Audit Committee finds that public money was put at risk in funding the LG projects

Public money was put at risk by the actions of authorities, including the Welsh Office and the WDA, over the LG projects in Newport, an Assembly Audit Committee report has found. The Committee’s report, Protecting Public Money in the LG Projects, published today, says that the Welsh Authorities – the Welsh Office (later the Welsh Assembly Government), WDA, Newport council and Gwent Training and Enterprise Council – did well to recover much of the public investment despite significant weaknesses in the funding package originally negotiated with the LG companies. The LG projects – an electronics manufacturing complex at Imperial Park, Newport– were planned to be the largest inward investment in Wales when they were announced by the LG group of Korea in July 1996, intended create over 6,000 jobs. To attract the investment to Wales, the Welsh Authorities offered an aid package worth £247million – the largest award ever made to attract an inward investment to the UK. A total of £131 million was eventually paid to the LG companies, but the projects were never completed as planned, and less than half the expected jobs were ever created.  The Welsh Authorities succeeded in recovering a total of £71 million in the form of cash and property.   The report says that the authorities’ actions during the project appraisal stage put public money unnecessarily at risk: “The aid package was front loaded –more was payable in the early stages of the project, as a proportion of investment by the companies, than in the later stages.  There are often good commercial reasons for front loading funding.  However, it had serious risks in the case of LG and the recovery provisions were inadequate in several important respects, which limited the ability of the authorities to recover aid if the projects did not go to plan. The risks of front loading were not properly assessed or managed.” The report makes a series of recommendations for future projects, including proper assessment and risk management. The report also recommends that legal agreements for major projects include a series of interim milestones against which progress can be clearly assessed, especially if the project is delivered in distinct phases. David Melding AM, Chair of the Audit Committee, said: “We found that the Welsh Authorities did very well in recovering as much money as they could, but there were mistakes with the project appraisal which meant unnecessary risk. This is clearly unacceptable and lessons must be learned for the future.” Audit Committee report ‘Protecting Public Money in the LG Projects, Newport’