affects the Post Office network as well. We need to know what the Government are thinking. They have said, and I completely agree with them, that it will not be a giveaway. They are trying to get the right price with the right company that will serve the interest. I, of course, am totally against that, as is known. The point is that we are where we are in discussing this Bill, and it is reasonable to put a limit on this. After all, we are only at the beginning of 2011 and we are talking about the end of 2012. What is wrong with that? I do hope that we get a more constructive reply from the Minister.
Baroness Kramer
My Lords, I should, I suppose, confess to something of a wicked past. Back when I was a banker in the United States, part of my work was advising companies that were making purchases and selling off subsidiaries. If I was advising a potential buyer of Royal Mail, I would be hoping very much that this amendment would pass, because, frankly, nothing would give more leverage to a potential purchaser than what in effect is being described here as a drop-dead date.
We have seen government in the past sell assets at far below their appropriate value. I was very involved from the other side when I was on the board of Transport for London and the Government insisted on the Tube public/private partnership. TfL set itself internal deadlines. I do not believe that they were externally set, although I would have to check that. The ability to negotiate in effect collapsed in the final days as those deadlines approached and were very much exploited by the private partners and the banks on the other side, so I beg this House not to fall back into that trap.
The noble Lord discussed uncertainty, but what greater uncertainty could there be than the knowledge that the Government might find themselves coming back to this House at the time of a sunset clause for leave to continue with a sales programme. That maximises uncertainty for Royal Mail and for the other parts of the group that will, we hope, go on to their new future.
Lord Jones of Birmingham
My Lords, I concur with the noble Baroness. If this amendment was passed, there would be no activity whatever until about November 2012. As noble Lords will know, I spend a lot of my time in the corporate private sector, and I can tell the House that a lot of companies would just wait. There would then be a lot of activity in December 2012, and the Government would find themselves selling this at a price that none of us would want.
Lord Skelmersdale
Not only that, but the Post Office could do the same thing under the current arrangements and no one would complain.
Baroness Kramer
Is it not correct that in negotiating the sale of the shares, the value of property that could be disposed of would be considered as part of the mechanism for valuing the company?
Baroness Wilcox
I am much supported by my noble friends on this side. They have given every answer that I could give at this stage and I am very grateful to them. I return to Amendment 2 and ask the noble Lord to withdraw it. I am sorry that it is such a long time since I made my argument. I hope that he has kindly remembered it.
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.
Lord Hoyle
The noble Baroness said that if we value it, we will not get a penny more. In past privatisations, it was not that we got the value for the business, but that we sold it at a loss, at a low price. That is what we are asking her to deal with.
Baroness Kramer
I fully understand what the noble Lord is saying. In the past, privatisations have been naive. We have to use pressure to make sure that the Government do not go through that naive process once again. I suggest that the remedy being proposed here—that the value is discussed in detail out in the public arena—does not achieve the purpose. It simply has the effect of making sure that in the end there is a cap on the sale price and creates another set of problems without necessarily disposing of the first set. We need to be pressing to make sure that the internal work is up to standard, but to my mind—and that is one person’s opinion—bringing it into the public arena does not achieve that.
Lord Brookman
My Lords, I had no intention of making a contribution in this debate but as someone who was involved in going from public to private in the steel industry I shall make one point. Who owns things is quite important. When the British Steel Corporation was formed when I was a young man, it had 267,000 employees. Tata Steel, formerly Corus, now employs between 15,000 and 20,000 people. Put that aside. We are a country that used to take pride in what we had and what we owned. I want to be reassured that if the Post Office or any other publicly owned business is hived off to foreign competition the interest of the British people is safeguarded. I just wanted to make that point.