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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The decline of the north's sporting powerhouse

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Now, things are different.

On a drive between Sheffield and Barnsley, I spotted a striking painting of the Kes poster. Billy Casper’s two-fingered salute covered the wall of a once-popular pub that is now boarded up.

It is almost 50 years since the late Barry Hines wrote A Kestrel for a Knave, the novel that inspired Ken Loach’s 1969 film, and it seems that the defiant, us-against-the-world, stick-it-to-the-man Yorkshireness he commemorated still resonates here. Almost two-thirds of the people of south Yorkshire voted to leave the EU, flicking two fingers up at what they saw as a London-based establishment, detached from life beyond the capital.

But whatever happened to Billy the unlikely lad, and the myriad other northern characters who were once the stars of stage and screen? Like the pitheads that dominated Casper’s tightly knit neighbourhood, they have disappeared from the landscape. The rot set in during the 1980s, when industries were destroyed and communities collapsed, a point eloquently made in Melvyn Bragg’s excellent radio series The Matter of the North.

Yorkshire historically acted as a counterweight to the dominance of southern elites, in sport as in politics and culture. Yet today, we rarely get to hear the voices of Barnsley, Sheffield, Doncaster and Rotherham. And the Yorkshire sporting powerhouse is no more – at least, not as we once knew it.

This should be a matter of national concern. The White Rose county is, after all, the home of the world’s oldest registered football club – Sheffield FC, formed in 1857 – and the first English team to win three successive League titles, Huddersfield Town, in the mid-1920s. Hull City are now Yorkshire’s lone representative in the Premier League.

Howard Wilkinson, the manager of Leeds United when they were crowned champions in 1992, the season before the Premier League was founded, lamented the passing of a less money-obsessed era. “My dad worked at Orgreave,” he said, “the scene of Mrs Thatcher’s greatest hour, bless her. You paid for putting an axe through what is a very strong culture of community and joint responsibility.”

The best-known scene in Loach’s film shows a football match in which Mr Sugden, the PE teacher, played by Brian Glover, comically assumes the role of Bobby Charlton. It was played out on the muddy school fields of Barnsley’s run-down Athersley estate. On a visit to his alma mater a few years ago, David Bradley, who played the scrawny 15-year-old Billy, showed me the goalposts that he had swung from as a reluctant goalkeeper. “You can still see the dint in the crossbar,” he said. When I spoke to him recently, Bradley enthused about his lifelong support for Barnsley FC. “But I’ve not been to the ground over the last season and a half,” he said. “I can’t afford it.”

Bradley is not alone. Many long-standing fans have been priced out. Barnsley is only a Championship side, but for their home encounter with Newcastle last October, their fans had to pay £30 for a ticket.

The English game is rooted in the northern, working-class communities that have borne the brunt of austerity over the past six years. The top leagues – like the EU – are perceived to be out of touch and skewed in favour of the moneyed elites.

Bradley, an ardent Remainer, despaired after the Brexit vote. “They did not know what they were doing. But I can understand why. There’s still a lot of neglect, a lot of deprivation in parts of Barnsley. They feel left behind because they have been left behind.”

It is true that there has been a feel-good factor in Yorkshire following the Rio Olympics; if the county were a country, it would have finished 17th in the international medals table. Yet while millions have been invested in “podium-level athletes”, in the team games that are most relevant to the lives of most Yorkshire folk – football, cricket and rugby league – there is a clear division between sport’s elites and its grass roots. While lucrative TV deals have enriched ruling bodies and top clubs, there has been a large decrease in the number of adults playing any sport in the four years since London staged the Games.

According to figures from Sport England, there are now 67,000 fewer people in Yorkshire involved in sport than there were in 2012. In Doncaster, to take a typical post-industrial White Rose town, there has been a 13 per cent drop in participation – compared with a 0.4 per cent decline nationally.

Attendances at rugby league, the region’s “national sport”, are falling. But cricket, in theory, is thriving, with Yorkshire winning the County Championship in 2014 and 2015. Yet Joe Root, the batsman and poster boy for this renaissance, plays far more games for his country than for his county and was rested from Yorkshire’s 2016 title decider against Middlesex.

“Root’s almost not a Yorkshire player nowadays,” said Stuart Rayner, whose book The War of the White Roses chronicles the club’s fortunes between 1968 and 1986. As a fan back then, I frequently watched Geoffrey Boycott and other local stars at Headingley. My favourite was the England bowler Chris Old, a gritty, defiant, unsung anti-hero in the Billy Casper mould.

When Old made his debut, 13 of the 17-strong Yorkshire squad were registered as working-class professionals. Half a century later, three of the five Yorkshiremen selec­ted for the last Ashes series – Root, Jonny Bairstow and Gary Ballance – were privately educated. “The game of cricket now is played in public schools,” Old told me. “Top players are getting huge amounts of money, but the grass-roots game doesn’t seem to have benefited in any way.”

“In ten years’ time you won’t get a Joe Root,” Rayner said. “If you haven’t seen these top Yorkshire cricketers playing in your backyard and you haven’t got Sky, it will be difficult to get the whole cricket bug. So where is the next generation of Roots going to come from?” Or the next generation of Jessica Ennis-Hills? Three years ago, the Sheffield stadium where she trained and first discovered athletics was closed after cuts to local services.

This article first appeared in the 19 January 2017 issue of the New Statesman, The Trump era