QinetiQ, the business created out of the Defence Evaluation and Research Agency, is Labour’s first attempt at full-scale privatisation, and it has deservedly run into heavy flak. The Daily Telegraph is particularly agitated about the fact that private investors cannot apply for shares in next month’s £1.1 billion flotation, which is open only to institutions. Bankers handling the sale say QinetiQ is too complex to explain to ordinary punters without spending unjustifiably large sums on a marketing campaign. Spokesmen for small shareholders declare that every citizen should have the chance to benefit from the sell-off of state assets. The bankers’ attitude is certainly patronising, but the institutions that will take up the shares are no more than collective repositories of citizens’ savings, and the row about who can apply is a distraction from the real potential scandal, which is the matter of how the US ‘private equity’ group Carlyle was allowed to acquire, for £42 million in 2002, a one third stake in QinetiQ that could be worth £340 million after the flotation.
Carlyle is a curious beast, which may or may not be as sinister as it is painted by Dan Briody in his book The Iron Triangle (John Wiley, 2003) — strongly recommended to anyone who enjoys a good conspiracy theory. Its European chairman is Sir John Major, and famous names on its payroll have included George Bush Senior and former US secretary of defence Frank Carlucci. Its connections to the Pentagon and the military establishments of America’s allies have no doubt been valuable to QinetiQ. But we should demand to know exactly how valuable, because (as the former defence minister Lord Moodie admitted last week) Carlyle clearly got into QinetiQ very cheaply. After little more than three years, Major’s firm will collect an eight-fold profit which counts as a direct loss to British taxpayers, who might otherwise still own the whole QinetiQ business.