Abortive privatisation cost taxpayers pounds 2.4m

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The Independent Online

Westminster Correspondent

Outside advisers have emerged as the only winners from an abortive major Government privatisation exercise. Their advice - which took three years - that the Department of Trade and Industry should not contract-out its Insolvency Service, cost the taxpayer pounds 700,000.

The DTI minister, Philip Oppenheim, disclosed that the whole exercise cost pounds 2.4m. In three years, the Government received 149 bids from firms keen to run the service and put them through six different stages of competition. After all that, and an expensive advertising campaign to boot, the Government suddenly changed its mind and wrote-off the cash.

The expenditure will raise further questions about the Government's reliance on management consultants and its constant searching for privatisation candidates. Labour is claiming the money was needlessly wasted to satisfy political dogma.

In July 1993, the Government announced that the Insolvency Service, which deals with bankruptcies and debt recoveries, would be handed to the private sector to run. A "pre-feasibility" and "feasibility" study were undertaken and advertisements for potential bidders placed in national newspapers.

Almost 150 expressions of interest were received, and a detailed prospectus prepared. Subsequently, 91 firm proposals were sent in, from 34 companies. Negotiations were launched between the companies, the Insolvency Service and the DTI.

A shortlist of three candidates was drawn-up. Then, suddenly, ministers had a change of heart: the Insolvency Service would remain in the public sector.

The whole exercise, admitted Mr Oppenheim, in a Parliamentary answer to Barbara Roche, the shadow Minister for Small Business, cost pounds 2,415,345 - including more than pounds 700,000 for outside consultants and lawyers.

Mrs Roche condemned this as a waste of public money. "I find it astonishing that ministers have squandered pounds 2.4m of taxpayers' money. The Government's privatisation dogma has meant a bonanza for outside consultants and lawyers, job insecurity over three years for people working in the Insolvency Service, continued concerns amongst small firms about the effect of the contracting out, and a complete waste of public money."