The Welsh Government’s initial funding of the Circuit of Wales: A tale of two halves.

An interview with Adam Price AM, member of the National Assembly for Wales’ Public Accounts Committee.


The Public Accounts Committee has just published its report on the Welsh Government’s initial funding of the Circuit of Wales project. In the report the Committee has said that it’s deeply concerned at how the Circuit of Wales project was approached by the Welsh Government. Can you give an overview of the inquiry and some of the key things that the committee learnt?

In some senses it’s a report of two halves and I think that probably tells you some of the deeper truths that underlie what we learned from the way that the Welsh Government approached the Circuit of Wales project.

Essentially you’ve got the initial period where the Welsh Government was very positive about the project. The Wales Audit Office original report on the initial funding of the Circuit of Wales and the first section of our report address the sense in which corners were cut. For example concerns by some officials about the purchase of FTR Moto and the way in which those concerns were overridden, and the extent of Ministerial oversight of those decisions.

The general feeling you get is that the policy direction was to support the project and therefore anything that needed to be done in order to achieve that goal was done. And then there’s a kind of reverse gear when you move in to the second half of the report which leads up to the final decision – the third in a series of decisions not to agree the Welsh Government guarantee which was essential to making the project happen. So it’s a kind of a ‘grand old Duke of York’ scenario where the Welsh Government marches its officials up to the top of the hill and then marches them back down again.

Now of course governments, like anyone else, can and do change their mind, but the important thing is that processes are not fixed around the policy. Processes, good governance arrangements, transparency, rules, are all there for a reason – to protect public money and ultimately to protect the reputation of government and probity. That’s really why we have the Public Accounts Committee – to make sure that in the enthusiasm of politicians to achieve whatever policy goal they have, that they don’t cut corners because that leads to bad decision making.

I think what we had in this case is a huge amount of enthusiasm and positivity driving in one direction and then suddenly, for some reason, the political weather changed and then it seems that everything is done to put a spanner in the works.

 

The Welsh Government seemed to focus its decision around a technical accounting issue and the balance sheet configuration. Does the Committee feel the Welsh Government presented the information around the decision not to fund the project in the best manner?

There is a genuine concern that the Government was not as transparent and comprehensive as they could have been in explaining their decision to perform what effectively was a massive U-turn. You have to remember that the Welsh Government remained very positive about the overall nature of the project and it set certain criteria by which it was going to determine its ultimate decision. It came as a shock to most people that the Cabinet rejected this project.

At the time this quite technical issue of whether or not the project would be on balance sheet seemed to be presented as the central plank of the Government’s argument as to why they couldn’t continue, but during the process of this inquiry we teased out that it wasn’t the only issue – there were also questions about the jobs etc. I think there is still an air of mystery as to how a Government, which had spent a lot of public money and huge amounts of officials time over many years, ended up in a position where all of that was turned on its head in presumably in a 20 minute cabinet discussion.

I understand why governments generally don’t want official advice to be published but in this case it raises questions in our mind.

The other thing the report touches upon is, this issue of the balance sheet was always a general issue but the company and its funders thought that it had been resolved. Nobody knew that it was going to basically be the single thing, more than anything else that killed the project off. So why not pick up the phone or why not try and postpone the decision to see if anything could have been done to salvage the project? The company and the Government had upwards of 40 meetings over a period of 12 to 18 months – almost on a weekly basis. So you would have thought that due to the huge amount of private money at risk and a project that, according to proposals could have generated thousands of jobs – why not just delay a week and see whether we can rejig things to get the project over the line.

I think the conclusion you have to come to is that the Welsh Government, for whatever reason, had decided it didn’t want to do this project. When a convenient rationale arrived which could excuse them from backing off they embraced that with open arms and that was the end of it

 

You’ve talked about the importance of governance, communication and transparency – later in the inquiry it transpired that there was no evidence to show that the Minister for Business Enterprise Technology and Science was informed of the agreement to purchase FTA Moto. How concerned were the Committee to hear that Welsh Government Ministers weren’t being kept up to date by officials and why is that important?

It’s very troubling when we are told that the Minister wasn’t informed of what I think was an unconventional use of this particular grant fund. Because of the close political interest in this project – a high profile project which had high level political commitment during this period from the First Minister down – you would have assumed that the Minister should have and would have been kept informed. I am troubled by the former as no evidence could be found. This is a formula that we often find in tricky situations because the absence of written evidence, e-mails etc. does not necessarily mean that the Minister was not informed. Why can’t the Government categorically say that the Minister was not informed? Why rely on this slightly opaque form of words which leaves a little bit of doubt in your mind as well? The key point is that in circumstances such as this, Ministers should be kept informed particularly when there’s obviously debate amongst officials with some officials warning against a particular course of action.

