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?