Exposed: PFI cronyism

New head of pounds 5bn government initiative has close business links with disgraced former minister
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The Independent Online
THE leading City fund manager appointed last week to spearhead the Chancellor's pounds 5bn private finance initiative is a close business associate of the disgraced former Paymaster-General, Geoffrey Robinson, The Independent on Sunday can reveal.

Gordon Brown selected Derek Higgs, chairman of Prudential Portfolio Managers, for the high-profile chairmanship of Partnerships UK, the new body charged with driving the whole PFI programme.

The post, although part time and unpaid, ranks as one of the most influential held by an outsider in the whole of Whitehall with powers to invest substantial sums of taxpayers' money in a range of deals.

But critics of the burgeoning "Tony's Cronies" culture will question why Mr Higgs was chosen ahead of other leading candidates from the City.

Mr Higgs is a director of Coventry Football Club with Mr Robinson, where the former minister and ally of Mr Brown is a dominant force and owns up to 40 per cent of the shares.

Mr Robinson was on the Coventry City board until he resigned on appointment as a minister after Labour's victory in the 1997 election.

But he has now returned to the club as president, after being forced to leave the Government over the scandal involving his pounds 373,000 loan to fellow minister Peter Mandelson - a highly controversial transaction that also led to Mr Mandelson's downfall before his recent return to government as Secretary of State for Northern Ireland after 10 months in exile.

Another member of the Coventry City board is Mr Robinson's close business associate Brenda Price.

Mr Higgs was also a party to a controversial share deal executed by Mr Robinson's family trust, Orion, which reaped the then minister tax-free profits of almost pounds 200,000.

Documents filed at the club's head offices showed that in June 1997 - five weeks after Tony Blair came to power - Orion Trust's trading arm, Craigavon, sold 5,568 Coventry City shares to Mr Higgs for a total cost of pounds 371,385.

The secret deal was considered highly controversial as it allowed Mr Robinson to avoid capital gains tax on his profit because Orion Trust was set up offshore - at a time when he was guiding government policy on clamping down on tax avoidance vehicles.

It also raised questions about Mr Robinson's influence over the pounds 12m Orion Trust while he was still a minister and officially barred from taking an active role.

Plans to float Coventry City were expected at the time to reap a tenfold increase in value of the shares.

Partnerships UK will be the leading adviser to public authorities considering PFI deals and - when needed - will put up development capital itself.

Mr Higgs, who spent 24 years at merchant bankers SG Warburg, was also involved in the steering group advising the Treasury on PUK's formation.