The Great British sell-off. Who’s in?

A stake in Eurostar is up for grabs and will herald a privatisation jamboree to tackle the nation’s debts and fix the economy. But not everyone is keen

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The Independent Online

Don’t tell Sid, but the privatisation train has barely left the station. London St Pancras to Gare du Nord, to be precise.

Back in the days when British Gas was on the block, and all those Sids were about to be made a few hundred quid richer, state assets were being sold at a gallop. Many of those going under the hammer – with fat fees for the merchant banks who steered them – were assets it now seems barely believable were ever state-owned. British Rail’s hotels, the cross-channel ferries, Rolls-Royce were all once owned by the state.

Those and many more were in the Conservative party’s manifesto in 1983 and, along with British Airways, British Steel and British Shipbuilders, all were sold, followed by the British Airports Authority and, of course, most notoriously, British Rail.

Margaret Thatcher privatised no fewer than 50 state-owned assets, many of which – steel, shipbuilding, aerospace – had been nationalised by previous Labour administrations. She raised some £50bn for the public coffers. But much remains in public ownership that the Government sees as ripe for a sale – if not quite now, then within a few years.

Yesterday, the Chancellor, George Osborne, finally made official the fact that Britain’s 40 per cent stake in Eurostar was up for grabs. Those with an eye for history will note that the advisory team at UBS, whose forebears SG Warburg were so influential in the nationalisations of the 1980s, are advising the government on the sale. More recently, UBS was one of the City advisers who helped run the Royal Mail float a year ago almost to the day.

Eurostar is a smaller sale, expected to fetch some £300m. The Chancellor said this was part of his plan to “reform the British economy and tackle our debts”. He has previously declared he wanted to see £20bn of state assets sold by 2020.Even that will barely dent the UK’s debt pile of £1.3 trillion, but every little helps.

Bidders for the Eurostar stake are most likely to be infrastructure investors and pension funds. But it has not gone without notice that another French state-controlled business, the transport group Keolis, is expected to bid as part of a consortium.

This means we could see another formerly state-owned asset, and all the future profits that will come from it, being sold to foreign taxpayers. That enrages the left. As Steve Hart, chairman of the think-tank Class, pointed out: “It is absurd that the UK government is selling off the Eurostar when it is profitable. Rail infrastructure is fundamental to the success of our economy. The French government knows this, which is why it is not selling off its half of the Eurostar.

“Three quarters of UK railways are now owned by foreign governments. The UK is seriously out of step with the rest of the world, where many countries are bringing key services back into public ownership.”

The right is, of course, delighted at the sale, declaring privatisations are a crucial way of avoiding tax rises while improving the country’s appalling fiscal position.

Nick Faith, chairman of Policy Exchange, says: “Privatising public assets will help. It is a good thing.”

However, he points out that the government must be seen to get a good price for the assets being sold. In the case of the float of Royal Mail, this was arguably not the case. Despite much of the “froth” having come off the share price since spring, Royal Mail’s shares still trade around 20 per cent above its float price.

Policy Exchange has argued that, in the case of assets like the taxpayer’s bailed-out stakes in RBS and Lloyds, the government should give the shares directly to taxpayers, rather than float them on the Stock Exchange.

The argument has much to recommend it in the light of the floats of Royal Mail and the sale of Qinetiq, the Ministry of Defence inventions arm whose sale arguably handed millions of pounds of value from the British people to company directors. If shares were given to the public, they would profit from any rise in the price rather than City types.

Secondly, Policy Exchange argues, the government should stop presenting the floats as privatisation for privatisation’s sake. “They should get across the message that privatisation will also lead to services being run better,” Mr Faith argues. He cites a previous Policy Exchange privatisation idea which suggested selling our magistrates court building and have the JPs sit in police stations instead. “This way, you raise money from selling the court buildings, which are often rarely used at the moment, and you do away with the cost and delays to justice of transporting people from police cells to the magistrates.”

The idea of selling an “improved service” story is particularly relevant when it comes to transport sales like Eurostar, given the fiasco of British Rail’s privatisation. Critics of the Eurostar sale say it is hard to see where the benefits for passengers will come from by selling our stake, and the future dividends – which last year alone brought us £7.4m.

So, what’s next in the privatisation jamboree? Expect to see the Royal Mint, Ordnance Survey, Met Office and other small fry sold sooner or later (although the Mint has been shelved for now as it’s simply too small). Sales of the Student Loan book and radio frequencies currently owned, but not used by, the emergency services and armed forces are also likely.

But the big one is Urenco, the nuclear enrichment operation owned by us, the Dutch and the Germans. This could fetch as much as £3bn for the Exchequer, but the sale seems to be repeatedly stalled.

Urenco is known in nuclear history as being the organisation where Karachi’s very own Dr Strangelove, Abdul Qadeer Khan, learned his trade. He worked for Urenco shortly after its formation in 1971 before filching its highly classified blueprints and distributing nuclear enrichment know-how to Pakistan and, allegedly, other troublespots.

Security issues around selling such an operation to the private sector would appear to the layman to be pretty overwhelming, but the British government last year hired Rothschild to launch a sale process. Despite the best efforts of those advisers, it has since got bogged down, partly due to UK fears of nuclear proliferation, but mainly because legislative issues in Holland are proving somewhat gluey.

Urenco may be off the For Sale shelf for now, but, with Holland’s budget deficit yawning just like ours, expect the country’s political squabbles to be overcome sooner, rather than later.

The portfolio: financial year 2012-13

1. Companies House

2. CDC

3. Channel 4

4. Eurostar (40%)

5. Export Credits Guarantee

6. Land Registry

7. London and Continental Railways

8. Met Office

9. NATS (49%) 

10. National Nuclear Laboratory 

11. Nuclear Decommissioning Authority 

12. Nuclear Liabilities Fund 

13. Ordnance Survey

14. Post Office

15. Royal Mail (30%)

16. Royal Mint

17. UK Green Investment Bank 

18. UK Hydrographic Office

19. Urenco (33%)

20. Working Links (33%)

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