The government has been accused of shortchanging the taxpayer by “selling the family silver at a record pace” after new analysis showed a record £26.4bn raised last year through privatisation.
A final 30% state holding in Royal Mail, 11bn shares in Lloyds Bank and a stake in Eurostar were among the assets sold by ministers in a bid to pay down debt and balance the books.
The multibillion pound bonanza, details of which were compiled by the Press Association, dwarfed a previous high point in 1987 when Margaret Thatcher’s government raised £20bn selling off blue chip names such as British Airways and Rolls-Royce.
This time round, the Treasury dismissed suggestions of a politically inspired “fire sale” and promised there would be more disposals to come. There is speculation that Channel 4 is among those in the future firing line.
“Central to our plan to fix the public finances is the sale of government assets to help pay down the national debt and ensure economic security for working people,” a Treasury spokesman said .
“That’s why we’ve set an ambitious target to sell £5bn worth of assets by 2020, which will put us on track to meet our target,” he added.
But the shadow business secretary, Angela Eagle, accused George Osborne of touring China to sell off any British asset he could lay his hands on to the Chinese state bank. “Osborne will only meet his debt target by selling off public assets, which explains why the Tories are flogging off the family silver at record pace,” she said.
The TUC general secretary, Frances O’Grady, said the privatisations were all about politics and nothing to do with economic security. “Eurostar and Royal Mail were both sold for well under value,” she said. “Flogging them off for short-term political gain is shortchanging taxpayers.”
The PA analysis shows that almost half of the record-breaking £26.4 bn came from the sale of mortgages previously owned by Northern Rock, which brought in about £13bn. More than £1bn was raised by the sale of the government’s remaining shares in Royal Mail, while a further £800m came from the sale of a 40% stake in Eurostar.
The TaxPayers’ Alliance welcomed the disposals. Jonathan Isaby, the chief executive, said: “Ministers are absolutely right to have identified assets to be sold off. Where shares, buildings or land no longer need to be in government hands, their sale can help ease the burden on already hard-pressed taxpayers.”
Howard Archer, chief economist at IHS Global Insight, said the bumper set of privatisations had been helped by largely favourable equity market conditions during much of the year. “Current financial market turmoil and uncertainty could slow and delay further privatisation plans,” he added.
About £2bn of shares in Lloyds Bank are due to go on sale to the public later this year. With regard to the potential privatisation of Channel 4, David Cameron said it was right to “look at all the options”.
The first sell-off of 2016 has already taken place. The government announced on 22 Januarythat it had sold its stake in a 67-acre redevelopment site near King’s Cross station in London, raising £371m. Transport minister Robert Goodwill argued the sell-off was “an excellent example of how we are reducing the deficit and delivering lasting economic security for working people”.
The Unite general secretary, Len McCluskey, described the findings as evidence of the government’s categorical refusal to consider that investment, not cuts, is the way to secure the economy.
He said: “Ministers suggesting that everything is better off in private hands simply insult the public’s intelligence. Tell that to fed-up customers who have had to endure the twin abuses of higher costs and poorer service when big business gets its hands on public services like the railways.”
“This fire sale is aimed at plugging the financial holes in chancellor George Osborne’s illiterate economic policy characterised by faltering growth and increased borrowing costs.
What the government sold off in 2015:
- January: Constructionline – £35m. The government sold the Constructionline business to Capita. This database contains details of more than 23,000 companies in the construction sector and provides a verified list of suppliers who have passed industry checks.
- February: Greencoat UK Wind – £51.2m. The government sold its entire shareholding in this fund, which was set up to encourage investment in UK wind farms.
- March 2015: Eurostar – £757.1m. The government sold its entire 40% stake in Eurostar to a consortium comprising a Canadian pension fund and Hermes Infrastructure .MPs on the House of Commons public accounts committee recently criticised this sale for being significantly less” than the £3bn poured into the business by taxpayers and “further evidence” of assets being undervalued.
- June: Royal Mail – £1.3bn. The government’s remaining 30% stake in Royal Mail was sold off in two stages in 2015. The first sell-off, in June, raised £750m. A further £591m was raised in October.
- August: Royal Bank of Scotland – £2.1bn. A 5.4% stake in RBS was sold off in August. This reduced the government’s overall stake in the bank from 78.3% to 72.9%. The sale proceeds were a third below the price the government originally paid, representing a loss of more than £1bn.
- November: Northern Rock mortgage assets – £13bn. The government sold these assets to US private equity group Cerberus. The Government has now sold off more than 85% of Northern Rock, which it nationalised in 2008.
- December: Lloyds – at least £9.1bn. A total of 11.2bn government shares in Lloyds were sold between 17 December 2014 and 3 December 2015. They were sold at an average price of more than 81p per share, raising more than £9bn. According to the latest figures, the Treasury still owns approximately 6.6 bn ordinary shares in Lloyds.
- Source: the Press Association, using data from UK Financial Investments Ltd and the Shareholder Executive
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