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20.01.16

Eurostar sale is proof government ‘still undervaluing public assets’

The government is continuing to undervalue its public assets and over-rely on a small pool of expensive advisers and asset sales, MPs have found.

In a report looking at the government’s sale of its share of Eurostar – as well as the delayed evaluation of construction of the high-speed link that connects London to the Channel Tunnel – the Commons Public Accounts Committee (PAC) concluded that Whitehall does not have “sufficient understanding of the economic impact and regeneration benefits of transport infrastructure”.

MPs on the committee said central government has a long track record of undervaluing its own assets. The Eurostar shares were actually sold for nearly double their pre-sale valuations done by the Treasury and UBS, its finance adviser – who were overly cautious that a competitor would emerge to run trains on the same track.

PAC recommended that the Treasury examine the underlying cause of the government and its advisers’ repeated tendency to undervalue assets before a sale.

On the financial advisers themselves, the PAC said the government is relying too intensely on the same major names. UBS, for example, also advised on the sale of HS1 and Royal Mail, the latter of which also involved Freshfields, an adviser to the Eurostar sale.

“Although we are not questioning the integrity of the appointment process and have no reason to doubt the professionalism and expertise of these advisers, we are concerned that a small number of advisers are engaged so frequently,” PAC said.

The committee also took the opportunity to criticise the evaluation of HS1. Its evaluation of the high-speed project, which connected the capital to the Channel Tunnel, came two years later than promised.

And, even then, the Department for Transport still refused to accept that its own evaluation proved the scheme had been poor value for money, PAC argued.

Its chair, Meg Hillier MP, commented: “The public’s stake in Eurostar was sold for significantly more than valuations had anticipated - but also significantly less than the total invested by taxpayers.

"We now also know, following publication of the government’s much delayed report, that the costs of HS1 far outweigh its economic benefits.

“Taken together these facts raise serious questions about the government’s approach to valuing public assets, as well as its commitment to considering the value for money of public spending on such expensive projects.”

But Treasury defended its sale of Eurostar, arguing that the process was “well-handed and secured a good return for the taxpayer”.

“Releasing public assets we no longer need is at the heart of our long-term plan to tackle Britain's debts and boost economic growth, and that's why we've recently identified up to £4.6bn of further asset sales, to help build on the huge progress we've already made,” its spokeswoman said.

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