Taxpayer loses as fat cats reap pounds 60m

A second privatised arm of the Government's property agency has produced a windfall profit - this time more than pounds 60m in three years - for the "fat cats" who took it over, The Independent has learnt.

The Government paid the engineering consultants WS Atkins pounds 11.5m to take the company off its hands in 1993. It has made a profit every year since then and, when the parent company was floated on the stock exchange in July, the former public-sector business turned out to be worth around pounds 50m.

Labour has condemned the deal as more evidence that the taxpayer has been "ripped off". Last week The Independent disclosed that the 1993 privatisation of the southern divisions of the Government Property Services Agency (PSA) had netted a profit of more than pounds 70m for the buyers.

The Manchester divisions of the PSA, which managed public buildings and building projects in the Midlands, North-west and Wales, were transferred to WS Atkins at the same time for a "negative consideration" of pounds 11.5m, in other words, the Government paid the new owners to take it away. This was despite the fact that it made profits of pounds 5.2m in the year before the transfer and has continued to earn about pounds 5m a year. WS Atkins has effectively kept the money and funded the restructuring of the company out of profits.

In addition, the Government guaranteed contracts to manage Ministry of Defence buildings for five years and underwrote most of the potential redundancy bill in case the company folded. The National Audit Office, in a report earlier this year, criticised the Government's failure to negotiate a "clawback" clause if the company should be successful in the private sector.

Paul Jowers, a spokesman for the company, said: "Like all commercial operations, we took advantage of a situation and turned it into a good operation. Yes, it is phenomenally successful. We would maintain that it is because we are phenomenally successful managers."

Derek Foster, Labour's spokesman on the Civil Service, said: "This is another example of Tory privatisation dogma ripping off the taxpayer."

WS Atkins, a former Tory party contributor, was valued at pounds 197.8m when it was floated. The prospectus does not give a full breakdown of the performance of its subsidiaries, but the former PSA Manchester divisions, now called WS Atkins Facilities Management, contributes one-quarter of the group's pounds 20m-a-year profit, suggesting that it would be worth pounds 50m if sold as a separate entity.

The flotation prospectus said "facilities management performance since acquisition is strong" and the former PSA business "now makes an important contribution to group profits".

The beneficiaries of this apparent under-valuation by the Government include the family of the firm's founder, the late Sir William Atkins, which still owns 10 per cent of the company, and nine directors who own another 7 per cent between them. Michael Jeffries, 51, the group chief executive, has a shareholding worth pounds 3m.

WS Aitkins has recently moved into privatisations and government business; most of the former PSA work is for the Ministry of Defence and the company retains Sir Archie Hamilton, a defence minister until 1993, as a consultant.