State sell-off errors 'cost UK billions' lost

A CATALOGUE of errors in the Tory privatisation programme left the taxpayer potentially billions of pounds out of pocket, Parliament's public spending watchdog said yesterday.

In the most comprehensive survey of all state sell-offs to date, the Commons Public Accounts Committee called for much tighter controls to ensure that public assets were never again sold too cheaply.

The report set out strictguidelines to ensure that the mistakes were not repeated by the current government in its own privatisation plans.

More than 150 businesses have been privatised in the past 20 years, from small enterprises to big firms such as BT, British Gas and the rail, water and electricity companies.

The MPs concluded that privatisation had on the whole been a success, raising more than pounds 90bn for the public purse while revitalising ailing industries and improving services.

However, in many cases, much higher proceeds could have been achieved if the Conservative government had insisted on staged sales of shares and clawback deals to recoup unexpected profits. The taxpayer could have recouped at least pounds 15m from the rail rolling-stock companies if clawbacks had operated.

Water and rail companies went for a fraction of their value, with one estimate suggesting that some pounds 30bn more could have been raised from the water sale.

Alan Williams, Labour MP for Swansea West and one of the committee members who called for the report, said: "There has been a profligate disregard for the public interest and getting full value for money for state assets."

The committee said that better value for money would be achieved if shares were sold in stages rather than one single public flotation. "In a succession of flotations, culminating in the sale of the Regional Electricity Companies in 1990, departments sold all the shares on privatisation, only to see the price of shares increase rapidly, often as soon as trading commenced," the report stated.

A staged sale of the atomic energy company, AEA Technology, could have netted an extra pounds 110m, for example. A similar sale of National Power and PowerGen shares meant that the taxpayer had secured an extra pounds 2.6bn.

The committee chairman, David Davis MP, said that the privatisation programme had been very successful as whole but "mistakes" had sometimes been made in its implementation. "It is vital that departments [act on] lessons learnt," he said. "Assessing the value of an entity in the public sector is the single most difficult issue in privatisation, but it must be done properly."

Mr Williams added: "In any previous century, one would have been talking impeachment when you look at the appalling way public assets have been squandered and virtually given away, in some cases, I would say, deliberately."

Although Labour opposed many of the Tory privatisations of the past two decades, the Government will continue some sell-offs. As well as selling shares in state-owned businesses, surplus assets will be disposed of and others used commercially.