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Come again?

Betsan Powys | 10:49 UK time, Tuesday, 22 March 2011

When Plaid Cymru unveiled proposals for their £500m infrastructure investment fund "Build for Wales" last week, Labour were right in the vanguard of attacking it.

"Completely unworkable" and "electioneering of the worst sort" were two of the choicer phrases issued by the party in response.

It's clear to me that though this plan is different to that floated in Scotland - before being sunk by the Treasury - "Build for Wales" would also, realistically, need a nod from the Treasury.

Plaid said last week that "discussions with the UK Treasury are underway to enable the establishment and operation of this entity to take place".

The response from the Treasury has a less positive ring to it: ""UK Government officials only engage with Welsh Assembly Government officials on Welsh Assembly Government business, they do not engage with individual political parties or individual party policies. No discussions with the Welsh Assembly Government officials have so far taken place on this issue."

However they confirmed that the "Assembly Government has sent a paper for future discussions but there have been no discussions about it yet".

So there were some nagging questions here. Labour had comprehensively rubbished the plan unveiled by Plaid.

This very short document that has just appeared online now adds to those questions. What it shows is that within the last couple of months, the Labour Finance Minister Jane Hutt personally signed off on putting a plan that Plaid say is the one they proposed last week - to the Treasury on the Assembly Government's behalf. The Treasury have confirmed, above, that they've received it.

Jane Hutt took the lobby briefing this morning. So did she believe then that the plan outlined by Plaid was "completely unworkable" and "blatant electioneering"? Or did she think it was worth exploring, until Plaid unveiled it as a manifesto policy last week?

Her response: that "as a responsible government, we have to look at every mechanism;" that "we have to make sure that we are opening up all lines of discussion and a whole number of policy areas as indeed I have done consistently over the past year with the Chief Sec to Treasury" and that "there are no doors that should be closed".

Labour say this morning there had been plenty of theoretical discussions amongst ministers and officials about future mechanisms for funding capital projects in Wales at a time when the money that's around to spend on big projects has been slashed. But those theoretical discussions were "a quantum leap" away from any any sort of plan, let alone the plan outlined as "Build for Wales"

They're adamant and remain adamant that the idea of bonds was never part of any discussion and that Plaid are conflating all sorts of 'what if' discussions to claim Labour support one particular plan - which they don't.

Plaid, on the contrary, insist that the very same plan had Labour backing until it became public and that far from being in a position to accuse others of "blatant electioneering" are guilty of just that themselves and then some.

Someone, somewhere no doubt has access to a paper trail that would tell us who is right. I don't.

The Liberal Democrat leader Kirsty Williams has just told journalists that Labour are now in a "real mess" over this and that Jane Hutt has questions to answer about why her party issued what she called a "devastating critique" of a policy that she was proactively pursuing inside the government.

UPDATE 11.45

Plaid have put out a statement:

"This is an exciting and innovative proposal which could make a significant contribution to the Welsh economy at a time the Welsh capital budget is facing cuts of 41%. The other option would be to sit back and do nothing. So far, no comparable ideas have been proposed in respect of how Wales can meet this challenge.

"Plaid would of course welcome the support of the other parties to enable the public sector in Wales to invest more in its infrastructure, and would look forward to co-operating with them after May the 5th in showing a united front to the Treasury in the interests of the people of Wales."

Comments

  • Comment number 1.

    Well I never!

  • Comment number 2.

    In the last two post Betsan wrote on this subject, there seemed to be some uncertainty as to what exactly Plaid were proposing.

    So I would recommend that people who want to know more about Build for Wales read what Madoc Batcup—who was one of those in Plaid who has been at the centre of developing the idea over the last few years—wrote about it. Either here at Syniadau, or on the IWA site.

  • Comment number 3.

    Fancy posting a link number 2?

    As mentioned before, such a proposal must of had some grounds to it, even if that ground was just wishful thinking. With this new information, it is clear that this isn't quite as 'unworkable' as first suggested.

  • Comment number 4.

    Policies are things a prospective government knows it can do, not things it is going to ask for and is unlikely to get. I still don't understand how a party can have a keynote policy that it doesn't know whether it will be able to implement, as it admits itself. That's an aspiration not a policy.

  • Comment number 5.

