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Royal Mail privatisation: the multi-billion pound swindle

 

By a CWU postal rep

The privatisation of Royal Mail last month was not the victory for “popular capitalism” the Coalition government has crowed about. On the contrary, it was a defeat for the users and deliverers of a popular public service.

But even by their own terms, it only succeeded because the government deliberately undervalued the company so the sell-off wouldn’t fail – swindling the taxpayer out of billions as hedge funds and millionaire investors cashed in.

Royal Mail was valued at £3.3 billion and shares at 330p each. On the first day of trading on 15 October the share price skyrocketed and the value of Royal Mail jumped by a jaw-dropping £1.2 billion.

When stockbrokers Panmure Gordon claimed publicly a week before the sell-off that Royal Mail was worth much more, Lib-Dem Business Secretary Vince Cable condemned them as “irresponsible”. He desperately tried to downplay the rise in value as simply “froth”.

But ten days later it hit 555p, and by early November peaked at 591p – 79 per cent above the initial offer. Analysts have predicted a possible 1033p share price – if “staff costs” are cut quick enough!

 

Privatisation porkies punctured

Media leaks show ministers knew Royal Mail was worth far more before privatisation. Three major banks had told them the company was undervalued: Citi, Deutsche Bank and JP Morgan, with the latter saying the company could be sold for £10 billion, three times higher than it was ultimately sold for!

Privatisation was always a con, aimed at opening the postal sector completely to profit and breaking the shopfloor strength of the CWU postal union. Now it’s been exposed as a financial swindle as well.

The Con-Dems preach “fiscal responsibility” with policies to pay off the deficit by crushing the poor, like the bedroom tax, which they allege will save £480 million But this is dwarfed by the billions the sell-off has given to their millionaire chums.

Cable has since changed his story completely, claiming that the real reason for the undervaluation was a threatened strike by postal workers; in other words the Con-Dems deliberately undersold Royal Mail. But who can now believe this scandalous liar, who has admitted misleading Parliament and the public?

Billy Hayes, leader of the CWU, has accused the Con-Dems of conducting a “conspiracy against the taxpayer” and demanded Cable’s sacking. Too right – Cable should be prosecuted for deliberate fraud and thrown into jail… though the capitalist courts would never do this.

 

Hedge fund locust

In another privatisation porkie, Cable and Royal Mail CEO Moya Greene emphasised they were looking for long term, “blue-chip”, “socially responsible” investors to run Royal Mail.

But on the 22 October it was revealed that the biggest private shareholder was The Children’s Investment Fund (TCI), with a stake of 5.8 per cent after “buying ferociously” in the shares market – TCI desperately wants to grab hold of Royal Mail.

The nice-sounding TCI is actually one of the world’s largest hedge funds. Its billionaire boss Chris Hahn’s nickname is the “locust” due to his reputation for being “ruthless with the management of the companies he invests in”, according to the Telegraph. As a shareholder he fought for Dutch bank ABN Amro to be broken up, forcing a global takeover battle and its sale.

The sell-off also awarded extensive shares to other speculative investment funds like Blackrock and Threadneedle. In short, it’s been an asset strippers’ field day.

Postal workers’ fears about Royal Mail being taken over, broken up, or part-franchised have been proven well founded. Indeed Cable, in a letter to critical MPs defending the company’s low sales price, stated that he believes hedge funds may still be buying into Royal Mail even at the now higher share price “in the belief that Royal Mail may be transformed and modernised quicker than anticipated”.

Panmure Gordon has also stated that Royal Mail is a plum take-over target: “If things don’t work out on an independent basis, it would look very cosy in the portfolio of UPS or Deutsche Post.” A takeover will become more likely if the government sells its remaining 38 per cent stake before the next election.

 

Renationalise

These locusts have descended on the feast for one purpose: to break up Royal Mail and steal the potential millions in profit locked up in the jobs, conditions, and pay of postal workers. Only a strike in their defence could seriously stall this process.

In the long term the only solution is to renationalise Royal Mail – and do the same to the private competitors, like TNT and UKMail – and place an integrated postal service under workers’ control.

Not a penny should be paid in compensation to the speculators. To them we should simply say: “You gambled – and you lost.”

 

Restore the strikes

As we go to press, postal workers in the CWU remain in limbo, after union leaders cancelled the first one-day strike on 4 November in favour of talks.

There have been some concessions – improved pay and longer legal protections for terms and conditions – but a deepening of union collaboration in radical job cuts and workload hikes.

If we are to secure the deal we need and maintain our strong position at the heart of Royal Mail, postal workers need to strike.

More analysis on the postal workers’ struggle can be found here

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