Public Sector - Rail privatisation 'rip-off'

The public accounts committee has been told how a failure to assess the real value of rolling stock prior to rail privatisation cost the taxpayer millions of pounds, writes Lawrie Holmes.

Last week, the commons committee questioned the bidders and buyers of the three rolling stock companies Porterbrook, Angel and Eversholt Leasing about how the value of the businesses changed so dramatically. They were privatised for #1.8bn and sold for #2.65bn just two years later.

Brian Souter, the chairman of Stagecoach which bought Porterbrook, said the government could have claimed

some of the profits if it had used a simple clawback system. ‘It was the flaw in the process,’ he added.

But all of the representatives questioned said the issue of clawbacks never arose during negotiations.

PAC chairman David Davis said: ‘You all appear to be supporting the idea that the taxpayer lost out significantly because market sentiment changed.’

Heads of the consortiums that successfully bid for the companies were asked how much they had gained from their sale. Sandy Anderson, the former head of Porterbrook, said he invested #120,000 which became #33.5m after Stagecoach’s takeover.

Andrew Jukes, the former head of Eversholt Leasing, invested #110,000 and made #15.9m. John Prideaux, who led the Angel Trains buyout said he made a #15m gain without any investment.

Asked if they felt guilty about ‘ripping off’ the public sector, the directors replied they had invested in a period of risk, with little market sentiment for rail privatisation.