    Labour electioneering at its worst, totally hypocritical

  • Comment number 6.

    The rubbishing of this suggestion by people who obviously have not take the time to understand it fully does not bode well for the future of the Welsh economy, post referendum, unless they start on a very sharp learning curve!

    Of all the political parties, Plaid alone have shown that they have the financial expertise, the imagination, and dedication, to find a way out of the impossible situation that the financial crisis created by Labour in London, and now compounded by the Tories (abetted by the Liberals). All the other parties have suggested is to lie down quietly and take it!

    I am not sure why the Treasury need to get involved in this?

    There is no suggestion of a Welsh Bond issue - this will be an independent company, not a Welsh Government Bond. The principle of PFI is accepted by both Labour and the Tories, - and this is effectively PFI - without the Profit element.

    This idea - first floated, in a cut down form, a few weeks ago as a method of financing Welsh trains - has merits independent of the party that proposed it, and to dismiss it just because it came from Plaid would be to do the whole of Wales - and future Welsh generations - a great disservice.

  • Comment number 7.

    #6 PFI now goes on the govt balance sheet, unlike in the past. Therefore the Treasury will have a say. What the Treasury usually says is "no".

  • Comment number 8.

    Having taken a long holiday form this blog when its comments section became a haven for some of the worst welsh-hating, minority-bashing rubbish to be found on the Welsh media scene, can I just say what a pleasure it is, now that the referendum has been won and the trolls sent packing, to see some politics discussed without the bilious slanging that became the blog's hallmark?
    Nice to be able to discuss infrastructure plans and party policy difference without some crank calling Welsh-speakers 'primitive' , 'jihadists' etc or wanting Monmouth to be taken over by England - which used to be the usual fare on this site.

  • Comment number 9.

    This proposal is little more than politicians wishing to spend the electorates money, without having to meet them at the ballot box.

    If politicians wish to spend additional money over and above the generous settlement/income it gains from the UK Government the only honest vehicle is "tax raising powers", discussions have already been offered by Westminster.

    I doubt the politicians in Cardiff Bay are prepared for that responsibility, "tax raising powers" would get my vote, the Plaid proposal would not, it is as the Liberal Democrats have said, "pie in the sky".

  • Comment number 10.

    Labour caught red handed doing what they do best: pure electioneering.

    It seems that Labour are interested in one thing, winning seats. If this is WAG policy as opposed to a Plaid proposal, (though it would have come from Ieuan Wyn Jones' department I assume), Labour could have opted to accuse Plaid of taking a 'One Wales' policy as their own and they could have tried to take some credit for it, but instead they thought of it as an opportunity to make out that Plaid were irrelevant, lacking in economic ability and are proposing pie in the sky by labeling it "unworkable" and ironically, accused Plaid of electioneering.

    Finally they've been caught red handed, and it's good to see the BBC reporting it as well, so that those who don't read the Western Mail can see what Labour is made of.

  • Comment number 11.

  • Comment number 12.

    Sorry if it wasn't clear, JCM [#3] and now Alwyn [#11], but if you had clicked the word "here" in #2 (which will be underlined or in a different colour depending on your browser) the hyperlink will take you to Madoc's article. About 50 people managed to get there, but the more the better.

    -

    Tredwyn makes the point that the new accounting requirements did appear to take away one of the main reasons for PFI, namely that it did not appear as public borrowing. But things didn't quite work out that way, as this article (that's another hyperlink) in Public Finance explains:

    "The effect of this is that, while almost all PFI projects will now be recorded in the public sector for accounting purposes, almost all the related investment will remain invisible to capital expenditure measurements – as has been the case since the PFI’s introduction in 1992."

    In other words, PFI is not dead and buried. Of course the main problem with it is that the private sector was meant to take financial risk, and tended to do this simply by setting profit margins on the maintenance period so high that there wasn't any real risk. The new ConDem coalition in Westminster may well make noises about wanting to claw back some of the excessive profit from PFI consortia, but it's hard to see how they can do so with deals that have already been signed.

    That's why this "not for distributable profit" model is so attractive. So far as both the Treasury and client bodies are concerned, it works as PFI. So it shouldn't require any special permission. The difference is that the profit is recycled into future projects instead of going to shareholders. That should mean that the PFI deal (i.e how much is paid each year over a typical 25 year period) is cheaper for the client because the imperative to make a profit is less. But if a profit is made, it remains in the public purse so as to reduce the financing needed for subsequent schools and hospitals.

