Saturday, 7 November 2015

"Taxpayer lost £2.2bn from 'rushed’ sale of Eurostar"

Emailed in by MBK from The Times:

The taxpayer lost more than £2.2 billion from the sale of the government’s stake in Eurostar after the auction was rushed through before the general election, the National Audit Office said.

While the spending watchdog said that the sale of the 40 per cent stake was well run and provided value for money, it fell well short of the £3 billion that the government invested during the past two decades.

So we didn't lose £2.2 bn from the sale, that loss already existed, that money was already spent or misspent. But the sale was at undervalue as well...

The sale raised more than £757 million and the final price was 90 per cent higher than earlier valuations, a report by the office said.The sale raised more than £757 million and the final price was 90 per cent higher than earlier valuations, a report by the National Audit Office said.

Meg Hillier, Labour chairman of the Commons public accounts committee, said that the government’s focus on Eurostar appeared to have been on short-term cash rather than on long-term value for taxpayers.

“Once sold, the family silver can’t be bought back. Had it kept its share, the government was forecast to pay off over £500 million of national debt over the next ten years using dividends from its 40 per cent share in Eurostar, and receive a further £243 million in dividends from its preference share.”


The Stigler said...

£500m in dividends over 10 years? £50m a year? How does someone figure that out when the BBC is reporting that it only got £7.4m a year in dividends ( Who is forecasting £500m?

Frankly, Eurostar is rubbish. It's marginally faster if you're going directly from London to Paris. From elsewhere, or going elsewhere, you might as well fly. It's the "Top Gear Challenge" problem. You might be on some superfast bullet train, but you start throwing some connections in, and average speed rapidly falls. We once went to Disneyland Paris by car because it would be slightly faster and a lot cheaper. By the time we'd have got onto a Eurostar, we could have been at Folkestone in a car.

Mark Wadsworth said...

TS, each to his own. We went to Europe a couple of times by train/tunnel, which is definitely more convenient that train/ferry, but since we had a car we go by car/ferry.

Others say that going on the Eurostar with a car is really good, but I can't comment.

As to the dividends/income, that surplus is clearly rental income so should be retained by the government and not flogged off.

Bayard said...

TS, AFAICS, high speed trains are great if you are going from city centre to city centre. Otherwise, I agree, you're better off flying.

IMHO, the great missed opportunity of the Channel tunnel is the lack of sleeper trains. Who cares if the train takes longer if you can get on a train in Manchester, go to bed in Kent and wake up in Austria.

Random said...

"Once sold, the family silver can’t be bought back."
Of course it can. WTF is the author on about?

The Stigler said...

Eurostar is better than rail/ferry. And we're regular users of Le Shuttle. The main advantage of that service is in another not-so-visible thing: the loading and unloading time. It's not just that it's quicker, it also unloads quicker than a cross-channel ferry.

Not sure I agree on not selling it. If the ROI isn't very good, it's better to sell - maybe someone else can get a better return on it.

It's pretty much a truism with all public transport. If you have to take 1 train, it's often a better idea than driving. If you have to change trains, the waiting time for a connection makes it a lot longer.

I'd love an international sleeper service. I've got to go to Switzerland this week and in order to get a full day, I'm flying the day before and staying overnight. If I could do an overnight sleeper, I could save on a hotel. I'd pay quite a lot for that. But in general, demand for sleepers has been falling, so I think I'm in the minority.

Bayard said...

"But in general, demand for sleepers has been falling, so I think I'm in the minority."

Do the railways still run any? The UK is really too small to use sleepers properly. North Scotland is really the only feasible destination and how many people want to go there? Now, as you would like, if you could get one to Switzerland, there'd be a lot more demand. It's the whole "moving" hotel idea.

"I'd pay quite a lot for that."

Exactly, part of what you are paying for in your hotel room is "land" and that is something the railways have which they can sell and costs them nothing, so in that respect a sleeper should be more profitable than a day service. Plus there's the lack of the hassle in getting from airport to hotel and hotel to meeting.

The Stigler said...


To be fair, I was only thinking of the Scottish ones which had some mad subsidy. The cross-channel ferries have a high demand for the overnight ferries in summer for this reason. Leave work on Friday, arrive at Portsmouth, go to France overnight, wake up in Caen at 7am and you're in the Vendee by lunchtime. They even slow down the ferry so that it arrives at roughly that time.

On your rent thing, rail's problem is that they have different monopoly rent - the highly paid staff on monopoly railways. And as railways aren't particularly run by competing companies and so much of what they do is dictated by the state, you don't see anyone trying to make things work.

Bayard said...

Agreed, there's not much internal competition between railways, especially on the continent, but there is external competition with other modes of transport. Subsidy and monopoly are, however, great sappers of efficiency.