Rogue Mail: a demo by the Communication Workers Union against Royal Mail privatisation, October 2013
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The Royal Mail underselling shows this was privatisation through ideology not pragmatism

If ministers had held out for a better price, they could have raised an extra £750m.

Money is still a bit tight down at the Treasury – so any deal under which the taxpayer loses out to the tune of three quarters of a billion quid might be considered just a tad embarrassing.

That's certainly what the National Audit Office (NAO) thinks. Last October the government sold 70 per cent of the Royal Mail at a price of 330p a share. By the end of that day, those shares were already trading at 455p, and in January they hit a peak of 615p (they’ve since fallen back a bit). In other words, if ministers had held out for a better price, the sale could have fetched an extra £750m.

The watchdog’s boss, Amyas Morse, doesn’t really go in for fiery language but his comment was quietly damning nonetheless. The business department’s approach was “marked by deep caution,” he said, “the price of which was borne by the taxpayer”.

Anyone expecting ministers to be don sackcloth and ashes about all this, though, will have been sorely disappointed, and on this morning’s Today programme, the business minister Michael Fallon was utterly unrepentant. “The audit office report actually recognises that we achieved our objectives,” he explained to an increasingly exasperated Jim Naughtie. “It was the biggest privatisation for 20 years, we had to be careful about it to make sure that we got it away [and] we did get it away.”

In other words, the government was so frightened that the deal wouldn’t come off at all that it cheerfully underpriced it to make sure that it did. Fallon was basically admitting to exactly what the NAO had accused him of: privatisation was an end in itself, and we should consider ourselves lucky that the government succeeded in flogging off the family silver at all.

There are a number of reasons why a minister might favour privatisation. To raise money for other things. To outsource risk. To duck responsibility, by giving them someone else to blame.

For many on the right, though, it’s a matter of genuine faith. Services will always do better under private sector leadership, they think, because business types are clever and public servants suck. Hulking government bureaucracies are always less efficient and responsive than equally hulking corporate ones.

Never mind that most of the privatised railways are drowning in public subsidy, while the East Coast Main Line has started turning a profit since being taken back into public ownership: the latter needs to be re-privatised as quickly as possible because, well, it just does. Private good; public bad.

(There’s another view, common in some parts of the left, which states that business is inherently evil, the state inherently great, and that any move from the latter to the former will inevitably lead to the collapse of civilisation as we know it. This is, indeed, equally silly. It’s just not what I’m writing about right now, so there.)

The thing is, some privatisations were probably no bad thing. Yes, the shareholders are only interested in profits, and most corporate execs these days demand the kinds of salaries that’d enable them to turn their basement into the Batcave for a laugh. Get things right, though, and the government can use all that to its advantage, to encourage innovation, or investment, or difficult decisions for which ministers lack the guts. To go back to the railways, the lines into Marylebone station are run vastly better these days than they ever were run under British Rail. Sometimes, it can work.

But sometimes, it doesn't. Sometimes government mucks up the way it structures its contracts. And sometimes a service is just so unprofitable that the only way of ensuring it exists at all is for the taxpayer to suck it up and pay for the bloody thing.

Which side of this divide the Royal Mail privatisation will come down on is not exactly clear: cleverer people than I don’t seem to agree. But I’d be more confident about it if Michael Fallon hadn’t just suggested that the government’s goal was privatisation at any cost. Getting these things right requires careful thought and lengthy negotiation. If ministers couldn’t hold out for a better share price, then how can we believe they held out for any of that?

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.