Ministers allowed officials to 'hit the jackpot' in MoD privatisation

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Ministers have been accused of allowing a handful of civil servants to "hit the jackpot" by signing off a privatisation deal that netted them "mind-boggling" profits of nearly 20,000 per cent on their investment.

MPs expressed fury after a report by public spending watchdogs revealed the vast scale of profits reaped by managers after a major stake in the former state-run defence research giant QinetiQ was sold to a private equity firm.

The National Audit Office criticised the Ministry of Defence for failing to reap the full potential of the sell-off to the private equity group Carlyle.

Auditors warned that top managers in the business – formerly the research arm of the MoD – were allowed to negotiate improvements to their lucrative incentive deal even before final bids for the business were submitted. They said that managers should be banned from negotiating incentives in any future privatisation until bids had been agreed.

The report said that the 10 most senior officials in QinetiQ invested £540,000 in the business but ended up with shares worth £107.45m when the firm was floated on the stock market last year – a return of 19,900 per cent. Some 245 senior managers bought shares for £450,000 that rose in value to £65.26m on flotation.

The sale of 37.5 per cent in QinetiQ in 2003 paid Carlyle £55m lower than the £374m it originally bid. The assistant auditor general, Jim Rickleton, said taxpayer profits could have been "tens of millions" more.

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