By Mark Kleinman, City Editor
The Government has risked stoking the row over Royal Mail's £3.3bn privatisation by saying the share price rise since the company listed on the stock market was "expected" by ministers.
Sky News has obtained a copy of the annual review of the Shareholder Executive (ShEX), the body which manages the Government's stakes in state-owned businesses, which was quietly published late last week by the Department for Business, Innovation and Skills (BIS).
The document claims that ShEx showed "real strengths" in delivering the Royal Mail flotation, saying: "In challenging circumstances, and following years of failed attempts to privatise Royal Mail, ShEx delivered a sale of 60% of the shares in Royal Mail to a mix of long-term high-quality institutional investors and almost 700,000 members of the public.
"Nearly £2bn was raised for the Exchequer, and the Government still holds a 30% stake in a company that has, as expected, increased in value following the introduction of private sector ownership."
The remark is potentially inflammatory and is likely to attract the attention of MPs on the Commons BIS Select Committee, which will question the Business Secretary Vince Cable about the Royal Mail sell-off on Wednesday.
Mr Cable has consistently dismissed the surge in Royal Mail's shares as "froth" that will subside following the frenzy among both retail and institutional investors to secure an allocation of stock in last month's privatisation.
The stock dipped just over 1% on Monday to end the day at 533.5p, still more than £2-a-share higher than the offer price.
MPs are likely to ask why Mr Cable decided not to increase the sale level if they expected the share price to increase, as indicated by the ShEx annual report. Advisers to the Government said last week that they had considered raising the price but were deterred from doing so by a hostile reaction from institutions.
Adrian Bailey, chairman of the BIS Select Committee, asked: "If the price was expected to go up, why did the Government not increase the sale price during its last-minute deliberations?"
A spokesman for BIS said: "We always made clear that the Government would retain a stake in Royal Mail so that the taxpayer could benefit from any increase in the company's value following private sector involvement. We have retained a 30% stake which represents good value for money for the taxpayer."
Mr Cable will appear on Wednesday alongside Michael Fallon, the Business Minister; Mark Russell, chief executive of ShEx; and William Rucker, chief executive of Lazard, the independent adviser to the Government.
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