Government to review way it handles public asset sales

Vince Cable
Image caption Mr Cable has insisted the Royal Mail sale was successful and the government achieved its objectives

Business secretary Vince Cable has launched a review of the way the government conducts stock market flotations of public assets.

It will look into the "book building" process used ahead of a share sale to gauge investor demand, and whether this could be improved.

Former City minister Lord Myners will lead the review.

It comes ahead of a select committee report on the Royal Mail sale which is expected to be critical.

The review will look at recent UK private and public sector stock market listings which have seen significant rises or falls in share trading prices following flotation.

Business Secretary Vince Cable said the review would help him to "assess whether changes are needed to the current system government operates for the sale of its assets".

The review follows controversy over the £3.3bn privatisation of Royal Mail, where the government has been accused of selling off shares in the firm too cheaply.

The government initially priced Royal Mail shares at 330p each, but they have risen sharply since and are now trading at about 470p a share.

A report by the National Audit Office found that ministers in charge of the privatisation were too cautious when setting the sale price.

In April, Mr Cable insisted that the Royal Mail sale was "successful" and "the government achieved its objectives".

The review will examine:

  • What alternative IPO methods are available to government
  • Whether alternative methods of book building should be considered
  • Whether measures could be taken to improve the current book building process

Analysis, Kamal Ahmed, BBC Business editor:

Critics of Mr Cable will seize on the timing of this announcement, coming as it does a mere two days before what is expected to be a highly critical report by the House of Commons Business Select Committee on the controversial Royal Mail share sale.

Are they connected? Well, put it this way, my sources inside the business department are not denying it.

The best form of managing a controversy that you know is just around the corner? Get your retaliation in first.

Chuka Umunna, shadow business secretary said: "By announcing this inquiry, the Government is admitting what everyone else has known for months - that its privatisation was a first-class short-changing of the taxpayer.

"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."

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