If you see a spring in your postman’s step this morning, in the rare event of his arriving before you depart for work, it is because you have just assumed responsibility for his pension.
Nationalising Royal Mail’s pension fund delivers some £28 billion worth of assets to the Government, while, in a conjuring trick that the late Tommy Cooper would have admired, the liabilities remain off the books because they only fall due over coming decades. Just like that.
The losers from this wheeze, as so often, are the generations to come. Their taxes will pay for this postdated cheque, written on their bank account. Officially, the liabilities to be assumed by future taxpayers total around £37 billion, although, in reality, life expectancy being what it is, the final bill will be far higher. No wonder the postal unions are ecstatic.
Meanwhile, although the subterfuge allows the Government to pretty up the national accounts, the benefits will be negligible. It is a fair bet that many of the assets acquired will be gilts, which, if kept, effectively means the Government is lending to itself. One has to ask what the point is.
The case for the defence is that, since taxpayers already effectively provide a backstop to Royal Mail, as with other state-owned industries, this move makes little difference.
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The real reason for this stunt, of course, is to facilitate the privatisation of Royal Mail. After saddling future taxpayers with all these open-ended and unpredictable liabilities, ministers had better get a good price for it.
An auspicious sign for Tesco
In Buddhism, the lotus symbolises the purifying rise of a spirit from muddy water. It’s certainly a fair bet that the UK’s biggest supermarket operator will be hoping that yesterday’s successful flotation of the property division of Tesco Lotus, its Thai operation, points to an emergence from the mud.
Little has gone right for Tesco this year, following the profits warning it delivered in January and last week’s controversial departure of Richard Brasher, its UK chief.
But the debut enjoyed by the snappily titled Tesco Lotus Retail Growth Freehold and Leasehold Property Fund must be considered a success by any measure.
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Thailand’s biggest stock market flotation since 2006, and the second biggest in Asia this year, attracted applications for almost four times as many shares as were being sold. Tesco raised $600 million from the issue, and the shares climbed 10 per cent.
While the strength of the debut says much about Thailand, where property funds are rare and where investing in a business like this is seen as a bet on future growth in consumer spending, it also speaks volumes for Tesco’s attractiveness as an investment proposition to overseas investors.
And, if Tesco can repeat the trick in some of its other foreign territories, the faithful may well regard this IPO as representing something of a rebirth.
Smaller field delivers hope
Then there were three. The takeover of TNT Express by United Parcel Service leaves just a trio of major players in the market for express parcel delivery in Europe — UPS, FedEx and DHL.
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On the face of it, then, even though TNT Express was a wounded beast, EU competition watchdogs ought to be crawling all over this deal. Deutsche Post’s DHL, showing an enthusiasm for all things regulatory curiously absent when it snaffled Britain’s Exel in September 2005, has already argued as much.
Yet there is an alternative view which is that, rather than stifling competition, this deal could actually encourage it. The fastest-growing part of the parcel market, by far, is ironically the part most operators find the most fiddly — delivering goods bought by households from online retailers. Customers are often out, demand for the service swings wildly according to the time of year, and, because the parcels are not large, the price charged per item tends to be low.
Accordingly, as the parcel firms respond by raising prices, some online retailers may eventually conclude that they can make a better fist of delivery themselves and set up their own operations. The likes of Amazon are certainly big enough to do so.
Polyus U-turn is no great loss
More ammunition for those wary of admitting to the FTSE 100 foreign owned resources companies with modest free floats and little corporate governance.
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Polyus Gold, which is owned by the potash tycoon Suleiman Kerimov and the defeated Russian presidential candidate Mikhail Prokhorov, said last night that it had withdrawn plans to change its domicile to the UK which would, in time, have enabled it to gain admission to Britain’s premier index.
There have been suggestions that Messrs Kerimov and Prokhorov have been unwilling to sell down their stakes in order to create the free float demanded by the UK Listing Authority. An alternative explanation is that Polyus is frustrated at the time taken by the Russian Government’s foreign investment commission, chaired by Vladimir Putin himself, to assess its relocation request.
Either reason will do. They both highlight why businesses like this are unfit for admission to an index whose members, by virtue of being followed by widely held tracker funds, is owned by what old market hands used to describe as widows and orphans.
Pledges are on shaky ground
Here’s a statistic to bear in mind when the Government is making grandiose claims — there was another yesterday concerning something called the “Get Britain Building” scheme — about its support for UK housebuilding.
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According to Geoff Cooper, chief executive of Travis Perkins, at the current rate of household formation and the rate at which new homes are being built, every home in Britain will have to last for 218 years if the entire population is to be housed.
The idea that every house built since 1794, the year Horatio Nelson lost his eye and Maximilien Robespierre his head, would still be standing today, even without the Luftwaffe’s intervention, is stretching it somewhat.