A Treasury official has defended the use of magic circle lawyers to provide legal advice over the sale of the government’s stake in Eurostar.
The National Audit Office reported concerns earlier this month that the £2.8m bill from Freshfields for its work on the project was ‘more costly than expected’.
The cost included an estimated £500,000 spent on the internal transfer of shares from the Department for Transport to the Treasury.
At an evidence session on the sale before the Public Accounts Committee last week, Conservative MP David Mowat said the relationship between law firms and government procurement departments ‘gets too cosy’ and asked why civil servants had not suggested capping Freshfields’ fees.
His committee colleague Stephen Phillips MP, who used to work for Freshfields, suggested that a ‘paucity’ of expertise within the legal profession means that government is overpaying for external advisers.
He asked whether procurement managers feel more comfortable going to the ‘Rolls-Royce service; £1,000 an hour for a partner’, rather than to those who might charge less.
Mark Russell, chief executive of the Shareholder Executive, the umbrella body for businesses owned or part-owned by the government, said his colleagues look ‘forensically’ at value rather than price.
He said: ‘Our experience has been actually that we do still get some very good value from some of the magic circle, but you can be sure that we are continually quizzing – can we use other types of law firms, can we use alternatives to the big four accountancy firms?’
Roger Lowe, senior responsible officer for the sale of Eurostar, explained the £500,000 bill incurred by Freshfields in 2014 included the cost of transferring the asset out of a subsidiary company. Around £200,000 was incurred in preparation work and around £300,000 in the actual transfer.
Committee chair Meg Hillier MP said the need to transfer the company was a ‘very expensive technicality’ but Lowe said the project had been tendered across a range of law firms, with Freshfields offering the best bid and doing a ‘first-rate’ job.
He added: ‘One thing we should recognise is that the transaction itself was probably one of the cleanest I have seen, in that the residual risk to government was almost non-existent.’