Girobank sale 'whitewash' claim

A NATIONAL Audit Office report on the sale of Girobank to the Alliance & Leicester Building Society in 1990 was attacked yesterday as a whitewash by Sir Dennis Landau, who handled negotiations on behalf of the failed bidder, the Co-operative Bank.

Sir Dennis said the Government did not want the Co-op to buy Girobank for political reasons despite the fact that it offered what he claimed was a better deal.

The Co-op Bank is owned by the Co-operative Wholesale Society, which has Labour associations.

The NAO report details two serious mistakes made during the sale as well as an unforeseen delay in completion. But it does not directly criticise the Government, the Post Office or its merchant bankers or say the mistakes would have affected the outcome.

The report says the Post Office made a book loss of pounds 64m on the sale of Girobank and its leasing subsidiary. The bank was unattractive to many bidders and difficult to sell.

The report confirms a mix-up over what the CWS would pay. This resulted in the Post Office board and ministers being told the Alliance bid was worth pounds 13.4m more than the Co-op's when the gap was pounds 3.9m.

A clarifying letter from the Co-op did not arrive until the day after the key Post Office board meeting. Sir Dennis, a former chief executive of the CWS, said it was nonsense to suggest the true price was not known in time.

He said the Co-op offered a similar price but with completion promised in cash in six weeks. Because Alliance took 15 months to complete this 'lost pounds 15m of taxpayers' money' at the interest rates prevailing.

The delay, according to the NAO report, was because the sale to a building society broke new legal and regulatory ground. The complexity was not fully realised when the Government gave sole negotiating rights to Alliance.

In a separate sale of the Girobank leasing business to Norwich Union, a tax mistake discovered the day before signature overstated the value of the pounds 323m bid by pounds 55m. Schroders, the merchant bank advisers, reopened talks with the rival bidder, but Norwich was still chosen.