31 October 2008
By Tash Shifrin
The government has defended the controversial privatisation of defence research organisation Qinetiq, which saw shares held by the top ten managers rocket in value from £540,000 to £107m on the day of flotation.
The privatisation had been attacked by the Commons Public Accounts Committee in a June report. It said Qinetiq's management team – which had negotiated its own incentive deal before Carlyle Group was selected as the preferred bidder – had made '£200 for each £1 they invested while the taxpayer received just £9'.
The report added: 'Such profiteering at the expense of the taxpayer is not something this committee would expect from former public servants.'
The government defended the sell-off in a response buried in Treasury minutes. 'Returns to management need to be viewed in the context of the over £800m that has been raised for the taxpayer,' it said. 'The objective of the management incentive scheme was to maximise the growth in the value of the business during the period when the government retained the majority of the shares, and therefore ensure that the taxpayer was the greatest beneficiary.'
It added: 'The government believes that the structure of the scheme was consistent with this objective.'
The response also challenges the MPs' view that the taxpayer could have gained £90m more from the deal, saying their analysis 'does not reflect the potential for changes in one area to have had an adverse impact on the value of other parts of the sale'.
An agreement to sell 2.5% more of the company to Carlyle than first planned was 'part of a larger negotiated package of changes agreed in November 2002'.
PFoct2008
