We move on to item 3, a statement by the Cabinet Secretary for Economy and Infrastructure on the Circuit of Wales—Ken Skates.

Thank you. I’d like to update Members on progress with the Circuit of Wales project following a meeting I had earlier today with Michael Carrick, chief executive officer of the Heads of the Valleys Development Company and Martin Whitaker, chief executive officer of Circuit of Wales. As Members will be aware, we have been working with the Circuit of Wales and providing financial support to develop this project over a significant period of time. We recognise the potential positive economic impact it could have for Wales, and Ebbw Vale in particular. It is a large undertaking and we have always been clear that any support provided by the taxpayer needs to be proportionate and fair.

The Heads of the Valleys Development Company was established in 2009 and has subsequently developed plans to create an automotive cluster, centred on a performance racing circuit designed to host international motor sports events. The racetrack is planned to be situated just north of the Rassau industrial estate in Ebbw Vale, with the aim of attracting a range of two and four-wheel racing events, including Moto GP, with a target of attracting three quarters of a million visitors a year within three to five years of start-up. The project is forecast by the developer to create 300 full-time equivalent jobs, consisting of 49 full-time roles and 3,500 part-time temporary staff for events. There would also be employment opportunities created during the two years the track would be under construction.

The often publicly quoted claim of 6,000 jobs is predicated on the assumption that additional jobs would be created by businesses, particularly in the engineering and automotive sectors, clustering alongside the circuit and also by other employment multipliers such as hotels and catering. The main benefit to the Welsh economy would be derived from the future investments that might be expected to be created by the existence of the circuit, but, accordingly, this involves a degree of uncertainty and can only be seen as a long-term aspiration.

The Welsh Government has been engaged with the Heads of the Valleys Development Company since 2011, since when the company has sought financial support from us at each key stage in the project’s development. It is important to remember that when this project was first presented to us, we were told it would be one that would be fully funded by private sector risk capital without the need for a Government guarantee. At that stage we made a commitment to part-fund the project development and agreed to grant aid of around £16 million towards certain aspects of the circuit project, primarily to support the creation of jobs. This grant aid was conditional on the Circuit of Wales raising the necessary private finance. Unfortunately, despite the best efforts of the company, they were unable to raise the stated private investment and, accordingly, they have been unable to draw down this grant.

Earlier this year the Circuit of Wales asked us to consider a new proposal with an alternative financing structure. Their plan sought a Welsh Government guarantee to underwrite 100 per cent of a project finance facility provided by Aviva Investors of £357.4 million. This level of guarantee would have increased the exposure to risk of the Welsh Government by around 15 times.

In April, my predecessor, the then Minister for Economy, Science and Transport, decided that it would be an unacceptable risk to underwrite the entire £357.4 million investment for the project, but stressed that our door remained open if sufficient private investment could be secured that presented a fair share of risks between the public and private sectors.

The developer submitted a revised proposal for discussion in mid-April, which, following observations from Welsh Government officials, was further refined and resubmitted at the end of May. The latest proposal has been presented by some commentators as a solution where the majority of the funding is coming from private finance. However most of this funding still requires a Welsh Government guarantee, and taken in conjunction with loans provided by local authorities, the public purse still holds the majority of the risk.

Including both direct Welsh Government guarantees and local authority loans, the latest proposal put forward by the Circuit of Wales asks Welsh Government to underwrite around 75 per cent of the total £370 million cost of the project, with local authorities underwriting a further 8 per cent. Unfortunately, despite the efforts of the project backers, this leaves only around 17 per cent of risk being taken by the private sector.

That amount of risk falling on the Welsh taxpayer, through Welsh Government and local authority support, is unacceptable as it currently stands, especially at a time when we are facing significant economic uncertainty from a UK exit from Europe. In our view, this project does not currently provide the level of value for money necessary for the amount of public funding being put at risk. On that basis, I have today told Michael Carrick and Martin Whitaker that I believe further work is needed on this proposal. My door remains firmly open and I’ve urged them to revise their bid in such a way where the private sector takes more of the risk in order for this project to be taken forward.

We need to see at least 50 per cent of this project funded and 50 per cent of the risk underwritten by the private sector to justify value for money for Welsh Government and the public purse and they have accepted this principle. My officials will now work constructively with the Circuit of Wales team to ensure this project can be successfully delivered to benefit the local economy of Ebbw Vale and Wales at large.

