Civil servant grilled over rail sell-off
Monday 15 February 1999
Sir Richard Mottram, Permanent Secretary at the DETR, will appear before the Commons Public Accounts Committee to be quizzed over the National Audit Office's (NAO) highly criticial report into the sell-off.
The controversy about the Railtrack flotation has flared up again, with reports over the weekend suggesting that the Government could have raised an extra pounds 1bn by conducting an auction of the business. Trade buyers including Stagecoach, the transport group, and the Japanese bank Nomura had expressed an interest in buying the business.
In its report, the NAO concluded that the Railtrack sale could have fetched an extra pounds 600m to pounds 1.5bn had it been carried out in stages. The flotation in May, 1996, raised a total of pounds 1.9bn but Railtrack has quadrupled in value since then.
Appearing alongside Sir Richard will be David Freud and James Sassoon of the investment bank SBC Warburg Dillon Read, who advised the then Conservative government on the sale. Warburgs was also criticised by the NAO for having had a potential conflict of interest because it was both the adviser to the government and co-ordinator of the actual flotation.
However, the NAO report itself was also widely criticised when it was published in December last year for failing to mention the pivotal role played by Clare Short, Labour's spokeswoman on transport, at the time of the flotation.
Ms Short was held to have been partially responsible for the under-valuation of Railtrack because of her threats to renationalise the business once Labour got into power. In the Railtrack prospectus she wrote that "dependent on availability of resources, and as priortities allow" Labour would "seek by appropriate measures to extend public ownership and control over Railtrack".
It was this statement that persuaded the government and its advisers to rush through the sale and sell 100 per cent of the shares, rather than an initial 60 per cent or 80 per cent, as the NAO recommended.
In the event, Railtrack shares did not begin to rise sharply until after Labour came into power, Ms Short was moved from the transport brief and it became clear that the threat of renationalisation would not be carried through.
NAO officials were furious at the criticisms made of the report and are thought to have briefed members of the Public Accounts Committee ahead of today's hearing.
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