Government is ‘failing to put the right price’ on sell-offs like Eurostar

The Public Accounts Committee (PAC) cited the sale of the public’s 40% stake in the Eurostar last year as “further evidence” that valuations were too low,

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The Government is relying too heavily on just a handful of City advisers leading public assets put up for sale to be majorly undervalued, according to an influential committee of MPs.

The Public Accounts Committee (PAC) cited the sale of the public’s 40 per cent stake in the Eurostar last year as “further evidence” that valuations were too low, after the Government sold it for almost double what it had initially been valued at.

The investment bank UBS was singled out for particular criticism, with the committee accusing ministers of too readily turning to the bank and not getting wider views and valuations.

Other controversial sales included that of Royal Mail, which listed on the stock market at 330p, under the advice of UBS, and was majorly oversubscribed. Last night the shares were 436.6p.

The committee also raised concerns over the Department for Transport’s “unacceptable” two-year delay in publishing an evaluation into the UK’s first high-speed rail line at a time when parliament was deciding on the suitability of HS2. The report eventually revealed that the costs of HS1 far outweighed the economic benefits and would cost the taxpayer £5.9bn over 60 years.

But the sale of the Eurostar stake was the major issue for the politicians, who pointed out that although it sold for double original valuations – at £757m – this was way below the £3bn of investment made into the Channel Tunnel project.

Questions were also asked over why the valuation was so badly wrong. The PAC’s chairwoman, Meg Hillier, said: “The public’s stake in Eurostar was sold for significantly more than valuations had anticipated – but also significantly less than the total invested by taxpayers. We now also know, following publication of the Government’s much delayed report, that the costs of HS1 far outweigh its benefits.

“Taken together, these facts raise serious questions about the Government’s approach to valuing public assets, as well as its commitment to considering the value for money of public spending on such expensive projects.”

The committee concluded that there is an “over reliance” by the Treasury on a “small pool” of advisers and added that the pre-sale valuation versus the actual sale price could be due to “the successful sale process and favourable market conditions” but added it was “further evidence of the Government and its advisers undervaluing assets”.

On the delay to the HS1 report, the chairwoman added: “The Government’s evaluation of HS1, produced at the urging of this committee, could and arguably should have been a key piece of evidence in scrutinising plans for HS2. Instead it arrived two years late, since when the Government has claimed benefits arising from HS1 that cannot be measured by its own methodology. It is simply not good enough.”

Manuel Cortes, the general secretary of the Transport Salaried Staffs Association, said: “It is to be welcomed that growing numbers of cross party MPs recognise the serious flaws with this Government’s approach to privatisation of public assets.”