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Committee chair slams Eurostar stake sale despite 'value for money' finding

Published 06/11/2015

Auditors said the deal represented value for money
Auditors said the deal represented value for money

The Government has been accused of choosing short-term cash over long-term value for taxpayers in the £757 million sale of its stake in Eurostar earlier this year.

A spending watchdog's report has found that the sale of the Government's 40% holding in the Channel Tunnel passenger train operator to a Canadian-led consortium was "run well" and achieved the Treasury's goal of maximising proceeds.

The £585 million privatisation netted almost twice as much cash as expected and - along with Eurostar's £172 million redemption of the Government's preference share in the company - represented "value for money for the taxpayer", found the National Audit Office in a report which was welcomed by the Treasury.

But the NAO report found that the proceeds were well below the total £3 billion taxpayer investment in the service over the years, and said that the timing of the sale was driven by the desire to complete it before the May general election.

The Labour chair of the influential House of Commons Public Accounts Committee, Meg Hillier, said that if the Government had held onto its share, it could have received dividends totalling around £750 million over the next 10 years.

Ms Hillier said: " The Government's focus in selling its stake in Eurostar appears to have been on short-term cash rather than long-term value for taxpayers ... The proceeds generated were £2.2 billion less than the taxpayers' investment.

"Had it kept its share, the Government was forecast to pay off over £500 million of national debt over the next 10 years using dividends from its 40% share in Eurostar, and receive a further £243 million in dividends from its preference share."

She said: "Once sold, the family silver can't be bought back."

The sale price of £585.1 million agreed by the Patina Rail consortium in March was 192% higher than the valuation of £305 million placed by the Government on its 40% stake in Eurostar, and resulted in part from "competitive tension" between bidders keen to secure the holding, said the NAO.

But its report found that a "credible" valuation of £500 million or more could have been supported.

The watchdog found that "the timing of the sale, agreed in 2014, was primarily driven by the desire to sell prior to the 2015 election". The Government considered waiting until after 2016 - when new trains are expected to boost passenger numbers and increase profitability - but decided to go for an early sale on the grounds that "any delay would come with uncertainly and risks".

The NAO's auditor general Amyas Morse said: "The Government prepared well for the sale of Eurostar and the sale process was run effectively. I regard the sale as value for money.

"This case illustrates some general lessons for Government as it embarks on an unprecedented asset sales programme forecast to exceed £62 billion over this Parliament. These lessons include: the need for detailed business cases in support of the decision to sell; objective and robust valuations to decide if, and when, to sell; and getting good value from advisers."

A Treasury spokesman said: "We welcome confirmation from the National Audit Office that the Government sale of the UK's shareholding in Eurostar delivered a good deal for British taxpayers - raising a total of £757.1 million to help reduce our national debt - and with a process that was well-run and effective.

"Getting the best value for money for the taxpayer and tackling our country's debts so our country lives within its means are key parts of our long term plan - and as this report shows, the Government is delivering on these objectives ."

Shadow transport secretary Lilian Greenwood said: "The National Audit Office's report confirms that ministers' rushed sale of the UK's stake in Eurostar means that the public purse has suffered a considerable net loss.

"It's unacceptable that the decision was 'primarily driven by the desire to sell prior to the 2015 election' and that taxpayers will never recoup their £3 billion investment that turned Eurostar into a profitable service.

"Just like with East Coast, the privatisation of a successful publicly-owned rail operator was prioritised over addressing chronic overcrowding and Network Rail's collapsing upgrade programme.

"It's clear that the Conservatives have repeatedly put short-term returns ahead of passengers and taxpayers' long-term interests. We need a new approach to the railways which puts passengers first, and leaves the Tories' ideological opposition to public ownership behind."

RMT general secretary Mick Cash said: "However you dress it up the fire sale of the UK's Eurostar stake before the election has cost the taxpayer billions in wasted investment and lost future profits.

"The total public investment in Eurostar racks up at £3 billion and yet we got back just £757 million for the sale of our stake and that is a gross rip-off by anyone's standards.

"With another £62 billion of our public assets set to be flogged off under this Government the Eurostar fiasco paints a grim picture of profiteering and bargain basement deals that rob the British people blind. Our family silver is being unloaded by the Tories to their friends and backers in the City at knock-down prices in a process driven by a combination of stupidity, greed and Thatcherite ideology."

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