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‘Insanity’: First Minister criticised as cost of ‘PFI-style’ contract for road reaches £1.7bn

02 Dec 2020 4 minutes Read
Dualling the A465 at Gilwern. Copyright M J Roscoe and licensed for reuse under (CC BY-SA 2.0).

The First Minister has been criticised over the use of a “PFI-style” contract for dualling a road, the cost of which has risen to £1.7bn.

Delyth Jewell, the Member of the Senedd for South Wales East region said the way the Welsh Government was going about duelling an 11-mile stretch of road between Dowlais and Hirwaun was “insanity”.

She accused the First Minister of repeating the mistakes of PFI through the use of its Mutual Investment Model, which she said would tie the Welsh Government down to an expensive 30-year contract.

The First Minister Mark Drakeford responded by claiming that Delyth Jewell didn’t understand the figures and “needs to go back and do her homework” because the “model that we have here in Wales is very different to PFI”.

He also said that a question from Ms Jewell on the floor of the Senedd was “a farrago of misunderstandings and misrepresentations.”

According to MS Jewell, the original construction costs were set to be £308.5m plus VAT and the initial total projected cost was £428m plus VAT.

The analysis of the lifetime cost of dualling the A465 between Dowlais and Hirwaun used by Plaid Cymru suggests that using the Mutual Investment Model adds around £1bn to the overall cost of the project over 30 years, compared to initial projections. This is put down to paying £38m a year for 30 years as an annual service payment.

 

‘Challenged’

Ms Jewell challenged Mr Drakeford on the figures during First Minister’s Questions in the Senedd.

She said: “When the project was signed off in the Stage 3 Scheme Assessment Report in 2017, the projected construction costs was £308m, with the total project cost approximated as £428m.

“Recently the Western Mail revealed something similar to what you’ve just said, that the cost of construction had now increased to as they put it £550m, although I will take the figure you just said as being £590m.

“But what was really shocking to learn was that in moving to the Mutual Investment Model of financing, the Welsh Government has now also committed to pay £38m a year for 30 years as an annual service payment.

“The total cost of the annual service payment over a period of 30 years will be an eyewatering £1.14bn.

“This brings the total cost of the project to £1.7bn over 30 years. That’s a £1.3bn increase from the initial projection of £428m.

“Let’s call this insanity what it is First Minister – PFI under another name.

“Spending £1.7bn on infrastructure in the Valleys is a great idea, but how about spending it on community regeneration, work creation schemes, public transport and improving housing and schools, rather than on what must be one of the most expensive roads, per mile, in history?”

Mr Drakeford said: “Llywydd, that was less a supplementary question than a farrago of misunderstandings and misrepresentations. I’m afraid the Member has no grasp whatsoever of the Mutual Investment model, a model adopted of course by the Scottish Government following the Welsh devising of it.

“So, her sister party in Scotland has chosen to follow our lead in this matter. She mangles together a whole series of costs and fails to make any sense of them.

“The money that will be spent through revenue after the road is completed does not simply service the debt, but it pays for all the ongoing maintenance of that throughout the whole of its life.

“Those costs are incurred in any scheme of road building, but they are not as transparent and as available for everybody to scrutinise as they are in Mutual Investment model.

“The model that we have here in Wales is very different to PFI. I’ve discussed it on the floor of the Senedd with the Leader of her party on a number of occasions when for example he asked me to explore whether or not the 15 per cent equity stake we take in the companies that will construct the road could be extended.

“Those I thought were very sensible conversations to get the most out of the model. I’m afraid the Member really does just need to go back, do her homework, and then we’ll have a more sensible conversation.”

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