12 December 2003
Department of Transport officials did not adequately test the financial plan that launched the beleaguered National Air Traffic Services, relying on 'blind optimism,' MPs have reported.
In a report published on December 9, the Commons' Public Accounts Committee also slammed the department for failing to give adequate consideration to alternative financial structures for Nats, which encountered difficulties after it was launched in 2001, and for 'raiding' its coffers at taxpayers' expense.
MPs said the £800m public-private partnership deal between the Airlines Group consortium and the government, which led the consortium to borrow heavily from banks to finance the project, was not financially robust.
The economic effects of September 11 on the airline industry left the group with funding problems that inadvertently increased the influence of their creditors over the project. The government also pumped £65m into the company as part of a £130m rescue package.
Nats' debts doubled following the PPP. Indebtedness was exacerbated, MPs claim, by the fact that the Treasury and the DoT took £758m from the sale proceeds. However, the group has recovered slowly from the low point of 2001.
PAC chair Edward Leigh said the DoT had been 'imprudent' in its analysis of the consortium's initial financial proposals.
He also blasted officials and ministers for dismissing 'too readily' a not-for-profit model for Nats – similar to that used to run Canada's air traffic systems – and for choosing a model that meant the consortium did not bear sufficient financial risk in the event of a downturn in air travel.
'Blind optimism by the department, coupled with its raiding of Nats' finances, left the company in a vulnerable financial position, with debts double what they were before the PPP,' said Leigh. 'In such situations, the taxpayer is unlikely to be the winner.'
Top Blair adviser to join Morgan Stanley
One of Prime Minister Tony Blair's most senior advisers is leaving Number 10 for a highly paid job with a City investment bank.
Jeremy Heywood, Blair's principal private secretary, is to join US-owned Morgan Stanley in the new year.
The prime minister's official spokesman, confirming an announcement from Morgan Stanley, said Heywood, who moved from the Treasury to advise Blair on economics and domestic policy, had served the government with distinction for 20 years. 'The prime minister is extremely grateful for all he has done and wishes him well in his new career,' the spokesman said.
Heywood's departure continues the changing of the guard at Number 10 that has involved communications director Alastair Campbell and his partner Fiona Millar, senior aide to Cherie Blair, leaving since the summer, when Godric Smith, one of Blair's two official spokesmen, also announced his intention to move on.
Heywood is to be replaced by another Treasury mandarin, Ivan Rogers, currently director of budget and public finances. Rogers was chief of staff to former Conservative foreign secretary Sir Leon Brittan when he was a European Commission vice-president, and was private secretary to Kenneth Clarke when he was chancellor.
Civil servants criticise plan to cap pensions
Government plans to cap 'fat cat' pensions throughout UK private and public institutions could 'severely damage' the retirement plans of senior public sector figures, Whitehall's managers have warned.
The FDA union, which represents senior civil servants, said that proposals to limit lifetime pension fund pots to about £1.4m were a dangerous move. It called on Chancellor Gordon Brown to 'get the detail right' or face stiff opposition from the civil service.
The Treasury is looking at ways of preventing organisations, mainly in the private sector, rewarding their senior staff with 'golden nest-eggs', This followed fears about excessive pay deals in City of London institutions.
The intention, sources told Public Finance, would be to tax heavily any individual's pension fund that exceeded £1.4m.
But FDA general secretary Jonathan Baume said: 'There is a real danger that in due course many senior managers in the civil service, NHS and local government will find their pensions severely reduced.
'While senior managers in the public sector will be unable to avoid this potential detriment… experience shows that the private sector will find ever-more creative ways to circumvent any restrictions. When it comes to their own pay and benefits, the ingenuity of the boardrooms knows no bounds.'
Baume also called on Brown to consider imposing a link between pension limits and increases that was in line with earnings, and did not simply follow inflation.
The FDA has won a separate battle over civil service benefits, following the Department for Work and Pensions' decision to withdraw plans to impose a financial penalty on absenteeism.
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