Letter - Royal Mail sell off (The Times)

CPS Head of Economic Research Ryan Bourne and Toby Fenwick from CentreForum write to The Times arguing that the distribution of the Government’s shares in RBS should prove more effective than the sell-off of Royal Mail. 

To view the original letter, visit The Times website. 

“Sir, A few Britons are more than £250 better off having invested £750 in Royal Mail’s shares. With the shares closing up 38 per cent on the first day, two points are clear. First, the shares were offered at a discount that appears to have cost the Exchequer some £700 million. A similar loss on an RBS reprivatisation would cost the Exchequer more than £13 billion, equivalent to the entire UK annual policing budget.

Second, if RBS were to be privatised in a similar manner, the windfall profits for those able to buy shares would be similarly narrowly concentrated — despite Britain’s taxpayers as a whole having taken the risk in saving RBS in 2008.

These problems present economic and political risks for the Government. The Centre for Policy Studies and CentreForum have endorsed Portman Capital’s proposal to distribute the Government’s shares in RBS to the British people. This is not a giveaway; the shares come with a fixed “floor price” that individuals pay when the shares are sold, leaving them with the profit. This also sets a floor under the price, as individuals won’t sell at or below this price.

People can sell their shares at a time that best fits their personal circumstances. Instead of the Government being one seller at a fixed price, the number of sellers is unknown for any given price. Combined with increased demand from pension and tracker funds, this inverts the supply and demand dynamics of previous privatisations, empowering sellers. As a result, the Government can command a higher price from the market, maximising returns to HM Treasury.

This ensures that having taken the risk on RBS in 2008, all Britons can participate in the profits of a reprivatisation.”

To view the original letter, visit The Times website. 

Read CPS’s ‘Give Us Our Fair Shares’ report here.

Read Ryan Bourne’s blog ‘How the Government should reprivatise RBS’ here.



Date Added: Thursday 17th October 2013