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FINANCIAL SWEETNERS FOR QINETIQ COMPLAINT BY MP

7 Jan 03. The Guardian Newspapers David Hencke, Westminster correspondent, reported that an MP is complaining to the Speaker about a Ministry of Defence “cover up” over the offer of nearly £100m financial sweeteners to push through the part-privatisation of the defence research agency QinetiQ to the Carlyle Group, a US firm whose European chairman is the former prime minister John Major. Llew Smith, Labour MP for Blaneau Gwent, accuses the defence secretary, Geoff Hoon, of having slipped out details of the concessions by placing documents in the Commons library at the start of the Christmas recess, making it almost impossible for MPs to object. Mr Smith, who wants a parliamentary statement on the sale, has asked the Speaker, Michael Martin, to intervene following his criticism of the government’s use of spin doctors and the failure of ministers to make statements to MPs on government announcements.

Mr Smith pointed out that the 15 day period to object to the sale was entirely covered by the recess. QinetiQ, which is due to be partly sold off soon, employs 7,000 scientists and engineers on state-of-the-art defence research which can also have big spinoffs for civilian use. To get agreement officials have had to offer indemnities and warranties worth at least £92.3m and several unlimited guarantees to the Carlyle Group. These include a £45m contribution to the staff pension fund for possible early retirements after the sale; £40m if the government terminates early a 25-year deal on use of long-range test firing ranges; £34.5m on unspecified provisions in the agency’s accounts; and some £33m to cover legal fees. In addition, the deal covers possible tax liabilities and any future liabilities. The government has already promised that taxpayers will meet any bills for environmental pollution after part-privatisation. The document says: “The department has concluded that accepting these additional contingent liabilities represents better overall value than the alternative.” Failure to get agreement would see a “disproportionate” drop in the bid, according to one document – suggesting ministers might get only half the money they expected for the sale. Mr Smith said: “This is a staggering admission by the government that this deal is not really good value for money as far as the taxpayer is concerned.”

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