Welsh Government criticised over funding model for new cancer centre

Martin Shipton

Serious concerns have been raised about the Welsh Government’s means of funding the near-£1bn new Velindre cancer centre currently under construction in Cardiff.

The siting of the new centre, which will serve patients in south east Wales, has been hugely controversial on environmental, clinical and procurement grounds.

Many residents in the Whitchurch district of the capital were deeply upset at the decision to build it on what was a much-loved green recreation area known as the Northern Meadows, clinicians argued that it should have been built adjacent to a general hospital and it was seen as outrageous that two of the companies involved in the consortium building it have previous convictions for bid-rigging.

Now attention has turned to the so-called Mutual Investment Model (MIM) used to fund the project. MIM is a variation on the much-criticised Private Finance Initiative (PFI) used by the Blair and Brown UK Labour governments to fund the construction of public sector buildings such as hospitals and schools.

Under PFI, private companies will construct the buildings and maintain them, while the public sector body pays for them typically over a 30-year period. The system has been criticised for being far more expensive than conventional financing with money borrowed by the public sector body.

MIM differs from PFI in that a representative of the commissioning public body can sit on the board of the private company or consortium delivering the project.

Now, however, a report from Audit Wales, the public sector’s spending watchdog, has questioned the value of having a Welsh Government director on the board because under company law their loyalty would have to be to the shareholders rather than to the Welsh Government.

A spokesperson for the campaign group Colocate Velindre said: “The recent Audit Wales report on the new Velindre cancer centre has shone a light upon the Welsh Government’s use of private funding to build it. The public now learns that the Welsh Government could not provide us with contemporaneous records setting out why or how it first decided that the project would be a MIM scheme.

“As many know, MIM is the Mutual Investment Model, a modest recast of the private/public partnership known in England as PFI, now discredited and long abandoned by the UK government.

“But most readers will surely draw breath at Audit Wales’ disclosure that no records exist for how Welsh Labour actually journeyed towards this immense leap in Welsh public financing, unique in the UK.

“Moreover, the MIM preference ultimately stemmed from a time segment containing another decision equally unsupported, this time a clinical one. It was the government’s settling on a trend-denying 1960s-style ‘stand-alone’ model, still claimed by government officials as right for the 21st century.

“The ‘innovative’ funding intentions and the clinical decision therefore both appeared suddenly, sharing in the same press release in October 2013. The 2013 announcement pre-empted the underpinning processes absolutely required for the two key big calls of location and funding. To these moves should be added the lack of a large-scale formal consultation, also considered indispensable to any major change in NHS clinical services.

“The Audit Wales report, then, adds to a picture where the effect of predetermining government decisions comes across as ‘rigging’ the entire options appraisal process.

“But there’s yet more in the Audit Wales report relevant to this portrayal. It maintains that ‘ultimately,, because the Welsh Government chose the MIM approach early on, other funding models were not fully explored at the Original Business Case or Final Business Case stages as there was deemed to be no other realistic alternative.

“But had the Welsh Government chosen to prioritise this project for traditional capital expenditure it could have done so. However, ‘this would have been at the expense of other capital projects, whether within the NHS or across other portfolios’.

“A government decision on MIM, in other words, again pre-empted the elements of the process in advance. Hence, no records exist for formal proceedings needed to validate either of the 2013 edicts on Velindre: on location and funding.

“Furthermore, Audit Wales picks up on the failure of a key selling point of MIM, namely the promise that the Welsh Government would be entitled to a director on the board of Acorn, the consortium that will oversee the facility when built. An independent board member, the public was told, would protect the Welsh Government and NHS interests. These would be considerable, say, if it became necessary to reconfigure the site in a fast-changing NHS.

“Audit Wales, however, has now disclosed that this promise never had a chance of being realised for legal reasons.”

Nonexecutive director

The Audit Wales report states: “As part of its investment, the Development Bank recommended a nonexecutive director to be appointed on Acorn’s board. The recommended director was subsequently appointed by Acorn. The Trust and the Welsh Government were not involved in recommending or appointing the non-executive director.

“We put to the Trust and the Welsh Government that this may have been a missed opportunity for them to have jointly agreed to the recommended appointment. In response, they explained that this was an intentional decision to avoid potential conflicts of interest. For example, if the Trust were to consider terminating the new Velindre contract, the director would be bound under the Companies Act 2006 to act in the best interests of the company, Acorn.”

‘Fatal flaw’

The spokesperson concluded: “Prior consultation, for which evidence is so lacking, might have exposed this fatal flaw in advance. It is truly incredible that such a much trumpeted key justification for adopting MIM could just disappear from the narrative without any government duty of candour. It took Audit Wales to break the bad news to the public.”

The Welsh Government is not offering comments on issues of political controversy during the run-up to next week’s election.