Taxpayers lost billions on MoD housing – so I can’t feel sorry for Terra Firma
The government has sold assets at rotten prices many times over the decades, but the sale of Annington Homes in the dying days of John Major’s administration in 1996 was one of the very worst deals. Television’s Michael Portillo, the defence secretary at the time, was the man who approved the sale-and-leaseback of 57,400 Ministry of Defence homes to the Japanese bank Nomura for £1.7bn, a sum that a quarter of a century of house-price inflation has made look ridiculous.
The worst part was that the MoD, in exchange for a 25-year discount on rent, took responsibility for maintenance and refurbishment, tasks that would normally fall to the landlord. When the National Audit Office reviewed the whole arrangement in 2018, it concluded that taxpayers were worse off by £2.2bn-£4.2bn during the first 21 years of a set-up intended to last for 200.
Hindsight is perfect, but details from the NAO report are excruciating. The MoD’s “preferred business case model” had assumed house prices would rise at only 1% a year excluding inflation for ever more. Ho, ho. Taxpayers got stuffed.
The winners were Annington’s owners, who enjoyed a beautiful annual return of 13.4% until the end of March 2017, calculated the NAO. That yearly rate won’t have altered much since then. Only the owners of Annington have changed (sort of) since the original deal. Guy Hands, Nomura’s in-house deal-maker in 1996, bought the business in 2012 for his Terra Firma private equity firm.
You can’t blame the MoD’s current incumbents for looking for an escape route. Jeremy Quin, defence procurement minister, thinks he’s spotted one: use “statutory leasehold enfranchisement rights” to buy out Annington’s interest in a portfolio now reduced to 38,000 homes. A test case has
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