MPs have urged the Treasury to ensure it has a wider pool of legal advisers after it employed a magic circle firm to assist with the sale of its stake in Eurostar.
A report published today by the Public Accounts Committee found while the £585m sale of a 40% stake in Eurostar was well handled, it provided further evidence of the government undervaluing public assets.
Members of the committee also found the government relied heavily on external advisers for corporate finance skills and expertise but took this advice from a narrow selection of firms.
During an evidence session last year it emerged that the Eurostar sale incurred legal fees of £2.8m from magic circle firm Freshfields.
The cost included an estimated £500,000 spent on the internal transfer of shares from the Department for Transport to the Treasury.
The PAC said the same firm had also been involved in advising on the sale of Royal Mail. While there was no question about the integrity of the appointment process or professionalism of the service, MPs were ‘concerned’ that a small number of advisers were engaged so frequently.
The committee highlighted the risk of a ‘vicious circle’ where only those firms and banks that have the experience can get the jobs.
‘There is an over-reliance on a small pool of financial and legal advisers in some government asset sales and projects,’ it added.
Treasury officials had assured MPs that they would consider a capped fee arrangement for legal costs in future. They added that where potential suppliers have equal scores in the procurement process it would ‘definitely try to prefer’ those they had not worked with before.
Mark Russell, chief executive of the Shareholder Executive, the umbrella body for businesses owned or part-owned by the government, said during evidence his colleagues look ‘forensically’ at value rather than price. He added that the Eurostar transaction had been one of the ‘cleanest’ that it had seen, with minimal residual risk to the government.