70 per cent of the Royal Mail is now in private hands. Photo: Getty.
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Its share price has fallen, but the Royal Mail sale was still a debacle

The government lost between £750m and £1.7bn in selling off the Royal Mail – or three times as much as the bedroom tax might save.

An announcement today, from the recently privatised Royal Mail PLC, has reignited the debate over whether the company was sold incompently by the coalition.

A slight fall in the share price has led some to suggest its IPO was not quite the disaster it first appeared – when its share price rocketed nearly 40 per cent in one day.

But, by any measure, the sale still appears to have been an abject failure.

Royal Mail’s shares were priced at £3.30 when they floated in October. Within hours they had risen nearly 40 per cent.

The spike wasn’t an aberration, as Vince Cable – the minister responsible for the sale – tried to suggest. (The other minister involved was Michael Fallon, who has since been made Defence Secretary.) The price stayed high, and within three months it had nearly doubled in value.

The current price is back in line with the price to which it rose on the first day of trading. At that price – around £4.50 per share – the government’s mispricing cost the taxpayer between at least £750m, but at January's peak price it cost £1.7 bn.

Cable has claimed that this outcome would have been impossible to predict, and criticism is all very well in hindsight. But the department was under no obligation to sell its 70 per cent stake all at once. It used a procedure called "book-building" to choose its floation price of 330 pence, and could have pursued similar measures to calculate the value of its shares.

Instead, it relied on the advice of many of the financial firms behind the last economic crisis – some of whom have been criticised by the Bureau of Investigative Journalism over their conflicts of interest – and sold almost all of its shares in bulk.

They did this despite the fact that the pre-launch demand for shares was 24 times greater than supply. It scarcely takes an economist to consider that a mispricing.

As a result, Royal Mail’s shares rose twice as much as any other new shares did on their opening day in 2013.

The £750m lost through the sale has cost far more than, for instance, the government's roundly-criticised bedroom tax is projected to save, and is twice as much as the nation spends on museums and galleries.

But, even more distressingly, the justification for the sale – a promise of long-term capital investment – quickly unraveled. The government allocated more than a fifth of the Mail's shares to 16 "priority investors" before launch. These were ‘long term, stable investors’, Cable declared in the wake of the sale.

But, by January, 75 per cent of them had sold at least 48 per cent of their holdings, and six of the 16 no longer owned a single share.

As usual, the government was left at the whim of private institutions who were placed under no obligation to deliver. After the stratospheric rise in the company's value, these financial firms made the quick profit made open to him.

Now, hedge funds, and other financial firms that were initially classed as "non-priority, long-only" funds, hold more of the company than the 16 priority investors who were used to justify the sale.

The past year has been relatively slow for the coalition. The Programme for Government, on which they ushered themselves into power, was never formally updated, and in June they announced the fewest bills by a government in 20 years.

But the selling of the Royal Mail was one of the great changes of the past year. Unfortunately, it has simply served as the latest example of how inept the government often is at selling the "family silver".

The Royal Mail is the company that delivers parcels and letters. It is (now) distinct from the Post Office, which operates the 11,500 red-lettered branches that pepper your local high street. The Post Office remains in government hands.

The government argued the service desperately needed private capital in order to reinvest and uphold its "universal service". Putting the firm in private hands ensured it wouldn’t compete with "schools and hospitals" for government funding.

They pointed to equivalent services across Europe – in Belgium, Austria and Germany – that moved into profit after privatisation, and delivered levels of service that more than matched British standards.

But, while this argument appears persuasive, in practice the sale has shown the way government appears incapable of mandating anything to the private firms it often relies upon. It also ignores the non-monetary benefits a government-owned service can provide.

It is the same problem that has plagued the government’s attempts to reform welfare, make the banks lend more, or introduce any large IT project.  

Harry Lambert was the editor of May2015, the New Statesman's election website.

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How the Lib Dems learned to love all-women shortlists

Yes, the sitting Lib Dem MPs are mostly white, middle-aged middle class men. But the party's not taking any chances. 

I can’t tell you who’ll be the Lib Dem candidate in Southport on 8 June, but I do know one thing about them. As they’re replacing a sitting Lib Dem (John Pugh is retiring) - they’ll be female.

The same is true in many of our top 20 target seats, including places like Lewes (Kelly-Marie Blundell), Yeovil (Daisy Benson), Thornbury and Yate (Clare Young), and Sutton and Cheam (Amna Ahmad). There was air punching in Lib Dem offices all over the country on Tuesday when it was announced Jo Swinson was standing again in East Dunbartonshire.

And while every current Lib Dem constituency MP will get showered with love and attention in the campaign, one will get rather more attention than most - it’s no coincidence that Tim Farron’s first stop of the campaign was in Richmond Park, standing side by side with Sarah Olney.

How so?

Because the party membership took a long look at itself after the 2015 election - and a rather longer look at the eight white, middle-aged middle class men (sorry chaps) who now formed the Parliamentary party and said - "we’ve really got to sort this out".

And so after decades of prevarication, we put a policy in place to deliberately increase the diversity of candidates.

Quietly, over the last two years, the Liberal Democrats have been putting candidates into place in key target constituencies . There were more than 300 in total before this week’s general election call, and many of them have been there for a year or more. And they’ve been selected under new procedures adopted at Lib Dem Spring Conference in 2016, designed to deliberately promote the diversity of candidates in winnable seats

This includes mandating all-women shortlists when selecting candidates who are replacing sitting MPs, similar rules in our strongest electoral regions. In our top 10 per cent of constituencies, there is a requirement that at least two candidates are shortlisted from underrepresented groups on every list. We became the first party to reserve spaces on the shortlists of winnable seats for underrepresented candidates including women, BAME, LGBT+ and disabled candidates

It’s not going to be perfect - the hugely welcome return of Lib Dem grandees like Vince Cable, Ed Davey and Julian Huppert to their old stomping grounds will strengthen the party but not our gender imbalance. But excluding those former MPs coming back to the fray, every top 20 target constituency bar one has to date selected a female candidate.

Equality (together with liberty and community) is one of the three key values framed in the preamble to the Lib Dem constitution. It’s a relief that after this election, the Liberal Democratic party in the Commons will reflect that aspiration rather better than it has done in the past.

Richard Morris blogs at A View From Ham Common, which was named Best New Blog at the 2011 Lib Dem Conference

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