Vince Cable recalled by MPs over Royal Mail privatisation

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Vince Cable recalled by MPs over Royal Mail privatisation controversy

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Vince Cable has been recalled by MPs to give further evidence on the privatisation of Royal Mail following a damning National Audit Office report that found the government had cost taxpayers £750m in a single day by massively undervaluing the postal service.

The business secretary will be called before the business select committee on 29 April to answer claims that he botched the sale and allowed City traders to make huge instant profits at the expense of taxpayers.

Adrian Bailey, a Labour MP and chair of the committee, has already called for Cable to resign in the wake of the NAO's scathing report on the sale.

"This is a massive loss. Just on the first day's trading alone the taxpayer lost out, effectively, on £750m," Bailey said last week. "For one person to be responsible for that, I think in any other context they would be asked to resign."

Cable is also under intense pressure to explain how and why he allowed 16 City firms priority access to the shares on the understanding that they would hold on to their stakes for the long term. Yet within weeks of the sale, six "priority investors" had sold 100% of shares at "huge profits". By the end of January the priority investors, who were selected by Cable, held just 12% of Royal Mail's shares.

Labour leader Ed Miliband accused the prime minister of presiding over a sale of the 500-year-old national institution at "mates' rates to his friends in the City".

Miliband branded Cameron the "dunce of Downing Street" for allowing Royal Mail to be dramatically undervalued."It is basic maths. Not so much the Wolf of Wall Street more the dunce of Downing Street. A third of the shares were sold to just 16 City investors and there was a gentleman's agreement that those City investors wouldn't sell the shares."

Cable has said: "There was no agreement – gentleman's or otherwise … we did not seek to lock them in as they would have paid less for a stock they could not trade."

The NAO's report said the government's desperation to attract "long-term, blue chip" institutional investors led to the shares being underpriced.

It said the government gave the select group priority access to the shares, which were in huge demand from the public, because of its "expectation that they would form part of a stable long-term and supportive shareholder base".

At the time, Cable said: "We wanted to make sure that the company started its new life with a core of high quality investors who would be there in good times and bad, interested in Royal Mail and the universal service it provides for consumers over the long term."

Cable, who took the lead role in arranging the privatisation in October alongside business minister Michael Fallon, has already endured a bruising encounter with the select committee when he first appeared to explain the Royal Mail flotation in November. Fallon will also be recalled to appear before the committee on 29 April.

Billy Hayes, general secretary of the Communication Workers Union, which represents 100,000 postal workers, said: "If a postal worker had lost an item, a precious item, they would be sacked. Vince Cable lost £1bn on the way to the stock exchange and he's still in his job. So I think he needs to consider his position."