Published: 09:09, 01 April 2014 |
Updated: 11:15, 01 April 2014
The Business Minister has defended the government after a report suggested taxpayers lost £750m because shares in the Royal Mail were sold off too cheaply.
Sevenoaks MP Michael Fallon tried to downplay findings by the National Audit Office, which described the government as being deeply cautious when it set the insitution’s share price at 330p when it floated on the stock market in October.
The report says the flotation could have earned an extra £750m in one day if the price had been set at its opening day closing price of 445p.
The 38% spike in price on their debut was the biggest one-day rise in a privatisation since British Airways in 1987.
Yet Mr Fallon defended the opening share price, saying the flotation could have been a failure otherwise.
He told Sky News: “We took independent professional advice at the time and to have priced it higher than we did would have run a serious risk of the flotation being a flop.
“That would have damaged Royal Mail irretreivably.
“We were certainly cautious. The Royal Mail is one of Britain’s most important public assets. You wouldn’t have wanted us to take risks with it.
“If the flotation had flopped the value of the Royal Mail today would have been far less than it is.”
Mr Fallon pointed to the share price dropping 20p at one point last week.
He said: “Since then we have seen some wildly varying fluctuations in the valuations different banks have put on the share price and we have seen a number of investors sell out presumably because they think the shares are now over valued.
The government earned £2bn from the floatation and still owns around 30% of the company.
Mr Fallon added: “We have reduced the risk of the Royal Mail having to come back to the taxpayer for support for the six day a week service that we all rely on.”
“When you launch a public offering of a share you often expect it to go to a premium in the first few days and weeks and that is exactly what happened.”
Every morning at 10am we play you an hour of tunes from the 90s. We call it, #WeLoveThe90s.
Play 'Say It' with Garry and Laura on kmfm Breakfast and you could win £1,000!
Wake up to kmfm Breakfast with Garry and Laura - it's Kent's alarm call.
A guide for your future. For year 11 students in Kent and Medway. Click here for the e-edition.
Education, Training & Childcare is a special supplement published by KM Media Group four times a year. Click here for latest e-edition.
This is a brand new online resource covering every aspect of owning and improving a home in Kent and Medway.
Get the latest food and drink news, recipes from some of the nation's top chefs plus updates from Kent's vineyards and breweries.
Search in your local area to find your perfect partner in Kent, with FreshStart Dating! PLUS, register for free!.
Neil Miller, Hever Castle head gardener is new gardening blogger.
Buy pictures that you've seen in a KM newspaper, or send in a picture and we will place it on our photo sales website so that you can purchase a super, unique gift.