Sale blocked by Blunkett

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David Blunkett, the Education Secretary, has blocked a £1bn deal to sell his department's property estate.

David Blunkett, the Education Secretary, has blocked a £1bn deal to sell his department's property estate.

The move is understood to have disappointed Treasury officials keen to release the value locked up in the 1,200 properties owned by the Department for Education and Employment. Similar deals have proved to be successes for the Department of Social Security, the Inland Revenue and Customs & Excise.

Earlier this year the Treasury commissioned consultants Deloitte & Touche to produce a feasibility study into selling the estate under the Private Finance Initiative. But Government insiders have revealed that Mr Blunkett put the brakes on the report before it was finished.

One source close to the project said: "Blunkett stepped in and said, 'No way'. The deal will never happen while Blunkett is Education Secretary." Mr Blunkett, one of the Labour Party's most successful left-wingers, is understood to have intervened as he believes the private sector should not run the Government's estate and services. But he has been tipped for a future promotion, so Treasury officials privately hope that one day the deal could be resurrected.

The source said that, while never finished, the report was likely to have recommended that the DfEE's estate could be transferred to the private sector in a £1bn deal. Analysts said investment banks Nomura and Goldman Sachs, and billionaire financier George Soros would be interested.

The DfEE's property estate comprises 1,000 job centres but also includes offices occupied by a raft of affiliated organisations such as the Office for Standards in Education, the Teacher Training Agency and the Further Education Funding Council. The deal would have been modelled on "Project Prime", which transferred the Department of Social Security's property to Trillium, a facilities and property company backed by Goldman Sachs. Trillium also provides and manages all the buildings' services on a 20-year contract. The National Audit Office said Prime saved the taxpayer £560m.

This led on to "Steps", involving the Inland Revenue and Customs & Excise estates. After a near two-year bidding process, Mapeley, a consortium backed by George Soros and US real estate investor Fortress, was selected as the preferred bidder in August. The £2bn deal will see Mapeley take over the ownership of the 750-property estate and manage the facilities for 20 years.

The BBC is also planning to use the PFI model to release the value of its estate. Last week it shortlisted two consortia to take charge. The two are 2020 Insight, made up of Trillium and Land Securities, and Foresite, which includes Amey Ventures, Barclays Private Equity and Arrowcroft.