Bus sale fee criticised

The City bank BZW was criticised yesterday for in effect setting its pounds 4m bonus for advising London Transport on the successful sale of London bus companies, writes John Rentoul.

The 10 bus companies were sold a year ago for pounds 233m, more than twice the pounds 100m "benchmark valuation" set by London Transport. BZW received pounds 5.07m, of which pounds 3.87 was a "success fee" based on the difference between the proceeds and the valuation - which was itself carried out by BZW.

Robert Sheldon MP, the Labour chairman of the Commons Public Accounts Committee, said the arrangement seemed "strange", because the lower BZW set its valuation, the higher its success fee.

The National Audit Office, the public spending watchdog, concluded that, "overall, the sale was managed effectively". But its report warns: "There are risks in linking success fees to benchmark valuations as these may focus on a vendor's minimum expectations and will not necessarily reflect best estimates of likely proceeds."