City & Business: Shunted from rolling stock to laughing stock
Sunday 10 December 1995
But who wants it? Not the public. Not, in their hearts, do many Tory backbenchers. Not even former BR chairman Sir Bob Reid, who attacked BR's fragmentation into 25 franchises - the train operating companies (TOCs) - three rolling stock firms and Railtrack, the oft-abused track owner.
Who wants it? Only ministers, it seems, rushing to sell off another state industry cheaply to pay for last minute pre-election tax cuts.
Rolling stock has already degenerated into laughing stock: the BR timetable pulped over mistakes; a 1,000-page book of travel restrictions; mountains of legal paperwork covering access to 2,500 stations - all of which are keeping lawyers and bankers in clover.
Senior BR directors have warned that Railtrack may be sold for a quarter of its pounds 6bn asset value and the TOCs for one-third of their pounds 9bn. Whatever the debate about their true worth, no firm in its right mind would flog off assets so quickly this way.
The cost to the rail-travelling taxpayer will be high, too. Many fares may have been pegged to inflation, but only at the cost of public subsidy rising to up to pounds 1.8bn by 1998 from pounds 1.1bn last year.
The farce looks set to continue. Like electricity and buses before, in their zeal the Conservatives look like creating yet another "academic market".
How apt, then, that Tuesday's likely winner of South West Trains is Stagecoach, Britain's largest bus company. In 1986, when National Bus was split into no less than 72 subsidiaries, the industry was already re-amalgamating before the sell-off was over, with Stagecoach leading the gobbling-up. The company, whose tactics have since been the subject of more than 20 Office of Fair Trading enquiries, may not be able to run leapfrog trains to drive rivals out, as with buses. But there is nothing to stop it bidding for as many TOCs as it likes, or buying them afterwards. So much for competition, when the result is likely to be bigger rail monopolies and greater private profits.
More political risks lurk ahead. The main difference between rail and post, which was stymied by backbench rebellion, is that the primary rail legislation is already on the statute book. But the core issues are the same: fewer services in shire Tory areas, just like threatened post office closures. One fatal train crash because of sell-off chaos and the Government may be in serious trouble.
Auditing the auditors
POOR accountants, in the firing line again. Personally poorer to the tune of pounds 34m at audit firm Binder Hamlyn, if 150 partners fail to overturn a landmark High Court negligence ruling last week.
Pending claims against the profession in the UK now run into billions, possibly more than partners' entire personal capital. Most arise from spectacular collapses, the likes of BCCI, Maxwell and Polly Peck, or the Lloyd's of London insurance market.
The irony - possible salvation, cynics would say - is that as administrators or receivers, the accountancy firms are suing each other. Binder's case, though, was different. Alarms and one-time British Car Auctions firm ADT brought the case over a deficient audit of Britannia Security, for which it overpaid in 1990.
Following KPMG earlier this year, most auditors could well rush towards some form of limited liability to shield personal wealth. Like any company occasionally selling a pup, there is no reason why audit firms should not possess such status. The cost may be higher fees or more qualified advice. The lesson, though, is likely to be less willy-nilly rubber stamping of lucrative deals, which would benefit investors, creditors and pensioners alike.
Bland's bitter pill
TAKE a bow, privatisation once more. This week two more power firms, East Midlands Electricity and Southern Electric, are set to pay out upwards of pounds 200m apiece in special dividends to shareholders, making pounds 1bn by the industry so far.
The cash thrown off by the industry puts into stark relief the failure of regulation to ensure customers get a fair deal, too.
Meanwhile, another privatisation dream died last week, when NFC scrapped its employee profit sharing scheme. NFC, formerly the National Freight Corporation, was one of the earliest and most innovative sell-offs: to an employee buy-out in 1982.
A bitter pill, then, that the axe-wielder, new chairman Sir Christopher Bland, pocketed pounds 14m from share options after Granada's bid for LWT. The cake, it seems, gets cut unequally all round.
Moores not merrier
"THE Board now expects other potential offerors to recognise the wishes of shareholders and not prolong the period of uncertainty." Thus spake Littlewoods chairman Leonard van Geest after Moores family members rebuffed former chief executive Barry Dale's pounds 1.1bn bid on Thursday. That went for mail order firm N Brown, Iceland Frozen Foods and anyone else queuing up, too.
Last week's lesson is probably that Littlewoods' on-off flotation is, er, on-off once again. The stores group's results next year are likely to be awful and family splits will grow, not weaken. Watch this space.
Come clean, Ken
THE Government wrapped up its bumpy involvement in BP last week, with the pounds 513m sale of its remaining shares. One issue remains unresolved, however: an Inland Revenue investigation into pounds 600m of allegedly illegal tax breaks gained by the Kuwait Investment Office when it was forced to sell 12 per cent of BP - bought after the last state sell-off flopped in the 1987 stock market crash.
Chancellor Kenneth Clarke announced the investigation publicly in 1993, but enquiries to the Treasury and Revenue about its progress have since met a brick wall.
The KIO holds on to 9.9 per cent of BP and, as we report opposite, has problems of its own. But pounds 600m would build quite a few hospitals, or take thousands of homeless off the streets. Mr Clarke should now publish the results of the review.
q Patrick Hosking is away.
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