Postal Services Bill

Lord Razzall Excerpts

Tuesday 24th May 2011 Lords Chamber

[Lord Whitty]

My Lords, I support this amendment. The Government have to recognise that despite the hours which this House and another place have spent on this Bill and the very protracted proceedings, to which the noble Baroness replied in a very courteous and often very helpful way, the central fact of this piece of legislation, which deals with one of our national institutions and an essential part of our national infrastructure, is that nobody—not the Government, employees, customers, competitors or potential investors —knows what Royal Mail will look like once this legislation is passed. We do not know who the prospective buyers are. We do not know what mechanism the Government are intending to use for the sale, and therefore we do not know who will call the shots in Royal Mail’s future decisions once the privatisation is complete.

In those circumstances it is not entirely surprising that the basis for valuation causes concern. This is what lies behind my noble friend’s amendment. He is right that, historically, assets were sold off at a price that proved to be less than their value. However, in the 1980s, at least it was clear how we were going to sell them, which were going to IPOs and which were to be sold directly to particular bidders. This is not the case here. It is therefore even more important that this great national institution is not passed to an unknown process of sell-off, or to an unknown buyer, without Parliament and the public as a whole being confident about the basis on which that valuation is carried out.

As my noble friend has said, the amendment does not say that we should publish a valuation and therefore undermine the Government’s negotiating position, but it does say that we ought to know the criteria in the Government’s mind on which the valuation is based. This is a fairly minimal requirement. I hope that the Government, who are determined on this course, will at least have the self-confidence to make the public feel confident that this great asset will not be seriously undervalued. I hope that my noble friend’s modest proposal would go some way to achieving that objective if at this late stage the Government were to concede that such a measure should be included in the Bill.

[Lord Razzall]

My Lords, I have some sympathy with what the noble Lord, Lord Whitty, describes as a modest proposal. However, I completely endorse the remarks of my noble friend Lady Kramer. What worries me about the amendment, were it to be carried, is that the most likely outcome would be a sentence in the report simply saying, “It was the best price we were offered”.

[Baroness Wilcox]

We have debated at length the issues around revealing the Government’s internal estimation of the value of Royal Mail shares prior to a disposal. Amendment 2 would not require the Government’s estimation of the value to be revealed, but would require us to publish the methods and criteria for making that valuation. Our expectation is that we will apply a range of valuation methodologies to our assessment of the business’s value.

I reiterate what I said on Report—that we would, of course, expect that both the National Audit Office and the Public Accounts Committee will wish to review the sale process, including the valuation methodologies that we have applied. They would both provide their own independent view to Parliament on whether the Government had achieved value for money for the taxpayer. This is consistent with the reporting requirements for previous sales of government assets. What should matter is not the technical valuation methodologies that we may apply, but whether we have the right objective for the sale. In that respect we have committed to report back to Parliament prior to a sale process beginning, and this report will confirm our objective for the proposed sale.

I reiterate a further point with regard to valuation. As your Lordships will fully understand, we cannot, and should not, reveal our estimation of the value of the company. Doing so would be giving the whip hand to the potential investor and would severely undermine our ability to negotiate the right deal for the taxpayer or for the company. Put simply, it does not make good business sense.