Public servants have been issued with advice from the Head of the National Audit Office on the selling of public assets.Sir John Bourn says the former Department of Transport could have made up to one and a half billion pounds more from its sale of Railtrack

It says the Department, now part of the DETR, failed to follow previous good practice in phasing the sale of a public asset, so that as share prices rose, future sales of Government shares would result in more profit.

At the time the Department was worried that interest in the utility would be low, and that investors would be even more cautious if the Government was seen to be retaining control over some stock.

The NAO says future such sell-offs should reflect two lessons – always strongly consider selling in stages, and, when deciding on levels of first year returns to offer investors, compare against other investments currently available, rather than the track record of previous utility sales completed in different economic climates. The audit office considered the first year dividend offered on the Railtrack sale unnecessarily generous.