The Circuit Of Wales: Welsh Government Nationalised The Risk & Destroyed The Reward
The Circuit of Wales was supposed to bring hope to thousands of residents in the Blaenau Gwent community, where the area has few prospects and the highest youth unemployment level in Wales. The Welsh Government however has turned that hope into anguish and disappointment. I wanted to find out just how much Welsh taxpayers money went into this, and if the project doesn’t go ahead, what will we have to show for it?
The Circuit of Wales project has been a complex topic to follow, surrounding multiple private companies, investors, executives and of course the Welsh Labour Government. I could write a great deal about the Circuit of Wales as a concept and whether or not it should be supported, but the key issue for me remains the taxpayers bill.
The beginning of the Welsh taxpayers involvement in the Circuit of Wales project was back in October 2012, when the Welsh Government approved a £2 million pound ‘Property Development Grant’ for the Heads of the Valleys Development Company (HOVDC) (the company behind the Circuit of Wales).
The aim of this scheme is to provide support for the development of business sites and premises in Wales.
Welsh Government Website
The above quote is the stated purpose of the Property Development Grant, yet apparently the Welsh Government failed to understand this, as £300,000 of this money was granted for the purchase of FTR Motor Ltd, a motorcycle engineering company based in Buckinghamshire. According to a report from the Wales Audit Office:
The Welsh Government has been unable to explain to our satisfaction why it approved grant funding intended for property development so that HoVDC could acquire a motorcycle engineering company […] which is inconsistent with the grant scheme’s purpose.Wales Audit Office
I have yet to hear any response from the Welsh Government on this decision. Had the same happened in Westminster, there is no doubt we’d be seeing far more of the term ‘scandal’ and rightly so, I might add.
Though the Welsh Government offered an additional £16 million pounds of Welsh taxpayers money in June 2014 to support what developers called ‘phase 2’ of the Circuit of Wales (the construction phase), this was never taken up. Unfortunately for hardworking Welsh taxpayers, there is more.
In July of 2014 the Welsh Government agreed to guarantee a £7.85 million bank loan taken out by the Heads of The Valley Development Company (HOVDC) to pay suppliers. In what surely cannot be considered coincidence, over £1 million of this tax payer underwritten loan managed to find its way into a company called Aventa. Aventa is owned by a man called Michael Carrick, who is also the Chief Executive of the HOVDC.
In May 2016 the bank issued a return for the loan taken out by the HOVDC and guaranteed by the Welsh Labour Government, only to find out that HOVDC couldn’t afford to pay it back. The Welsh taxpayer as a result was forced to pay £7.3 million to cover the loan (this number was lower than the original because of exchange rates and conversion of some pounds into euros) taken out by the company behind the Circuit of Wales.
The company mentioned earlier, one FTR Moto Ltd, purchased with Welsh taxpayers money through the ‘Property Development Grant’, went into administration in October 2016 with debts of over £500,000. Though the Welsh Government will not be required to cover the cost of the debts, this represents a ridiculous splurge of tax-payers cash.
The Welsh Government, with full knowledge of everything I have outlined, have rejected 3 offers to underwrite private financial investment. The first offer came in April 2016, where the HOVDC asked for £357 million to be underwritten. The second offer came in July 2016 and asked for £234 million to be underwritten. The final offer, and the one we’ve heard most about, was for £210 million and represented 48.8% of the total cost of the build.
What most alarms me about this process is the sheer willingness of the Welsh Government to plow almost £10 million of Welsh taxpayers money into a project they ultimately decided was too risky to pursue. As the Welsh Audit office stated when questioning the £7.3 million debt payment the Welsh taxpayer covered;
HoVDC is contractually liable to repay this sum, plus additional interest and fees, to the Welsh Government on demand. However, as HoVDC was established specifically for the CoW project, it is unlikely to be able to repay this debt unless the CoW project secures the private investment for it to proceed.
Welsh Audit Office
With the news that the Welsh Government will not support the Circuit of Wales project, which will likely spell its end, it is becoming clear that the Welsh taxpayer will not be refunded for its considerable payments. The £7.3 million for the loan and the £2 million Property Development Grant will never be returned. That leaves the Welsh taxpayer almost £10 million down, with nothing at all to show for it.
Ultimately, the decision not to underwrite the private investment is based on an entirely different risk assessment. Despite the £210 million underwrite requested by the HOVDC being largely in-line with what the Welsh Government were happy to pay, it is an accouting procedure rather than financial risk which spurred the decision.
The Welsh Government if it decided to underwrite this investment is currently unsure as to whether the full £373 million will appear on the governments accounts against Capital spending. In essence, if it does, the Welsh Government is forced to find £373 million from other budget areas. My concern is that if it doesn’t, £10 million of Welsh taxpayers money has just been wasted for no good reason.
The Circuit of Wales project, whether it goes ahead or not, has been a disaster for the Welsh Labour Government. Welsh taxpayers money has been squandered and the hopes of thousands dashed because of the Welsh Labour Governments lack of effective procedures.
Either the project is viable, and the Welsh Government have made a massive, longlasting mistake which will deny Wales the ability to host one of the biggest racing championships in the world, or it is not viable and the Welsh Government have squandered taxpayers money on a pipedream.
Whatever happens to the Circuit of Wales project, the Welsh taxpayer should be far more concerned about recovering its sizeable losses when this whole charade is over. In an disasterous effort to bring hope to a deprived community, the Welsh Labour Government tried to nationalise the risk and privatise the reward. In the end, they appear to have nationalised the risk and destroyed the reward.