    -

    Now yes, it might be even better if the Welsh Government was allowed to borrow either by issuing its own bonds, or by a facility through which the Treasury does so on its behalf. It would probably be a cheaper way of borrowing, but it would be fully visible. However we don't have those powers ... at least not yet. And if we had our own independent facility, the Welsh Government would need tax setting powers, and Labour keep telling us that they aren't yet ready for that level of responsibility.

    So Build for Wales is a compromise that lets us go ahead with much needed infrastructure improvements using the powers available to us now. The choice is either to sit back and do nothing while our capital investment budget is cut by more than 40%, or to do something better. I'm sure if we let Labour make a few "substantial improvements" to the plan (like changing the name from Build for Wales to Building for Wales) Peter Hain will claim that it was his idea all along.

  • Comment number 13.

    9. At 21:47pm on 22nd Mar 2011, John Tyler wrote:

    “....it is as the Liberal Democrats have said, "pie in the sky"”.


    I think you’ll find they have changed their position slightly?

  • Comment number 14.

    Glyndo, if you read the sentence it was not an observation on the Liberal Democrats, but my use of their expression ...

    ... have said, "pie in the sky".

    This proposal by Plaid is straight out of their Constitution, it is "decentralised
    socialism", our nationalist "friends" would prefer their vision of an early 20th century model that failed. The dreadful aspect of this particular débâcle is that Plaid prefer not to introduce it via the ballot box, rather it would use sleight of one hand to produce the illusion, whilst putting its other hand into our pockets. This is taxation without representation.

    Though it has been timed well to coincide with today's budget, a budget that continues to make good the economic damage that the Labour-Plaid coalition contributed to when they indulged in confetti like spending; both parties should take responsibility but choose instead to deceive the public ...

  • Comment number 15.

    I am not sure how it can be sleight of hand if it is in a manifesto and I am not sure how you can say that its avoiding the ballot box when it will be a plank of an election campaign. Somewhat contradictory I think.

  • Comment number 16.

    In a sense all Plaid manifesto proposals are sleight of hand. Its is something that is becoming evident in this new era of coalition politics; a party with radical and unlikely (but attractive) policy proposals would ln the past have been unlikely to have been tested as to their honesty, i.e. they were unlikely to form a government.

    In Westminster now we have a LibDem party who have by chance found themselves actually in Government and answerable for their failure to keep pledges on Tuition fees, non-privatisation of the NHS etc.

    In Wales Labour will be the main party for the foreseeable future but, more often than not, with a partner. Plaid aim to be a party of Government with about 20% of the vote. They might justifiably say that in Government they would expect to get between 20% and 30% of their policies accepted by Labour in One Wales 2. Therefore they can afford to "Float" manifesto pledges which they know they will never get away with.

    A "Win,Win" situation. They can't be accused of duplicity if its Labour (or better still "LONDON") who won't allow their entire manifesto to be enacted.

  • Comment number 17.

    The perenial problem with Plaid is their single minded pursuit of a "Culture and Language" separatist agenda above all things.
    Labour may have thought in 2007 that it was "Better to have Plaid inside the tent P'ing out than outside the tent P'ing in" but what they got was a group who were happy to come inside the tent but retained the right to freely urinate over their co-habitees.

  • Comment number 18.

    Are you confusing manifesto with constitution, I haven't found a manifesto, plenty of sound-bites, but no manifesto.

    At the ballot box, or just before casting my postal vote, I look forward to reading about how this fantasy will be underwritten; there is no doubt that the underwriters are the taxpayers, but plenty of doubt as to whether they will discover the fact before casting votes.

    I'm sorry Mr Thomas, there is sufficient real world fog surrounding this "pie in the sky" proposal that sleight of hand might be a more genteel description.

    If you wish to spend over and above treasury limits then campaign for full tax raising powers, that is the honest route map, subterfuge should be a thing of the novel.

  • Comment number 19.

