But by the time they got to electricity -one of the last things to be privatised – it really is quite extraordinary.”. Dan Corry,at the Institute for Public Policy Research, has the last word: “The whole thing is incredible. Mean- while, the scale of the fiscal disaster continues to leave observers breathless. The beneficiaries, of course, were the millions of investors who bought REC shares. Six months after the sale of th e RECs, when the Government sold the two power generators, it retained substantial holdings in each, and benefited from their subsequent rocketing share prices. More important, the Government has become much more wary of wholesale sell-offs – where 100 per cent of the shares are sold.

Privatisations since then have eschewed primary underwriting. It was the fact that the sale price was so low that made the directors’ share option packages so immensely profitable The sale had some positive effects. Some analysts have dismissed that as a whitewash – a view increasingly hard to dispute as the prices of REC shares continued to rocket in the following three years. The impact of the mushrooming share price has led to a related scandal – the huge pay packages given to the REC bosses.

In 1992, the National Audit Office concluded that the novelty of the industry and the uncertain market conditions made it particularly difficult for the Department to price the issue. Withouthis intervention one can only surmise that the RECs would now be worth even more, and the Exchequer would be looking even more hard done by. The regulator, Stephen Littlechild, later tightened the formula. The inflation-plus-X per cent formula imposed on each of the RECs was known before privatisation. Nor does the pricing regime in the electricity industry offer any explanation. Nor can the apologists claim efficiency improvements to explain the enormous growth.

Philip Burns, at the Centre for the Study of Regulated Industries, found last year that average productivity across the industry had not improved since privatisation. Yet while they have achieved 200 per cent-plus growth, the 1 00 largest quoted companies in Britain – those tracked in the FT-SE 100 index – managed less than 20 per cent. The RECs were marketed to the public as “yield stocks” – dull but safe shares offering reliable and generous dividends but little in the way of capital growth. More than 1.5 million first-time shareholders were created, by one estimate. Others argue that the pounds 11bn figure exaggerates the loss, because the capital value of the RECs could have been expected to grow anyway over the period since privatisation This argument holds little water.

With the markets nervous as well, the RECs had to be cheap simply to ensure buyers for the shares – to “get the issue away”, in stock broker parlance. Moreover, they argue, the privatisation succeeded in other ways, achieving the Government’s aim of widening share ownership. It was, from the viewpoint of Rothschild and the RECs, a brilliant success. As the share prices have continued to rise since, there have been any number of alternative explanations. None of them stack up – at least not to a height of anywhere near pounds 11bn. Defenders of the sale argue that it was creating a new stock market sector, which investors neither knew nor understood.