Ross Butler says MPs’ criticisms of the sell-off of theformer Defence Research Agency are financially naive
In America it would have created celebrity entrepreneurs and provided a template for future deals. Instead, the British government’s hugely successful privatisation of the defence business QinetiQ has prompted a political witch-hunt.
The taxpayer made more than £800 million from the deal, far more than anyone dreamed at the start of the process. But a Committee of Public Accounts report on 10 June, following a National Audit Office inquiry, blasted the Ministry of Defence for selling too cheaply, and the company’s management for profiteering from the process of transferring what was originally the Defence Research Agency into the private sector. The Committee’s Conservative chairman, Edward Leigh MP, said the MoD had conducted a preliminary sale to a private equity firm in 2003 ‘like an innocent at a table of card sharps’.
Meanwhile, QinetiQ’s chairman, Sir John Chisholm — who joined the Defence Research Agency on its formation in 1991, and went on to gain £26 million from its sale — stands accused of helping hand the business to private equity on the cheap in return for his cut. ‘It was a one-way ticket to a run-away success,’ according to John Humphrys in a Today interview with Chisholm last week.
The private equity firm in question, the Washington-based Carlyle Group, is famous for political connections acquired by hiring the likes of George Bush Sr and Ronald Reagan’s secretary of defence, Frank Carlucci; the European arm of Carlyle was chaired by John Major from 2000 to 2005. On the face of it, as one Public Accounts Committee member put it, the whole thing ‘stinks to high heaven’.
Yet, in reality, the QinetiQ’s story has been a textbook example of smart privatisation.
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