The British Government has come under yet more criticism today after the National Audit Office (NAO) said that it could have got the taxpayer more money from the partial sale of defence firm Qinetiq. Qinetiq was sold by the Ministry of Defence (MoD) to US based private equity group Carlyle in 2003 for Â£42 million.
In addition to this, the NAO also pointed out that the incentive scheme adopted by the Government allowed the bosses of Qinitq to net astronomical returns from their investments.
Although Carlyle only received 35% of the company instead of the 37.5% it originally bid for, the NAO still found that the Government received Â£32 million less than Carlyle's original bid.
Carlyle bought their stake in the company for Â£42 million, their shares are now worth Â£372 million.
In addition to this top Carlyle bosses have made huge returns from their original investment. The Chairman Sir John Chisholm invested Â£129,000 and now has a return of Â£23 million. The Chief Executive Graham Love invested Â£106,000 and now has Â£20 million.
The NAO said this revealed the Ministry of Defence needed to re-evaluate its incentive scheme.
It is of concern that the Ministry of Defence did not seek specialist advice on the incentive scheme, which resulted in the top ten managers owning shares worth Â£107m, The head of the NAO, Sir John Bourn said. This level of return exceeded what was necessary to incentivise management.
Opposition politicians have attacked the government for under selling a valuable public asset. According to the BBC, Conservative MP and chairman of the Commons Public Accounts Committee said taxpayers had been short changed.
Whilst acting Liberal Democrat leader, Vince Cable said, It is completely unacceptable that the government has sold off a valuable national asset for a pittance, providing huge profits for the Carlyle group and the senior civil servants involved. This deal didn't sell the family silver; it gave it away, reports the BBC.
According to the BBC's Robert Preston, Lord Moonie, who was the minister responsible at the time said that the reason for the sale was that stock markets had slumped and it seemed that the MoD would not get a good shareholding price.
Although he tried to delay the sale it emerged that Treasury pressure contributed to the decision to go ahead.
Lord Moonie said, We were reluctant to proceed with the sale, but a combination of the Treasury and the fact we needed the money for items in our budget persuaded us to go on with it, reports the BBC.
The news will be another blow for Gordon Brown who was the Chancellor of the Exchequer at the time. The Prime Minister has suffered numerous setbacks this week when a junior civil servant lost disks holding the personal information of 25 million people.
The Prime Minister was also attacked yesterday by five ex-chiefs of the defence staff saying that he risked soldier's lives and neglected the armed forces by not giving enough funding to the armed forces.