Eurostar trains at St Pancras station. © Eurostar
Eurostar trains at St Pancras station. © Eurostar

UK government’s sale of Eurostar shows ‘tendency to undervalue assets’

The government’s sale of Eurostar has provided further evidence of its tendency to undervalue public assets when it sells them, according to MPs.

The £585m sale of the government’s 40% stake in Eurostar in March 2015 raised almost double the amount forecast by Whitehall advisors.

But this was largely because the same limited pool of advisors that the government repeatedly relies upon had made too low an estimate of Eurostar’s value in the first place, said the Public Accounts Committee.

The committee said the public’s stake in Eurostar was sold for significantly less than the £3bn total estimated to have been invested by taxpayers.

MPs criticised the government for relying heavily on external advisers for corporate finance skills and expertise. Advisors such as UBS were also involved in the sale of the Royal Mail and the HS1 rail link.

Committee members also expressed concern about the Department for Transport’s approach to evaluating the benefits and economic impact of transport projects.

For example, the government did not accept its own evaluation of the HS1 project as poor value for money.

The two-year delay in publishing this view meant important information that could have been used by Parliament to measure the potential benefits of projects, such as HS2, was not available.

“We now also know, following publication of the government’s much delayed report, that the costs of HS1 far outweigh its economic benefits,” said committee chairwoman Meg Hillier.

But because this report arrived two years late the government was able to claim benefits arising from HS1 to justify favouring the HS2 project, she said.

“HS2 would require huge public investment and taxpayers are rightly concerned that their money should be spent wisely. This case will do nothing to reassure them,” she said.

The committee called on the Department for Transport to develop a “robust way” to evaluate its investments and report on progress by September 2016.

“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,” she said.

“In particular it is deeply concerning that work towards HS2 should have progressed without full and detailed consideration of HS1.”

MPs added that while the Eurostar sale took place during benign market conditions it was well handled and there was competitive tension between the bidders.

A Treasury spokesman said: “It is misleading to suggest the government set out to undervalue the assets we hold. In order to achieve good value for the taxpayer, we sought expert advice for this sale and our approach was approved by an independent adviser, resulting in a total of £757.1m raised, which will go towards reducing the national debt.”

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