Magazine article The Spectator

Labour Tries Its Hand at Privatisation - and Hands John Major's Firm a Fast Buck

Magazine article The Spectator

Labour Tries Its Hand at Privatisation - and Hands John Major's Firm a Fast Buck

Article excerpt

QinetiQ, the business created out of the Defence Evaluation and Research Agency, is Labour's first attempt at full-scale privatisation, and it has deservedly run into heavy flak. The Daily Telegraph is particularly agitated about the fact that private investors cannot apply for shares in next month's £1.1 billion flotation, which is open only to institutions. Bankers handling the sale say QinetiQ is too complex to explain to ordinary punters without spending unjustifiably large sums on a marketing campaign.

Spokesmen for small shareholders declare that every citizen should have the chance to benefit from the sell-off of state assets. The bankers' attitude is certainly patronising, but the institutions that will take up the shares are no more than collective repositories of citizens' savings, and the row about who can apply is a distraction from the real potential scandal, which is the matter of how the US 'private equity' group Carlyle was allowed to acquire, for £42 million in 2002, a one third stake in QinetiQ that could be worth £340 million after the flotation.

Carlyle is a curious beast, which may or may not be as sinister as it is painted by Dan Briody in his book The Iron Triangle (John Wiley, 2003) -- strongly recommended to anyone who enjoys a good conspiracy theory.

Its European chairman is Sir John Major, and famous names on its payroll have included George Bush Senior and former US secretary of defence Frank Carlucci. Its connections to the Pentagon and the military establishments of America's allies have no doubt been valuable to QinetiQ. But we should demand to know exactly how valuable, because (as the former defence minister Lord Moodie admitted last week) Carlyle clearly got into QinetiQ very cheaply. After little more than three years, Major's firm will collect an eightfold profit which counts as a direct loss to British taxpayers, who might otherwise still own the whole QinetiQ business. When the resale of Eversholt and Porterbrook -- companies formed by Major's government to own and lease railway rolling stock -- produced similarly freakish profits for early investors, Labour condemned it as 'a saga of privatisation excess'. Funny how history repeats itself.

There's something fishy about Iceland. This treeless rock in the north Atlantic, previously of interest only to Bjork fans and intrepid anglers, is emerging as a new utopia of entrepreneurship. Icelandic investors have had a hand in an extraordinary number of recent deals in Britain and the Nordic countries. The latest is the acquisition of a stake in easyJet by Flugleidir, the group which owns Icelandair. Among other British businesses already in Icelandic hands are Hamleys toy shop, Goldsmiths the jewellers, and the Big Food Group (conveniently including the Iceland frozen food chain), all of which belong to a conglomerate called Baugur, whose chief executive Jon Asgeir Johannesson seems to have incurred the enmity of Iceland's Prime Minister, David Oddsson, and has been busy fighting corruption charges in Reykjavik.

In the City, the stockbroker Teather & Greenwood is owned by one Icelandic bank and the investment bank Singer & Friedlander is owned by another. What is intriguing is that all this activity emanates from such a tiny and remote economy: Iceland has a population the size of Bradford's, and a gross domestic product -- largely dependent upon fish -- smaller than the annual turnover of Sainsbury's. …

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