Government stake in Eurostar was undervalued, say MPs

Government stake in Eurostar was undervalued, say MPs

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The sale of the taxpayer’s stake in Eurostar has come under scrutiny from the public accounts committee.

While the sale of the 40% stake for £585 million was “well-handled,” the process provides further evidence of the government’s tendency to undervalue public assets it is selling, MPs said.

The government is accused by the committee of an over-reliance on a small pool of financial and legal advisers in some asset sales and projects. It also relies heavily on external advisers for corporate finance skills and expertise.

The committee also raised concerns about the Department for Transport’s approach to evaluating the benefits and economic impact of transport projects.

Committee chairman, Labour MP Meg Hillier, said: “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 [the link between London and the Channel Tunnel] 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.

“In particular it is deeply concerning that work towards HS2 [the planned high speed line from London to Birmingham] should have progressed without full and detailed consideration of HS1.

“The government’s evaluation of HS1, produced at the urging of this committee, could and arguably should have been a key piece of evidence in scrutinising plans for HS2.

“Instead it arrived two years late, since when the government has claimed benefits arising from HS1 that cannot be measured by its own methodology. It is simply not good enough.

“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.”

The UK arm of Eurostar was previously part of a consortium London and Continental Railways, which planned to privately finance a new high speed line – known as HS1 – between London and the Channel Tunnel.

However, passenger numbers through the Channel Tunnel were significantly lower than forecast and taxpayer support for the company was required.

Following a number of restructurings a new Eurostar company was formed in 2010 of which the government owned a 40% stake alongside the national rail operators of France, SNCF (55%) and Belgium, SNCB (5%).

The Treasury sold its 40% stake in Eurostar for £585.1 million last March to Patina Rail, a consortium made up of a Canadian investment fund, and Hermes Infrastructure, a UK-based fund.


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