Eurostar: Is Now The Time To Sell?
Updated: 11:34am UK, Wednesday 04 December 2013
By Anushka Asthana, Political Correspondent
Eurostar is next in line for a coalition sell-off following on from the Royal Mail - the British arm of another iconic brand being placed back into private control.
Both have links to the Queen, whose face adorns stamps and who herself launched the Eurostar, making its first journey from London's Waterloo to Calais, in France.
The sell-off is part of a plan to realise the value of corporate and financial assets – that has now been extended from £10bn to £20bn. Why are they doing this?
It is clearly tempting for the Government to sell off lucrative assets in the face of an eye-wateringly large deficit.
But every move will be scrutinised closely - and timing is everything.
Ministers need to avoid stumbling in one of the many potential pitfalls these sell-off projects inevitably contain.
Just look at the controversy that engulfed the coalition during the Royal Mail privatisation after allegations of a serious undervaluation.
The Government came under fire after it sold shares for 330p each, valuing the company's equity at £3.3bn. The shares surged on the first day of trading.
Sky News' Mark Kleinman revealed JPMorgan had told the Government earlier in the year that Royal Mail could be worth up to £10bn including its debt.
There have also been questions surrounding the sale of part of the student loan book for a fraction of its value.
Ministers have decided they are not going to be able to recoup the value of loans handed out to students in the 1990s. Danny Alexander, the chief secretary to the Treasury, said ominously that the "private sector is well placed to maximise returns from the book, which has deteriorating value".
So, with Eurostar, the first question is: why now?
The British arm of this company has undoubtedly had a troubled financial history. The Government stepped in during the late 1990s while the second stage of the project was underway – a high-speed rail link starting at London's St Pancras.
A surge in cheap air-travel hit Eurostar's figures. It may have hit record rail speeds in 2003, but it fell short of passenger projections.
As recently as last year, the National Audit Office said the numbers were 30% below forecasts by the Department for Transport in 1998.
That "left the taxpayer exposed to an ongoing liability to support the project", it found.
But this year things have looked better with sales revenue reaching £207m between July and September, a 10% increase on last year, and passenger numbers up 5% to 2.7m.
Mr Alexander told Sky News today that he believed it was right to let go of Government assets at the right time – and sell if it is value for money.
"We think there is scope to expand the sale of Government assets," he said.
He wants the focus of the national infrastructure plan not to be on the sale of Eurostar but on the investment in new nuclear, Gatwick airport, the tube and the removal of plans for a toll on the A14.
They want to rebut the allegation that only a handful of 40 infrastructure projects given "priority" status in 2011 have been completed - insisting that 99% are on track - and push back against those highlighting ONS figures showing a 13% drop in infrastructure spending last year.
It is certainly welcome to see insurance companies pour money into this sector - six firms will invest £25bn in infrastructure projects over the next five years.
But, to be clear, no new Government money has been announced today. And it is perhaps inevitable that the focus today will be on Eurostar and its possible return to the private sector.
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