Don’t blame ministers for the Royal Mail sell-off. Beat up the bankers!

Vince Cable and Michael Fallon, ministers responsible for the Royal Mail sell-off, have been summoned for another select committee grilling after Easter. Meanwhile, Labour’s irritatingly smug business spokesman Chuka Umunna continues to score points by claiming that last October’s flotation was ‘botched’, costing taxpayers a notional £750 million as the shares leapt from the issue price of 330 pence to 455 pence on the first day, and much more since as they rocketed on upwards.

The truth is that the ministerial duo were right to be super-cautious about pricing a privatisation that had been thwarted for so long by union subversion, for which public enthusiasm was uncertain, and in which taxpayers would continue to hold a 30 per cent stake. Right also to rely on advisers — chiefly Lazards, relying in turn on consultation with the rest of the City — to recommend a level at which the issue could be safely got away, rather than pitched at higher risk to extract the last pound. The fact that it took off like the hottest dotcom in town was predicted by no one, even analysts whose early valuations were well above 330 pence.

So the outcome was a prize example of the capriciousness of markets: if at a late stage Cable had sniffed the air and told Lazards to whack the price up to £4, demand would have shrivelled and subsequent performance would have been completely different. On the other hand, the business secretary was clearly misguided when he referred to 16 ‘priority’ institutions as ‘a core of high-quality investors who would be there in good times and bad’. They were not contractually or morally committed to that role, and they behaved rationally by taking profits when the price surge took them by surprise like everyone else.