MPs call for probe into property deal

MPs are demanding a fresh look at a controversial £1.5bn deal to switch nearly 700 Inland Revenue and Customs & Excise properties to private sector company Mapeley.

They fear that because several offices will be shut as Inland Revenue and Customs move out, rental income will be cut and the deal may be in jeopardy, leaving taxpayers to pick up the pieces.

The deal, struck with property services firm Mapeley in 2001, has been criticised by the backbench Treasury Select Committee after it emerged that the company was placing ownership of many of the properties in a subsidiary based in Bermuda, an offshore tax haven.

Mapeley has already been through a cashflow crisis, which has since been resolved.

MPs plan to investigate the deal further later this year once the committee is officially reconvened in the wake of the election.

Michael Fallon MP, a leading committee member, said: 'This will be an important part of our review of the Revenue and Customs merger, which is one of our top priorities. As a first step, we will be questioning David Varney, the Revenue and Customs executive chairman, about it, probably in October.'

Mapeley, which floated on the London Stock Exchange last week, declined to comment. Shares in the company closed at £25.65, up from £23.

The company paid £220 million for the bulk of the Revenue and Customs property estate in what was seen as a groundbreaking public-private finance arrangement.

The firm undertook to manage the properties for 20 years and lease them back to their former owners in return for payments totalling £1.5 billion.

But in 2004, Chancellor Gordon Brown announced the merger of the Revenue and Customs with the loss of 12,500 full-time jobs from the joint payroll of nearly 100,000.

Later this summer, the merged service - HM Revenue and Customs - is due to give details of where jobs and offices will be lost.

For the Government, this presents few problems as the Mapeley deal gives it room for manoeuvre.

As the National Audit Office reported in May 2004: ' Customs and the Revenue now have the flexibility to relocate without having to meet the in-year costs of breaking leases or finding alternative tenants.'

But it added that Mapeley, by undercutting the next bidder by £500 million over the life of the contract, had put its finances in a tight position.

Seven months after the deal was signed in March 2001, Mapeley hit a cashflow crisis and asked for Treasury money. This was refused, but with both sides co-operating - and with Mapeley's finances improving - the crisis passed.

It is thought Mapeley is confident that its contract with the Government will protect its earnings against any dramatic changes in the numbers of buildings occupied.