I thank the Cabinet Secretary for his statement today, although it is disappointing that there is yet another delay on this project—a dash, potentially, to the hopes of the community who’ve had so many false dawns, since their area was deindustrialised some decades ago.

As the Cabinet Secretary has mentioned, millions of pounds of public money have already been provided to progress the Circuit of Wales project. Is it, therefore, reasonable to conclude that that was done without Welsh Government being clear about the precise nature of its intentions regarding the project as a whole? The Cabinet Secretary has said that his Government has engaged with the Heads of the Valleys Development Company since 2011; why are we here in 2016, and only now has the Government set out its red lines, its business proposal? Is the Cabinet Secretary able to reveal when the 50:50 liability share between private and public sectors became Welsh Government policy in relation to this project? And can he elaborate on why, for this project, such a breakdown has been deemed appropriate?

Whilst we fully accept the need for serious care when Government underwrites private schemes, Government usually does so, of course, when markets fail. In this case, a failure to invest in areas such as Blaenau Gwent under normal market conditions. Government intervention is therefore crucial in order to secure employment in such areas. Why has there not been a clarity of communication between Welsh Government, local communities and investors on that basis? As someone who has spent part of my upbringing in Tredegar, I, in my relatively short life so far—so far—have seen hopes raised and dashed in places like Blaenau Gwent; promises of new opportunities made and then taken away. And here we have, again, years and years of raising and dashing hopes of people and communities who’ve suffered intolerable poverty and unacceptable levels of deprivation. Is it any wonder that so many, for so long, have lost all hope that things will ever change? Will the Cabinet Secretary give his honest assessment on whether or not he believes this project has a future? And what impact does he believe this sorry saga of many years will have on the long-term economic prospects for our Valleys communities?

Can I thank the Member for his questions? It’s a shame that the Member doesn’t recognise the fact that I’ve been able to enter this role with a fresh pair of eyes and have been able to set a very clear bar for the Circuit of Wales—50 per cent of the project costs and 50 per cent of the risks being covered by the private sector. This is a private sector project and, yes, whilst there is market failure in parts of Wales, and it’s a responsibility for Government to make sure that there is investment in those areas where there is market failure, where there is a private sector project in play, it’s essential that the risk to the taxpayer is brought to a minimum, and that the value for money for the taxpayer and for the public purse is promoted to the highest possible level. That’s why I have set the bar at 50 per cent and the Member may wish to reflect on what I said at the end of my statement, which is that the Circuit of Wales has accepted that principle. Surely that shows that we have been able to secure the best possible deal for the taxpayer in ensuring that this project can go to the next stage.

I thank the Cabinet Secretary for his statement. The construction of the Circuit of Wales is a fantastic opportunity not only for the south Wales Valleys, but for Wales more generally. So, it is disappointing news today; I think there’s no getting away from that. But I hope that the Circuit of Wales project still remains an exciting project that can offer great opportunities to provide investment and jobs in the area.

The project has been estimated to create 6,000 full-time jobs ranging from research and development to hospitality, as well as a further 3,000 construction jobs. I note your comments in your statement today in that regard, but these jobs were promised to be delivered to local people. The project has also promised training placements and providing a significant amount of upskilling as well in the region, and, of course, increased tourist opportunities as well—providing an estimated £15 million to boost the local and regional economy. So, today’s decision is regrettable, especially at a time when the Welsh Government have set up a new taskforce to manage the regeneration of the south Wales Valleys and when local councils have expressed a willingness to contribute to the scheme as well. I understand that the Welsh Government, of course, must exercise caution when spending public money. I fully agree with that concept, but, at the same time, there’s got to be a recognition that the kicking of this project, potentially, into the long grass, beyond the summer, will be a huge blow to the region. There’s no getting away from that.

Now, given the fact that the Welsh Government has rejected the initial proposals, due to the unacceptable risk, can I ask the question—I don’t think you answered this fully—that the Plaid spokesperson did ask with regard to when the 50:50 risk to underwrite was submitted to the developer? I think there are questions here of when that was put to the developer, why the developers weren’t made aware of this at a much earlier stage, why it appears, only now, that this been put forward. Perhaps you can provide some clarity on that.

You also mentioned in your statement that there are uncertainties in the country as a result of the country leaving the European Union, which I accept as well. But are you suggesting that, perhaps, the decision might have been different had the outcome of the referendum been different? There’s a slight implication of that and perhaps you could clarify that as well.

