Kramer on the Postal Services Bill

• [Mar 08] Baroness Kramer (Liberal Democrat): MY Lords, I should, I suppose, confess to something of a wicked past. Back when I was a banker in the United States, part of my work was advising companies that were making purchases and selling off subsidiaries. If I was advising a potential buyer of Royal Mail, I would be hoping very much that this amendment would pass, because, frankly, nothing would give more leverage to a potential purchaser than what in effect is being described here as a drop-dead date.

We have seen government in the past sell assets at far below their appropriate value. I was very involved from the other side when I was on the board of Transport for London and the Government insisted on the Tube public/private partnership. TfL set itself internal deadlines. I do not believe that they were externally set, although I would have to check that. The ability to negotiate in effect collapsed in the final days as those deadlines approached and were very much exploited by the private partners and the banks on the other side, so I beg this House not to fall back into that trap.

The noble Lord discussed uncertainty, but what greater uncertainty could there be than the knowledge that the Government might find themselves coming back to this House at the time of a sunset clause for leave to continue with a sales programme. That maximises uncertainty for Royal Mail and for the other parts of the group that will, we hope, go on to their new future.

. . Baroness Kramer (Liberal Democrat): My Lords, I fully understand the concern of the noble Lord, Lord Christopher, that Royal Mail fully assesses the value of what it is, what it owns and what it has to offer, so that it understands its full value in the marketplace. That is an important process. I agree that that has not always been done when public entities have been sold. Indeed, there has often been an anxiety to achieve a sale quickly. I think that Governments have sometimes been seduced by investment bankers who would like a cheap, easy deal rather than trying to ensure that they get the maximum for the seller-in this case, the public. I hope that those lessons can be learnt. I agree that internal due diligence is critical.

However, I must say to the noble Lord that, although I care a great deal about transparency and openness, the day that this House or the Government put a value-£700 million or £800 million-on the asset, no bidder will offer a penny more. The art in a negotiation when you are selling a property is to get the buyer on the other side to decide what value he will bring to the table and give up some of that value to the seller. The goal is not just to achieve the value of the assets as they stand in some neutral and abstract form but to extract further value because of the benefits that a particular buyer sees because of their business plan and goals.

All of that disappears the day that the Government come out and publicly say, "This is what it is worth. You will not get X plus a penny, you will only ever get X". I think that that is unadvisable for the taxpayer.

1546)

Lord Christopher (Labour)

How would the noble Baroness value it? How would she put a price on it?

1547)

[11783

Baroness Kramer (Liberal Democrat): Internally, due diligence is critical. The specifications and the instructions to the investment bankers, accountants and others engaged in the valuation have to be tough and in the monitoring and examination rigour should be applied to the response that they come back with. However, it still has to be in an internal setting, not a public setting. People will have many opinions across this House, but this will be a highly complex process with a great deal of detail. While this House has the ability to understand all that, there may be a subset of people who might be interested in being part of the consultation process by taking a look at that on behalf of the House. However, to me, it certainly would not be possible to do it in a public setting without giving the buyer the most impossible leverage.

1547)

Lord Hoyle (Labour)

The noble Baroness said that if we value it, we will not get a penny more. In past privatisations, it was not that we got the value for the business, but that we sold it at a loss, at a low price. That is what we are asking her to deal with.

1547)

[11783

Baroness Kramer (Liberal Democrat): I fully understand what the noble Lord is saying. In the past, privatisations have been naive. We have to use pressure to make sure that the Government do not go through that naive process once again. I suggest that the remedy being proposed here-that the value is discussed in detail out in the public arena-does not achieve the purpose. It simply has the effect of making sure that in the end there is a cap on the sale price and creates another set of problems without necessarily disposing of the first set. We need to be pressing to make sure that the internal work is up to standard, but to my mind-and that is one person's opinion-bringing it into the public arena does not achieve that.

• Full Debate in Parliament