    I have read post 12 several times now and still don't understand it.
    "profit is recycled into future projects" - how do you define a profit in building a road or a hospital and managing them for say 25 years?
    "this SHOULD mean it is cheaper..." OK, but I won't get my hopes up on that rock solid assumption, especially if those managing these projects are charging £50 for a light bulb or a road cone.(If politicians cannot even get that sort of thing right in a project then god help us)
    "the imperative to make a profit is less" when was it ever an imperative for a hospital porter or teaching assistant to make a profit?
    "it will be visible" so we all get to see the credit card statement every year do we, great?
    And finally I leave you with this thought the cheaper, more transparent, better deal for the taxpayer any "loan" appears is inversely proportional to the number of "investors" who simply will not bother to invest as clearly there is nothing in it for them. I am more than happy to be proved wrong.

  • Comment number 20.

    Surely the point is, that this shows that both Welsh Labour and Plaid Cymru have already agreed to a 2nd One Wales government after the next Assembly election.

  • Comment number 21.

    14. At 07:14am on 23rd Mar 2011, John Tyler wrote:

    Glyndo, if you read the sentence it was not an observation on the Liberal Democrats, but my use of their expression ...

    ... have said, "pie in the sky".

    I agree, but never the less your quoting of the Lib Dems implied that they agreed with you, or vice versa; thus validating your opinion. As the LDs have now moved, following the new information, this implied validation, if it ever existed, no longer applies.

    18. At 08:52am on 23rd Mar 2011, John Tyler wrote:

    “Are you confusing manifesto with constitution, I haven't found a manifesto, plenty of sound-bites, but no manifesto.”

    Plaid Cymru haven’t issued their manifesto yet, why don’t you wait and see?

  • Comment number 22.

    I'm not sure whether your question about profit is genuine, Mr Beige, but I'll give you the benefit of the doubt. You should also read Madoc's explanation on Syniadau.

    Profit is simply the amount by which income exceeds expenditure. The expenditure of a PFI consortium comprises the design and construction of say a school or hospital, financing the capital cost, the cost of maintaining it over the contract period, plus its overheads. Its income is the annual payments made over the 25 year contract period, plus anything additional the contract allows it to charge for maintenance (as you mentioned, these charges can often be extortionate). The difference between the two is the profit. In rough terms, PFI costs about twice as much as procurement by traditional methods, and this indicates the high level of profit that PFI consortia can make.

    The beauty of the recycled profit model is that any profit the Build for Wales company makes does not go to shareholders, but towards future infrastructure investment. So it wouldn't much matter if BfW made a big profit, a more modest profit, or simply covered its costs ... for ANY profit would simply be recycled to reduce the financing cost of the next school, hospital or road.

    Of course it would make a difference to the client body paying for it. So if the annual charge for leasing a school is set too high, it's a fair question to ask why one local authority should pay over the odds, but the next local authority benefit from reduced costs because of the recycled profit. However that could easily be solved by ring-fencing or a balancing mechanism.

  • Comment number 23.

    #21. Glyndo I certainly do not need the LD's to validate, I believe, having read the references MH gave, it is "pie in the sky" but now I might add written by your friendly financial advisor.

    The second part of your critique is a little awry, it was Mr Thomas at #15 who implied there was a manifesto, I replied to him "Are you confusing manifesto with constitution, I haven't found a manifesto, plenty of sound-bites, but no manifesto."

  • Comment number 24.

    Dear MH we could go on for ever. You are right to suspect my questioning over profit as the reality is an accountant can make the figure whatever is required from him by his boss and as you point out in the PF1 schemes in operation (I would describe them in words more likely to end up in a libel suit!) they have miserably failed the long term interest of the taxpayer. " profit does not go to shareholder" - I am sorry it is beyond belief the chief exec and his cronies of such a set up will not extort the highest premium possible out of this. Now bonds I understand - fixed rate, fixed term, transparent costs..... every layer you add is a muddying of the waters, why would a politician do this? I would beg to suggest that life can be as simple as you make it. This does not suit politicians , to be honest and straight forward with the implications of their grandiose schemes, build this, build that, jobs now , economy growing...... fantastic, except debt levels rise, unsustainable costs, under utilised buildings, redundant workforce unless the next white elephant is brought out of the hat. It is in their make up that politicians live for the now and shove the hereafter under the nearest bush (until the next election at least).

  • Comment number 25.