You said in your statement today that you’ve met with the developers this morning or today, and I’d be grateful if you could perhaps talk to us about what you discussed in that meeting with regard to a timetable for when you expect developers to provide revised plans and proposals to you. We also have to accept, of course, the possibility, and I’m sure you will as well, that the project may now not go ahead in that regard, because, clearly, with the announcement today, there may be some uncertainties among potential backers that this project is not so sustainable as it originally may have been. So, with that in mind, perhaps you could outline what regeneration schemes the Welsh Government will put in place to boost regeneration in Blaenau Gwent and the Welsh Valleys.

Can I ask as well what the Cabinet Secretary’s assessment is of the wider impact on the local economy for other businesses that perhaps would have previously committed to setting up new businesses around the circuit of Wales site as well? Finally, is it your view—and I hope you can provide a positive answer to this—that developers are likely to come back with a revised plan that you believe that you will be able to back and support, and the project will go ahead?

Can I thank the Member for his questions and just stress that, again, this is not a disappointing announcement, given that the Circuit of Wales have agreed to secure the majority of risk from the private sector in order to take this forward? If we step back to the origins of the proposal, when we were first presented with the Circuit of Wales vision, it was on a basis of no risk falling on the taxpayer’s purse. It subsequently went to the point where my predecessor was asked to underwrite 100 per cent of the risk. That was unacceptable. We have now been able to cast a fresh pair of eyes, in the form of myself, over the proposals. However, my predecessor had said that the level of risk had to come down considerably. The Circuit of Wales fundraising plans are still a work in progress, and the timeline for a formal application rests with the Circuit of Wales. I have now given them a steer on value for money, as was requested. So, I have determined that we need to reduce that level of risk down below 50 per cent and ensure that it is a private sector project.

In terms of work that will take place to ensure that there is regeneration in the Valleys, my colleague Alun Davies is leading a ministerial taskforce to ensure that we exploit every opportunity to regenerate the Valleys, to ensure that we give every person in the Valleys an opportunity to gain quality employment as close as possible to where they live, so that people are proud of their communities, that people see their communities in the ascendance, not in decline.

In terms of the jobs that could be created, as I’ve already stated, there is a business case that proposes a certain number of jobs to be created during the construction period, a further set of jobs that will be guaranteed as a consequence of the circuit operating, but then an additional estimate of 6,000 jobs that would be created through attracting key players from the automotive sector, and, of course, hospitality to the racing track. This is not a disappointing decision today. What I have done is outlined how I have been able to reduce the risk attached to the taxpayer’s guarantee of this important project. But, as I’ve said, the Circuit of Wales have stated that they are able to work to the principle I’ve outlined of 50 per cent—no more—risk for the public purse.

I’m disappointed in the Cabinet Secretary, in whom I’d invested such high hopes a few weeks ago—[Interruption.]—when I welcomed him to his exalted position. I expressed the hope that, under his leadership, the Welsh economy would put its skates on. [Assembly Members: ‘Oh.’] Boom, boom. Unfortunately, he seems to have put it on the skids instead, as a result of the negative and unimaginative approach that has been demonstrated by this statement today.

I don’t think it’ll give many people in Merthyr, Ebbw Vale, and towns like that, a warm feeling inside to know that, instead of the Circuit of Wales, they will have Alun Davies and a ministerial taskforce instead. How many jobs is that going to generate? This proposal would generate 1,500 jobs in the construction phase, and up to 6,000 jobs in the future, if the site is fully developed. It’s important, I think—and I’m sure the Cabinet Secretary will confirm this—that the Welsh Government has not been asked to put in a single penny of further investment in this project, and it’s all being funded by the private sector, with the benefit of public sector guarantees.

This is a £380 million project, so that’s a massive development proposal; £240 million of that is being put in by Aviva, in which I suppose we’re all, in a sense, technically investors, because they invest the pension fund contributions that we contribute in this Chamber. And, out of that, only £190 million has been asked for by way of a guarantee from the Welsh Government. So, that’s 50 per cent of the project funding. And, in exchange for that, a commercial fee has been paid—or is proposed to be paid—of £3 million a year to the Welsh Government. That guarantee will be secured on the assets of the project, once they have been created. There will be no guarantee at all in the construction phase. So, this 50 per cent guarantee will be secured upon 100 per cent of the assets, and what’s being asked for, therefore, is only a secondary contingent obligation, which comes into effect only on an annual basis if the earnings of the project, when completed, are insufficient to pay the guaranteed element of the Aviva funding for that particular year. So, there is no risk of the Welsh Government suddenly being presented with a bill for £190 million in any one year in the future.

