Royal Mail sale short-changed taxpayers

London - Britain sold off Royal Mail too cheaply, the spending watchdog said on Tuesday, prompting the main opposition Labour party to accuse Prime Minister David Cameron's government of failing to look after the interests of taxpayers.

Britain's decision to sell a 60% stake in the 500-year-old state postal operator last October for 330 pence a share has been heavily criticised by Labour and trade unions after the stock soared by as much as 87%.

Labour has seized upon the flotation, and the quick profits made by big banks and City investors, to reinforce one of its central arguments ahead of next year's general election - that Cameron's government is out of touch with ordinary voters.

Approach

The sell-off, which followed three failed attempts to privatise Royal Mail in 20 years, came in the face of possible strike action at Royal Mail that the government had said could deter investors and contributed to its cautious approach on price.

"It was very clear to us that people would not pay, and that the big institutions would not pay over the top of the price range," said Business Minister Michael Fallon on Tuesday.

"We were certainly cautious because we wanted to reduce the risk to the taxpayers of this launch being a flop."

In its report, the National Audit Office (NAO) said the approach had led to British taxpayers losing out on at least £750m in the sale.

"The department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer," NAO head Amyas Morse said.

Damning

Britain sold its 60% stake for £1.98bn. However, Royal Mail shares closed at 455p on the first day of trading, 38% above their offer price - meaning the government could have netted the additional £750m.

Labour's business spokesperson Chuka Umunna described the NAO report as damning.

"When Royal Mail was privatised, (Business Secretary) Vince Cable described the huge rise in its share price as 'froth', but since then it has continued to rise.

"He and David Cameron have serious questions to answer on the hundreds of millions of pounds they have lost British taxpayers and cannot duck responsibility for what has happened."

With 10% of Royal Mail owned by its staff, many of whom fiercely opposed the sell-off, Britain now holds a 30% stake worth about £1.7bn.