Wednesday, 22 July 2015

Fees for privatisations

Mark Leftly, associate business editor at The Independent, finds it odd "that the part-privatisation of the Green Investment Bank, which has invested £2bn of taxpayers’ money in around 50 projects, should be shrouded in any secrecy".

" the Department for Business should tell us the fees it is paying for advice on selling a majority stake in the [Bank].

"The Government is using Bank of America Merrill Lynch and Herbert Smith Freehills, from the so-called 'silver circle' second tier of elite law firms. The GIB has hired UBS bank and Slaughter & May, of the ultra-elite 'magic circle', to help navigate the sale process. Reports suggest that the Government could receive a £1bn-plus windfall while still retaining a 30 per cent slice of the bank."

Liberal Democrats will point out that the GIB was a Liberal Democrat idea. Chris Huhne and Vince Cable fought for it to operate commercially, something which George Osborne's Treasury resisted.

Leftly goes on: "This is not a bank that is too big to fail, or one that is of structural importance to the economy (indeed, since it still can’t borrow from the market and relies on the Treasury for money, it’s not even really a bank). Neither is the GIB a matter of national security – unless you are the type of environmentalist who believes low-carbon energy will safeguard the human race’s survival. And neither is this a defence privatisation, where paranoia over almost any leaked detail would at least be understandable, if not always a credible reason for extreme secrecy.

"Also, the Department for Business has revealed the fees paid to advisers on last month’s sale of shares in Royal Mail. The Exchequer earned itself a handsome £750m and handed just one hundredth of 1 per cent – £75,003 – in fees to three banks, including Bank of America Merrill Lynch, and one law firm. They appeared to be accepting token fees in the hope of currying favour with the Government and winning more lucrative work down the line."

It is clearly naïve of me, but I wonder why it still needs four City firms to advise on a privatisation when surely Treasury civil servants must have built up considerable expertise after years of sell-offs under the coalition.

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