The economic impact of this scheme is expected to be worth £35 million to £50 million a year, in an area that is currently very economically deprived. The corollary of that, from the point of view of the risk that the Welsh Government is being asked to assume, is a guarantee call, which would, in the most extreme example, be in the order of only £8.5 million a year. Does the Cabinet Secretary not think that that’s a pretty good bargain for the Welsh people, generally, for the Welsh economy? And I hope that he will show perhaps rather more imagination in the future, because the Government is very strong on strategies for economic development, but in producing economic development, they’re a total failure.

Well, I’d like to thank the Member for his question, but say I do hope that he will show more common sense in the future. I’m rather disappointed that the Member is saying—or inferring—that he would be content for the taxpayer to be exposed to 75 per cent, or indeed 100 per cent, of the risk of the project and yet he does not believe that the taxpayer should only be exposed to 50 per cent of the risk. I don’t quite understand why the Member would rather expose the taxpayer to all of the risk rather than half of the risk, because that is specifically what he’s said he’s disappointed in. I’m afraid there was a question there, but it’s one that didn’t make sense.

The Cabinet Secretary has twice said that the Circuit of Wales now accept his 50/50 split in terms of the guarantee. Can I invite him to say a little more explicitly if they have agreed to a 50/50 split immediately, or whether they have agreed to work towards reducing the exposure of the public sector to that 50 per cent level over time? Can I ask him this as well? He’s said, of course, that Wales and the Welsh Government are open for business, and yet this proposal has been on his desk for many weeks. The company has repeatedly been seeking to engage with him, and yet it was only this morning, with minutes to go to this statement, and a statement, actually, that changed from the written statement because those words that they have agreed to the 50/50 split were added because, of course, the negotiation was conducted with the clock ticking. Now, surely, that is no way to conduct a proper negotiation on such a large and complex project as this.

Could he also say, as has already been raised, what basis is this new policy of the 50/50 split, which has landed like tablets of stone out of nowhere? What basis is that? Is it based on some UK Government green book policy, et cetera? We have the use of contingent liability, which is a standard procedure used by the UK Government, so where does this 50/50 split come from? And why prevent the local authorities? If the Welsh Government is prepared to accept a 50 per cent guarantee and the local authorities, because of the economic impact, particularly in some of the deprived communities, said, ‘We’re happy, on behalf of our residents, to actually take a little bit of this risk as well’, why prevent them from doing that? Why be so dogmatic in this case?

He refers to risk. Risk in this context constitutes two elements of course: there’s the quantum of the guarantee, but also it’s the likelihood of the guarantee ever arising; i.e. will the project fail? And I put it to the Cabinet Secretary, if he believes—

Can I just say, there is a Minister who is making comment, and perhaps the Minister would like to be a bit quieter so that the Cabinet Secretary can hear what the Member is asking?

I have to ask the Cabinet Secretary: if he believes that there is a high probability of this project failing, why has he even been having the conversation for five years in any case? And, isn’t it true that his own Government’s due diligence shows there is almost a negligible scenario where the guarantee will be called in? Because it’s a strong project; that’s why. There is a strong business case. In which case, all of this is academic, and he should get on with the job and actually support this proposal in an area of Wales that is crying out for jobs and leadership.

I note that many of the Member’s colleagues don’t share his views whatsoever. The fact of the matter is that many of the Member’s colleagues are utterly opposed to this project, so giving the impression that he and his colleagues are in favour of regeneration of that area through the Circuit of Wales, I’m afraid, is not quite the reality of the situation whatsoever. Indeed, the Member’s staying rather quiet at the moment.

Indeed, I am exceptionally disappointed that the Member—[Interruption.]—again infers that it’s in the taxpayer’s interest to shoulder more of the risk of this project. The developers have already said that they can work to the principles set out, to ensure that we don’t have the project on balance sheet, to work to that principle. They have accepted it; they have said, yes, they can do it. So, I’m not sure what it is that’s driving this view that it’s better to expose the taxpayer to 100 per cent of a project rather than to 50 per cent and no more. It does not make sense whatsoever.

