The Labour Party demanded a statement from the Government yesterday after learning that Eurotunnel, the cash-stricken operator of the Channel tunnel, is considering taking part in bids for the profitable rolling- stock companies as a way of improving its financial health.
The move followed news that KPMG, Eurotunnel's auditors, had approached bidders with a tax scheme that would involve Eurotunnel joining one or more of the consortiums, and passing on its tax losses to the other partners.
The consortiums could bring some of Eurotunnel's tax losses forward, enabling the groups to pay less tax in the early years. Eurotunnel would receive a cash sum for bringing this benefit to its partners.
The finer details of the scheme are unclear and yesterday neither KPMG nor the company would discuss the proposals. One source close to Eurotunnel said: "We are considering a scheme that has been put to us from KPMG. Naturally we are bound to consider anything that would be of benefit to our shareholders and this scheme is a perfectly normal form of tax-planning."
However, the mere consideration of such a scheme has infuriated the Labour Party, staunch opponents of the privatisation. Henry McLeish, shadow transport minister, said: "Rail privatisation has gone from being a bad idea that will damage the interests of those who use British Rail, to a disastrous idea that will damage the interests of every taxpayer."
Mr McLeish said in a statement: "It is appalling that any company should be allowed to milk the tax system in this way. Labour is demanding a National Audit Office inquiry and an immediate statement from the Government that they will not tolerate any privatisation that is based on tax-avoidance scamming."
He said that the rail-operating companies, which lease passenger coaches and trains to the rail network, generated profits of pounds 450m last year, and were meant to be at the heart of cash generation for investment in the railways. "Instead they look like becoming just another tax scam for clever accountants," he said. The Inland Revenue would not comment on specific proposals.
Bids for the three rolling- stock companies have to be in by 15 September. The Government's advisers on the sale, Hambros, hope the net proceeds to the Government will be around pounds 2bn.
Most of the bidders appear to be financial institutions. Sources say that interest has been received from GE Capital (a US company); a consortium headed by National Westminster Bank; Nomura, the Japanese bank; and three management buyout teams.
Followers of Eurotunnel's fortunes said it was too soon to say if the scheme might be a good idea for the company's long-suffering shareholders.Reuse content