Vince Cable wanted to be judged in January on the Royal Mail share offer. Six months later we asked how he survived the outcry
After the rise in Royal Mail When Royal Mail shares finally opened for conditional trading last October their price jumped from the government’s valuation of 330p each to more than 450p the Business Secretary asked to be judged on what the price looks like in three months’ time.
Five months after that 3 months (keep up), the Vince Cable was asked questions in parliament and the price was 550p – a 66% increase. It is believed that as trading opened, the share prices immediately became more volatile, losing the government approximately £750 million instantly.
So how has Cable survived after what many see as a catastrophic change to direct mail services?
To a degree, Cable has always been Teflon Vince – no amount of fumbling performances and lack of judgment seem to affect his survival in the cabinet. He has been outspoken on differences within the coalition and in December 2010 was caught out by undercover journalists at the Daily Telegraph. He was reported as saying “I have declared war on Mr Murdoch and I think we are going to win” – a somewhat embarrassing declaration as his Ministerial role involved responsibility for media affairs including ruling on Murdoch’s takeover plans for BSkyB. This responsibility was taken away from him.
There is also no doubt that his position within both the Liberal Democrats and the Coalition and as a former Deputy Leader of the Party, Cable is seen by many as the keeper of the left-wing flame, and standing firm against the dirty business of government; whereas Nick Clegg, David Laws and others have seen to be complicit in some (to many Liberal Democrats), hard-core Tory policies. With Clegg’s position almost constantly under threat, Cable is seen – even at 70 – as a potential leader, especially a leadership battle that comes out of a crisis for the party.
Since the October share issue, there have been four top level Ministerial resignations – but Vince never looked like his position was seriously under threat.
Vince plays the blame game
Perhaps one tactic that has worked for Vince is to blame poor advice from those consulting on the share issue. In front of a House of Commons committee Cable revealed 16 of the likeliest investors were consulted in advance on the price. Despite having made an informal agreement to hang on to their shares, by January 2013 only six of the investors were still amongst the biggest shareholders in the company, the remainder having taken the cash from their allocation instead.
With the government already under fire in the NAO report, with suggestions that the way in which they assessed the demand for shares was “not fully effective”, the press added more fuel to the fire this week with claims of insider dealing. The so-called “independent” investment advisors who acted for the government, Lazard Asset Management, providing advice for the controversial stock market sale, were also named as one of the 16 top priority investors, snapping up a large number of shares in the deal. Critics have suggested that Lazard deliberately took advantage of the spike in the share price, netting a cool £8 million in the process.
Vince has history on his side
Perhaps another reason for the lack of a major public outcry is that we tend to expect privatisations to be a bit of a giveaway – a bonus for the city that pours so much into the Tory coffers and that are the key advisors on all such sell-offs. In a similar vein to the events which transpired at Royal Mail, the shamelessness of the theft was almost unbelievable. The Professor of Geographical Political Economy from the University of Glasgow, Andrew Cumbers, discussed the subject of public ownership at length in his recent book. Professor Cumbers believes that there is “considerable evidence” that the prices at which state assets were being sold were “remarkably cheap”, leaving more questions than answers. Examples include BT whose shares were worth a valuable £15 by 1999, a sharp jump from the 130p at which they were sold for at the time the company was privatised. Railtrack is another example, with its value soaring to £8 billion from the sale value of just £1.9 billion in two years. There’s a number of other similar examples too, with Porterbrook Leasing, a rolling stock company, sold after eight months for £298 million more than its privatisation sale value, while two similar companies also were purchased for £900 million more jointly that their privatisation price. The actions were so blatant that it seems as if those involved in the transactions were making no attempt to cover up their endeavours. Indeed, ex-Chancellor Nigel Lawson admitted in his autobiography that selling at an under inflated price was a tried and trusted government strategy.
With powerful friends and the full weight of history behind him, it is perhaps no surprise that Vince is still the Prince of the Coalition.
Image Credit: Pete