    Actually its rather simple, the Welsh government would love to issue bonds - but they are not allowed to. At one time it was something that you saw local government doing on a regular basis, all very prudent and sensible - you don't buy your house on this year's wages. Given that the Welsh Government is not permitted to issue bonds, the next best thing is a suggestion from Plaid that removes the toxic element from PFI, ie private profit and creates an arms length investment body. The security is the payments from the project, ie if its a road then they get paid for the lease of the road, by who ever has ordered it, until the contract period ends and it moves into ownership of the public body that ordered it. Any profits from the deal (analogous to interest paid on bonds that would have other wise paid for the project) are fed back into the fund to build new projects...

  • Comment number 26.

    Forgive a naive view point on this, but in essence, the aim is to raise short term capital for investment on infrastructure projects and then the capital is repayed over the long term, by overcharging on the lease before it ultimately refers to public ownership?

    Who would ever sign up ? Long term debt for short term gain? I believe Greece or Portugal maybe interested in investing !

  • Comment number 27.

    Mr. Thomas, Wales has been offered tax raising powers, this is the honest way to raise funds by an administration; the Plaid way is not going anywhere, but as I wrote earlier, Plaid could put its money where its mouth is, finance the plan by asking its supporters.

    Myself, I know the proposal is without substance, do the sums, half a billion to create 50,000 jobs. This equates to 50,000 jobs that last 4 months, or does it, lets take out 20% for project design and project supervision, divide the balance equally between labour and materials and the 50,000 jobs are paying subsistence wages from the third world.

    So for the "M"ad "H"ouse contributors, back to the drawing board boys and girls, you plan is not so much a plan but "dreaming the night away".

  • Comment number 28.

    The central point is that no government pays for all its capital expenditure out of one year's money, its essential that they be allowed to borrow and pay off the cost over time. As we are not permitted to do that this is the only available avenue. Even if the National Assembly gained tax raising powers (as it should have) it also need powers to borrow. An imaginative suggestion from Plaid deserves to be examined.

  • Comment number 29.

    I'm sorry Lyn, may I call you Lyn, but this thread by Betsan relates to the £half a billion vehicle created to challenge the current government policy to reduce the public account deficit.

    What you are suggesting, WAG should be able to borrow is quite different, it is a activity that the electorate are able to influence through the ballot box, therefore it is a democratic process. I think the ability to borrow needs to be accompanied by full tax raising powers, WAG needs to be able to adjust its income directly in line with its spending, a question of responsibility.

  • Comment number 30.

    Well at least you are being consistent John, but I think given that Westminster will not grant borrowing powers this is the next best way. And far better than PFI which is just a money making scheme at public expense.

  • Comment number 31.

    In reply to M8, I think you'll find that the lack of comments from unionists on this topic is that it is a theoretical discussion between nationalists about some never-to-be fulifilled plan ! However, we can already see the next set of "demands" being hinted at, tax-raising powers and borrowing powers for the assembly !

  • Comment number 32.

    Well in reality this is how the UK Govt finances itself.
    Personally im against it-it gives way too much power to the bondholders over the citizens of a nation issuing the bonds .

  • Comment number 33.

    It is also partly how local councils finance themselves... it is nothing extraordinary. Indeed the only extraordinary thing about this is that the National Assembly does not have taxation or borrowing powers. Community councils have tax raising powers, County Councils have both tax raising and borrowing powers.

  • Comment number 34.

    Ok i agree i certainly agree that the Welsh Govt should have "borrowing powers"-and any other powers deserved of a Nation-i was merely worrying about the bond bit -a few Euro countries have recently gone to the wall Greece,Ireland etc-due to bond repayments-

  • Comment number 35.

    At 18:14pm on 22nd Mar 2011, daverodway wrote:
    Having taken a long holiday form this blog when its comments section became a haven for some of the worst welsh-hating, minority-bashing rubbish to be found on the Welsh media scene, can I just say what a pleasure it is, now that the referendum has been won and the trolls sent packing, to see some politics discussed without the bilious slanging that became the blog's hallmark?
    Nice to be able to discuss infrastructure plans and party policy difference without some crank calling Welsh-speakers 'primitive' , 'jihadists' etc or wanting Monmouth to be taken over by England - which used to be the usual fare on this site.

    and just where is your contribution to the debate,?

 

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