Plymouth Council accused of 'sleight of hand' over citybus deal

______________________________________________

'Numbers simply don't add up', insiders tell nby

Just seven hours after City councillors signed off the deal to sell Citybus to Go-Ahead plc, a 'whole new management team' was put in to run the privatised business, nby has learned. So far, only the appointment of Go-Ahead's Andrew Wickham has been announced; but we can confirm that in fact most of the senior management of what was the PCC-run Citybus will go.

This is but the latest odd twist in a sell-off that has been riddled with unanswered questions since the Conservative-led council decided to brook no opposition in going ahead with the sale. As one might expect, the original proposal to privatise the service (in direct contradiction of promises by Tory leader Vivienne Pengelly not to) evoked knee-jerk opposition from the Labour group on the council. Given Go-Ahead has an enviable track record in maintaining services and keeping fare costs down (for example in Brighton and Southampton) this seemed at the time unwarranted. But in the lights of details that have emerged, it seems to us that the Opposition in Plymouth do in fact have many valid points to make.

First, the Council spent almost £1 million on a viability study: a million pounds of taxpayers' money to finalise the practicality of something sold for just £20 million. By any standards, that degree of risk-assessment represents a crass commercial perspective; in a wider sense, it borders on dereliction.

Second, the service has been making (at the last audit) £2.5million per annum for the taxpayer. It isn't exactly what you'd call good Thatcherite economics to sell a going concern, but leaving even this aside, why did the management team need to be replaced on a highly profitable business? This will only cost Plymouth taxpayers more in layoffs.

Third, the sale at this price against past earnings represents a P:E ratio of just 8. Even in a relatively nervous stock market environment, the council could've got twice that and easily retained at least 30% of the shares for the taxpayer's benefit. On this basis - with the staff cuts and higher fares which will surely follow - Go-Ahead will easily amortize its investment within five years. Nice work if you can get it.

According to Unite, CityBus has been run on a commercial basis for the past 25 years. No wonder the buyers are called Go-Ahead: this smacks of 'go ahead guys, rape the taxpayer'. There is no way (either via a private sale or AIM flotation) anyone could buy such a transport company at eight times earnings in 2009: local businessman John Preece offered £12million for the operation in 2002.

Finally, the Tory majority values the Milehouse depot for £3m, when only 18 months ago it was valued at £20m. What's going on there? The Plymouth Herald describes PCC as 'cash-strapped', so why let the site go for such a derisory sum? And why plan a £46 million 'life centre' for the City?

A senior Labour figure in the region told us, "A profitable company which has been a goldmine for the taxpayers of Plymouth has been sold. Its depot has been made part of the deal, but still allows the Council to snaffle any profits made above £3 million on the sale. This woman Pengelly told us just six months ago that she wanted only to look at feasibility. Now a fire-sale has been rushed through. It stinks".

Next time in Plymouth Soap: the strange suicide of Julain Grail

Home