Why is the Government selling off the Royal Mail? To make its friends in finance even richer?

The government spends around £2bn a day. Of this, about £330m is borrowed (who knows how we’re ever going to pay it back). But our Government has a cunning plan – it’s going to raise tons of money by selling us shares in a company we already own – the Royal Mail. Pretty smart, huh?

So, how much money will the Government get for the Royal Mail? A paltry £3bn at most. This £3bn is enough to cover 36 hours of Government spending or about 9 days of Government borrowing. So, what’s the point? And what will be the result?

One reason the Government was so keen to flog off the Royal Mail was so that it could take the £28bn in assets from the Royal Mail’s pension fund onto the Government’s books thus miraculously appearing to reduce the Government’s debt by £28bn. Unfortunately, the Royal Mail’s pension fund adds £37.5bn of liabilities onto taxpayers – which works out at the equivalent of £365 of new debt for every household in Britain. But these liabilities (which far exceed the £28bn assets) will not be paid until well into the future, by which time today’s politicians will be enjoying their luxurious taxpayer-funded retirements. So why should they care?

What will be the result of the privatisation? Assuming union opposition doesn’t scare away any potential investors, the Royal Mail will probably suffer the same fate as thousands of other British companies – it will be turned into a “zombie company”.

The process goes like this:

1. Venture capitalists and private equity firms and others of their ilk will buy the Royal Mail, load it with massive debts while taking out “special dividends” of hundreds of millions for themselves. They may even set up their own special offshore companies to lend money to the Royal Mail at usurious rates so they can make massive, untaxed profits on the loans from themselves to themselves.

2. The interest payments on the debts will be so huge that the Royal Mail’s profits will be wiped out and it  will stop paying Corporation Tax. Moreover, because so much money is going in interest payments, there’s little to nothing left to reinvest into the Royal Mail. It becomes a zombie – still just moving, but paying so much in endless “special dividends” and interest that it cannot invest to grow.

This is what has happened to many of our water companies, electricity suppliers and firms like Saga, the AA, Findus, Travelodge, Thomas Cook, Punch Taverns, Birds Eye, Fitness First and many many others. Financial speculators move in, buy up the companies, load them up with debt (often lending them the money from offshore shell companies), pay themselves hundreds of millions in special dividends and reduce the companies to zombies – not quite dead, but not really alive either.

But, no doubt many of these financial speculators will continue to contribute generously to Tory Party funds. So, once again ordinary people get fleeced, while politicians and their business cronies get rich. This was all predicted in pages 41-44 of my latest book GREED UNLIMITED. How sad that it’s actually happening.

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