For sale: one bridge, a bookmaker and millions of student loans
Brown gambles on huge sale of assets to balance books
Monday 12 October 2009
A fire sale of public assets will be announced by Gordon Brown today to help cut the Government's mounting deficit.
The Tote, the Dartford crossing, the student loan book, the Channel Tunnel rail link and the Government's stake in Urenco, which enriches uranium for nuclear power stations worldwide, will all be offered to private bidders in the next two years, in an attempt to raise £3bn.
The Prime Minister will make his announcement in what he hopes will be the opening salvo of a campaign to convince voters that Labour, not the Conservatives, can be trusted to bring down government debt without plunging the country into a "double-dip" recession.
On the day that MPs return from their long summer break, he will deliver a long-planned speech on economic management and hold a question-and-answer session with leading economic commentators to lay out a strategy for steering the economy out of crisis.
The most controversial of the proposed sales is the 33 per cent government stake in Urenco, because of the risk of enriched uranium getting into the wrong hands, but Mr Brown will promise that the sale will include safeguards to protect national security.
Selling the Tote has been on Mr Brown's list of things to do for more than a decade, but each attempt to dispose of it has hit political problems. The Horserace Totalisator Board, as it is officially known, has a string of betting shops, 540 outlets in all, and a pools business. The first time that Mr Brown hinted that it might be for sale, before Labour came to power in 1997, he was blocked by vigorous opposition from the late Robin Cook, a devoted habitué of the racetracks. In 2000, Mr Brown overcame the Foreign Secretary's opposition and announced that the Tote would be sold to a racing industry trust. This pledge was included in Labour's manifesto for the 2001 election, but it ran into problems from the European Commission. In 2007, a consortium of Tote executives and the Racehorse Owners Association, backed by private equity borrowing, was prepared to buy the Tote for £400m, but the sale collapsed because of opposition from within the Treasury.
In March, the Chancellor, Alistair Darling, appointed Rothschild to prepare the sale of the Royal Mint, which is expected to fetch £35bn. It was thought the next asset to be put on sale would be Ordnance Survey.
Local councils are also feeling the pressure from government to prepare more surplus assets for sale. Mr Brown is hoping that the combined sales by local and central government will come to £16bn, to add to £30bn-worth of asset sales set out in a Treasury report by Sir Michael Lyons, commissioned by Mr Brown five years ago.
Nearly half the sales that made up Sir Michael's total came from council housing, and more than a quarter from sales by local government. Central government was expected to contribute only about £1bn a year for seven years.
The Ministry of Defence has been the biggest single contributor to government asset sales since the ending of the Cold War 20 years ago. The sale of Chelsea Barracks alone, in 2007, raised £959m. NHS trusts are expected to raise £200m this year, and a similar sum next year, from selling surplus land and buildings.
Another major source of capital for the Government comes from rationalising the use of office space in central London. Since the Lyons review in 2004, 85 leases on government buildings, occupying 250,000 sq m of central London, have come to an end, and many were not renewed. In that way, it is estimated the cost to central government was cut by £150m a year.
The various government departments are reckoned to hold about £220bn worth of assets, not counting the vast quantity of land, buildings and equipment held by NHS trusts. The two departments with the largest asset base are the Ministry of Defence and Department for Transport, which together hold about £152bn worth of assets.
Britain's budget deficit is becoming the biggest single issue between the main political parties, as the 2010 general election approaches. It could hit a record £220bn this year, or 12 per cent of gross domestic product.
But Mr Brown will repeat his warning today that if the Government were to start cutting the deficit too quickly, it would exacerbate the problems of falling output and rising unemployment.
Yesterday, Mr Darling, accused the Conservatives of "wallowing in the opportunity to seriously damage our economy and our prospects in the future".
Speaking on BBC Scotland's Politics Today programme, he claimed: "They don't recognise that maintaining support now is essential. Otherwise if the economy crashes, millions of jobs would be threatened. They don't understand that, they don't accept that."
That warning will be echoed today by the Prime Minister. "We also need a deficit reduction plan that supports growth and jobs, not one that snuffs out recovery before it has started," he is expected to say.
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