I have to say, observing this, Cabinet Secretary, that you’ve not come to the Chamber and said, ‘Wonderful; we have an agreement and on this basis, we can secure the project’. So, I think your grounds are somewhat suspect. I have to say that, in your answers to Mr Price and to Mr Hamilton, you have not been at your finest hour. There was some real scrutiny, particularly from Mr Hamilton, in his questions and I do think you need to answer them.

I have to say that it does amount to what is past practice. As we heard, the British Government has a long record as does, presumably, the Welsh Government and before that the Welsh Office, in terms of having to underwrite risk. We’ve had large projects before. Presumably, especially when these prestige projects are promised for very deprived areas, we look at it and it’s in the public interest then to provide that, underwriting that guarantee. I do think you need to get to some specifics very quickly on this. It has been a long time and, frankly, to come to this Chamber now and say, ‘We’ve just decided in the last half hour that this is the basis on which we can advance’—. Why on earth has this not been done before? If this project is viable, why haven’t you come in and praised the project and said that it’s now in a condition where it would be delivered?

I did come into the Chamber and present our case. I said that this has potential to regenerate an entire area, we welcome it and our officials will be working with the Circuit of Wales to take it forward. But we have been able to reduce the level—I keep repeating myself and I do hope that Members will acknowledge it—of risk that the taxpayer is exposed to. That must surely be something that Members would welcome.

Presiding Officer, I’m minded to publish, as fully as I can, risk assessments concerning the project and also to carry out a review of the process, so that we can be confident that it has been pursued properly and fully.

I want to address just a small part of this project, Cabinet Secretary, and notwithstanding the situation that you’ve outlined, and given that you’ve indicated that the door is always open, I therefore still find it very disappointing that Merthyr Tydfil County Borough Council are not offering their support to this prestigious project, especially as this is very much in their catchment area for jobs, et cetera. Has the Cabinet Secretary any information as to why they’ve not engaged?

Can I thank the Member for his question, but this is very much a matter for local authorities? Whether they choose to invest in an economic development programme is a matter for them. I cannot answer on behalf of that local authority, but of course they have an opportunity still, if they so wish, to invest in it.

Can I thank the Cabinet Secretary for his statement update on this important issue? I’m pleased as well, Cabinet Secretary, that your door is still open to this project. You’ll know that Monmouthshire County Council has been very positive about the project’s potential. I do hear some of your reservations. Other Members have asked for clarification on many of the points that I was going to cover.

Can I ask you, firstly, do you accept that it’s important that we distinguish between the underwriting and the guaranteeing of risk, compared with the funding of a project? I think that certainly many people who I have spoken to over the last few days are not clear as to what the Welsh Government is saying that it cannot do. You are not talking about funding this project; you’re talking about refusing to guarantee a certain level of risk. You’ve been adamant about that in the teeth of some opposition in this Chamber. Could you be absolutely clear about why you have set that level of risk at the level that you have done so? What independent assessment has been made by appointed experts and what were their conclusions? You’ve said that you would publish some information, I believe, as to why you’ve come to the decision that you have. I think it’s important that Members of this Chamber do see what independent advice you’ve had.

In terms of state aid, concerns about that were expressed by your predecessor. As I understand it, the threshold that would risk a state aid challenge is no longer an obstacle. Can you confirm that is the case? In which case, it is good at least that the state aid issue has been taken out of this. Finally, what is your assessment of the level of external funding that is available? Does it include development funding, development partner funding, and contractor funding? If so, are we talking about around £20 million of external funding, or do you question that assessment?

Can I thank the Member for his question? He’s absolutely right: I think there is some misunderstanding about what it is that Welsh Government is being asked to provide resources for. It is underwriting; it is not funding of this project. I think there are many people in our communities who believe that a 50 per cent support underwriting or guarantee would amount to actual direct funding to the tune of something in the region of £185 million. It’s not. It’s about guaranteeing the funding from private capital. State aid is no longer an issue as a consequence of setting the bar below 80 per cent. In terms of the advice that we’ve received, the due diligence exercise was commissioned from Grant Thornton and Fourth Street. I have already given an undertaking to publish what I can—information that is not commercially sensitive—and I will do that.

Thank you to the Cabinet Secretary.