As the campaign to restore Eurostar services at Ashford and Ebbsfleet International stations continues, what happened to the £757 million the government was paid for selling its stake in the company?

Political editor Paul Francis considers if the deal agreed back in 2015 was as good as ministers claimed...

When the government announced it was planning to sell its 40% stake in Eurostar, it signalled the end of a 20-year partnership with the French that had seen the shared ownership arrangement flourish.

The then-Chancellor George Osborne denied the sale was ideologically driven. But ahead of a general election in 2015, it was as much a showcase for privatisation as for its primary purpose of raising a significant chunk of money to bring down the national debt.

As Osborne put it: “As part of our aim to achieve £20 billion from asset sales by 2020, the sale proceeds would make an important contribution to the task of reducing the public sector debt.”

Now, of course, Kent is counting the cost of Eurostar’s decision not to stop at Ashford or Ebbsfleet, since the Covid lockdowns.

People living in Ashford say the town has gone downhill ever since.

Eurostar bosses have previously blamed Covid, Brexit and soaring inflation for their refusal to reintroduce the stops in Kent.

But would we have had more say on getting the trains back at Ashford and Ebbsfleet if the UK government had kept its stake in the company?

It was a sensitive time politically when Osborne made his decision in 2015. With voters set to go to the polls, the Conservatives were keen to to un-hitch from the coalition with the Liberal Democrats.

As it turned out, the Lib Dems supported the sale, taking the wind out of the Tories’ attempt to depict them as profligate spenders of public money.

There was plenty of commercial enthusiasm for a share of the government’s stake, with 22 companies pitching for a slice of the leading international high speed train operator.

The government eventually sold its stake to a consortium of two companies.

The first was the Canadian fund manager CDPQ, a long-term institutional investor that manages more than 30 public pension funds.

The second was Hermes Infrastructure, part of Hermes Investment Management, a UK-based fund managing approximately £3bn on behalf of clients.

The government hailed the sell-off as one that had secured more than it had hoped, with Osborne declaring: “It’s great that we have reached an agreement to sell the UK’s shareholding in Eurostar that delivers a fantastic deal for UK taxpayers that exceeds expectations.”

The deal saw the government pick up £757.1m from the consortium, consisting of £585m for the 40% stake and a further £172m after Eurostar agreed to effectively allow the government to cash in its shares.

Danny Alexander, the Lib Dem Chief Secretary to the Treasury, was equally enthusiastic, saying: “This sale, at a much higher price than market expectations, is a model example of how this government is securing great value for money for taxpayers as it helps rebalance and rewire our economy.”

It seemed the sale was a win-win for all those involved and even the National Audit Office – the government’s own spending watchdog – commended the deal, saying in a report it had fulfilled the Treasury's objective of maximising proceeds and represented value for money for the taxpayer.

There were some questions raised in the report – but they were not ones that would have compromised the sale. It said the government could have delayed selling its stake as the operator was expected to become even more profitable once new, larger trains were introduced.

According to the NAO, the government considered waiting to sell after the new trains were introduced as it thought higher profits could feed through into a higher price.

However, it concluded that any delay would come with uncertainty and risks, so decided to sell in early 2015.

There were also questions about dividend payments to the government, which – had it not sold its stake – would, over the next 10 years, exceed £700m, almost matching the amount paid for Britain’s 40% Eurostar stake and preference share.

“I do not think the government did the right deal at the right time...”

Despite the huge sums reaped by the Treasury, there remained some sceptics, among them the Ashford Conservative councillor Paul Bartlett.

He said: “I do not think the government did the right deal at the right time. The sum they got was acceptable but the problem with privatisation, particularly in Europe, is that they didn't put in the adequate controls which would have given them very high involvement in management.

“There has been a quite radical change to the privatisation programme where they [Eurostar] has not retained the service obligation they should have done. The legacy of the privatisation programme has gone hugely wrong for the government.”

It is not just a question of having a voice at the table, he says.

“It can be much more than that. The shareholder agreement in many privatisations allows the government to influence the management.”

He cites as an example the decision by the government to step in to stop Royal Mail from dropping deliveries on a Saturday.

So, how did Eurostar evade any obligation to continue with trains stopping at Ashford?

The answer seems to be that no-one thought it would be an issue.

Eurostar was continuing to perform well and the UK economy was in relatively good shape. It was a long way away from the devastating impact of Covid-19 on travel and tourism that has led to the suspension of trains stopping at Ashford and Ebbsfleet.

Cllr Bartlett believes that generally, the private sector ran things better, but there were times that it was necessary to “fetter the way the private sector did its business”.

As to the £757m the government got, that has long since disappeared into the Treasury accounts. Meanwhile the campaign continues to bring back services at Ashford.

It is a campaign, that had the government taken a different stance, could have been unnecessary.