The government is struggling with its new interventionist industrial strategy.
So far it has failed to come up with terms to help Jaguar Land Rover. This has triggered a blast from Tata, their Indian owner, at their failure to support manufacturing. Apparently the government wants too much say and influence, when the company thinks it just needs a loan. The government was wrong to offer them false hope. They need more customers for their cars. Buying every Minister a Jag in this climate would not be a smart political move.
A major steel plant teeters on the brink of closure, as the government promises to do whatever it takes to try to keep it open. Their promise falls short of taking delivery of the steel itself, when someone buying the steel is the only thing that will save it. Let’s hope the government can help the company’s lawyers and salesmen secure the customers and enforce the sales contracts, although it is difficult to see what the government can bring to that task.
Meanwhile we learn today that when the government is on the other end of the potential deal as seller or seeker of assistance, it finds the demands of buyers for influence and control too great! Apparently TNT want real influence and seats on the board of Royal Mail in return for their money to buy a 30% stake. I thought that was one of the attractions to the government of selling such a shareholding. We also are told that maybe TNT is not offering anything like enough money. They have clearly read the books and are not persuaded that a 30% stake in a business with such large employee responsibilities and costs is worth the £3 billion which the government has pencilled in.
The potential sale of a 30% stake was always a bad idea. Of course any company buying such a stake wants effective management control – and in a way the government wants them to have that, telling us Royal Mail needs new management and new directions. Yet a minority stake is always worth less, proportionately, than a controlling stake, so taxpayers are bound to be short changed for our asset.
Selling 30% means trouble with trying to sell the remaining 70% to anyone other than the new minority shareholder. At a stroke it greatly reduces the value of the remaining 70% and puts a future government in a weak bargaining position to sell the shares. Taking on the full pension liabilities for the taxpayer is bad news. The fiddle of bringing £24 billion of pension assets into the national accounts will not wash, as the liabilities are £9 billion more than the assets.
I would like to see the sale of the entire Royal Mail shareholding, as part of the sales we will need to start cutting the public deficit. I would offer some free shares to every postal employee, and give management and employees the chance to buy more if they wish. I would find more bidders prepared to pay more per share by offering the sale of the whole, than under the government’s half baked scheme. I would also take action to sort out the pension scheme.