The principal point is that the maximum amount of transparency is always better for all parties. If the Welsh Government has again been lax in terms of its scrutiny then that doesn’t lead to good decision making. It’s curious because the level of involvement of officers in this project was very high indeed. The only conjecture you can put on it is this story of two halves where essentially officials seem to be convinced that the project had political buy in at a Ministerial level and therefore they became quite invested, in a literal and metaphorical sense, in the project. Therefore the ordinary rigger that would be applied seemed not to be applied because everyone was aiming to get the project over the line. But even where there is political commitment it’s always best to follow due process. And then of course strangely what happens is that everything goes into reverse and then every argument under the sun that could actually be employed to kill the project off, is applied.

It’s very seldom that actually we see those two processes together in one project where you have the Welsh Government effectively bending over backwards to try to help this project be implemented and then everything done in the latter stages to prevent it. It really raises questions about the capacity of the Civil Service to deal with these kind of complex technical large scale infrastructure investment projects or business investment projects, and it also raises issues about the arm’s length principle.

This project became overly politicized. It’s an economic development project and should have been viewed on its merits or demerits. The politics clouded judgment and prevented the proper application of rules of due process and procedures. There was of course a due diligence process conducted but the interpretation of that still came back to the same point – which was a sense that the objective evidence was fixed around the policy. Basically whatever the officials felt the Minister wanted at any point in time seemed to be driving their actions. Once that interpretation changed, everything changed. That isn’t the way you should approach these kinds of project.

 

It’s important to point out that the inquiry focuses on the handling the funding and not on the principle that the circuit avails project itself. Does the Committee feel that the Welsh Government is doing everything it can to maximize the opportunities for investment in Wales?

I think this sorry saga shines a light on how poor we are at these kind of large scale investment projects. It’s a bit of a stereotype, but stereotypes are there usually for a reason, that the wheels of Government move very slowly and here is a project that took 7-8 years to arrive finally at a ‘no’. In business it’s better to have a quick ‘no’ or ‘yes’ decision. The worst thing is what happened in this case which is a seven year long ‘maybe’. Governments need to get better at actually getting to a decision earlier because prolonging decisions does nobody any good. We have to get faster and more agile in decision making. The real danger is the reputation, not just of the Welsh Government, but of Wales as an investment location has been directly harmed by this decision.

We need to build our own capacity in Wales for coming to quick decisions on these large scale investment projects and we should be actively seeking them. We are a country which needs investment. We do not currently have our own financial capacity to the extent that we would like. We don’t want to continue to be in the position that we’re currently in which is that we’re reliant on a relatively small pool of large institutional funds that are based not here in Wales unfortunately, but based in the country next door and principally in the city of London. These institutions talk to each other and what happened on this project will have been seen. I wonder what Aviva are saying to their partners and to their investors and stakeholders about the experience that they had in this case. They haven’t invested that often and actually it’s kind of exceptional that Aviva showed any interest in this kind of project based as it is in the Heads of the Valleys. When we say that we’re open for business as well, this was a terrible experience and it has not reflected well on the Welsh Government and by extension on Wales.

It is no criticism of individuals, it’s always systems that fail. The Welsh Government was out of its depth from the very beginning and we should never allow this kind of thing to happen again.

 

Why is this kind of scrutiny important to the people of Wales?

Good scrutiny ultimately leads to better Government. It’s obviously painful to focus on mistakes but that’s how we learn and learning is the key to innovation. Failure is actually a gift to us from the recent past and is a platform in which we can then can build a better future, and that’s the way that we have to see it.

Scrutiny is not about castigating individuals. It’s about trying to understand why the system is badly designed, why the system is failing and how we can redesign the system so that it can deliver better outcomes than all the individuals within it. Nobody goes to work to do a bad job, people want to do their best. When we fail is when we either design systems that are poorly calibrated to the purpose that they’re meant to achieve or the system design or the framework is there but the culture or the rules within that system are not being implemented. That’s where scrutiny comes in – to identify the problems which hopefully if we can be open, transparent and honest enough about them, means that the future will be better than the past.

 


Read the full report:
The Welsh Government’s initial funding of the Circuit of Wales project (PDF, 719 KB)


 

The Public Accounts Committee is charged with scrutinising the spend of all public money in Wales. The Committee can undertake either their own inquiries or they can follow directions from the Auditor General for Wales and the Audit Office. It’s a pretty big brief as they can look at all aspects of funding including health, education, local authorities and economic development as is the case for their latest report on the Welsh Government’s initial funding of the Circuit of Wales project.
You can download the full report on the Welsh Government’s initial funding of the Circuit of Wales project and out more about the Assembly’s Public Accounts Committee at http://www.assembly.wales/SeneddPAC, you can also follow the Committee on Twitter at @SeneddPAC.

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