In one of the most bizarre Government sell-offs, the buildings management arm of the Property Services Agency was sold for pounds 10.4m, but the taxpayer was left holding a bill for pounds 280m in redundancy costs.
A study by the National Audit Office, the public finance watchdog, issued today, lays bare the details of the scheme. In 1993, the five regional branches that comprised the PSA's building management division were bought by four separate businesses.
Total net proceeds were pounds 10.4m, although the buyers of three of the five - North-East, South-East and South-West - were allowed to delay payment for up to five years, while the purchaser of BM Manchester was in effect paid pounds 11.5m to take it off Government hands.
To pave the way for the sale, the total workforce was reduced from 15,000 in April 1990 to 6,700 in September 1993. Job cuts before the sale cost pounds 135.3m. The Government also agreed to pick up the bill for redundancies after the sale, costing pounds 146.4m, making a grand total of pounds 281.7m.
As part of the deal, PSA further guaranteed redundancy payments if the new owners went bust within five years of the sale and staff who moved across, lost their jobs. This could lead to a bill for an extra pounds 51m for the public purse.
The DoE was unable to give clear figures on the cost of closing the division, rather than selling it off. The NAO said it was unable to conclude whether it made more economic sense to shut the five branches down.
Despite raising just pounds 10.4m for the taxpayer, the privatisation cost pounds 14m, the bulk of which went to City accountants, Coopers & Lybrand, KPMG Peat Marwick and Ernst and Young.Reuse content