When the government sold its shares in Eurostar (the London to Paris train service) around a year ago, its primary motive according to a recently published national audit office (NAO) report was to reduce the level of government debt.  As the NAO says “Some asset sales are justified by government on the basis that the sale will result in improved efficiency for the business but this was not the case with Eurostar.”
The key point with privatisations is that reducing current debt may harm the health of the public finances. Any normal investor would only sell an asset if they thought they could get a price that exceeded what the asset was really worth. Although selling the asset would reduce the government’s net borrowing today, it would increase their net borrowing in the future because the government would not get the dividends the shares paid out.
The fact that the government had the wrong motives is an unfortunate by-product of debt or deficit targets. By necessity these targets have to be ‘realisable’ (to use a term from my paper with Jonathan Portes) - they have to be targets that are within the lifetime of a parliament. But that gives any government an incentive to effectively cheat: to sell off assets (like Eurostar) that help meet targets in the short term, but make managing the public finances beyond this more difficult. (This post discusses the point in more detail.)
So how do we judge if selling Eurostar was a good or bad decision? Reports that there was a general belief that the value of the shares would rise are worrying. To be honest I do not know the answer to this question, but in essence that is my point. Given the clear danger that the government will sell assets just to meet its short term targets, we need some independent institution to assess whether the government is being sensible or is cheating. (In some other cases, like selling off the student loan book, the cheating is pretty clear.)
The NAO had a remit which did not address these issues, although it tries in its report to at least raise them.  The obvious body to analyse and publicly report on issues of this kind is the OBR, but this is also not in the OBR’s remit, and at present it can at best only drop hints. With a large privatisation programme over the next five years, the government was never going to extend the OBR’s remit in this way, and (coincidentally?) the Ramsden review does not seem to have addressed this issue directly. The OBR needs to become not just a producer of forecasts, but more of a fiscal watchdog.
Without some independent oversight of this kind, we will have the irony of government ministers arguing that privatisations are needed because we must reduce government debt for the sake of future generations, when in reality they may be increasing the burden on future generations. We need a fiscal watchdog to protect future generations from shortsighted governments.
 Although the headline level of public debt is often described as net, it in fact only nets off liquid financial assets.
 The key technical issue is discounting, and how you handle uncertainty. Even if the government gets the current market price, that price may be low because the private sector discounts future returns heavily. That heavy discounting may reflect vulnerability in the face of uncertainty, whereas the public sector has much less vulnerability.