The House of Commons Public Accounts Committee has criticised the Government for the way it paid Linklaters & Paines more than £13m for advice on the sale of the first three rail franchises.
The report criticises the Office of Passenger Rail Franchising, Opraf, for not using a competitive tender to choose Linklaters and for not setting a cap on the fees of its advisers.
It spent £39.6m on advisers between 1993 and 1996 – a third of which was paid to Linklaters.
The committee also warns of the risks to the taxpayer of government departments becoming too dependent on such advisers.
It notes that financial advisers HSBC Samuel Montague and Linklaters were appointed to advise the Department of Transport on rail privatisation in 1992 and that “both were judged to be performing to a high standard and had gained considerable expertise”.
But it goes on: “We nevertheless urge departments to give careful consideration in such cases to the risk of their becoming dependent on particular advisers, which could eventually reduce competition and so put value for money to the taxpayer at risk.”
All 25 franchises have now been awarded. Linklaters advised Opraf on 23 of them. Partner John Ellard, in charge of the rail group at Linklaters, said Opraf had agreed a budget with Linklaters each year.
“It was a very big legal transaction, probably the largest we have ever undertaken,” said Ellard. But he refused to comment on the level of fees charged for advice on subsequent franchise awards. “Our fees will no doubt be made public by the next report of the National Audit Committee,” he said.