The government has launched an investigation into the way it disposes of state assets like Royal Mail, ahead of a report to be published tomorrow that slams the sale of the postal business last October.
Business secretary Vince Cable has appointed former Labour City minister Lord Myners to lead the probe, which will look at the way the government conducts initial public offerings and the bookbuilding process leading up to them.
The review will look specifically at sales that have seen significant rises or falls in price since flotation.
Myners and a panel of experts have been drafted in as the Business, Innovation and Skills (BIS) select committee prepares to publish a damning report into the Royal Mail sell-off, which argues that taxpayers were left shortchanged after shares in the business were underpriced.
MPs will recommend a ban on advisers who work on government-owned deals when other parts of the same bank are buying shares in the companies they float.
Cable came under fire earlier this year after it emerged that the government’s independent advisers for the deal, Lazard, were paid £1.5m for working on the Royal Mail deal, while the investment bank’s asset management unit was one of a group of priority investors given large allocations of shares.
The shares went on to rise 38 per cent on their first day of trading on the London Stock Exchange, leading to questions about the way the offering was priced by advisers.
Labour’s shadow business secretary Chuka Umunna welcomed Myners’ appointment yesterday but accused the government of shortchanging taxpayers. “Ministers have continued to defend their botched Royal Mail fire sale and maintained that the process was managed correctly, but the fact they have set up this inquiry shows the opposite is true,” Umunna said.
“Taxpayers have been short changed to the tune of hundreds of millions of pounds while large City investors, who were placed at the front of the queue by ministers, have been laughing all the way to the bank at the public’s expense,” he added.
The BIS report is expected to be highly critical of the way the government has handled the sale of Royal Mail, Sky News reported yesterday. It comes amid speculation that it could decide to sell its remaining 30 per cent share ahead of the general election.
MPs are also expected to voice concern that taxpayers will not reap the rewards of now-privatised Royal Mail assets, including sites in London worth many millions of pounds.
A spokesman for Lazard declined to comment but a source close to the bank said it was confident that its Chinese walls, which separate its advisory functions from its fund management activities, worked at all times.
A spokesman for the BIS select committee declined to comment ahead of the publication of the full report tomorrow.