In its 10 Year Plan the UK Government strongly commits itself to a new range of public private partnerships where a revenue stream, appropriate risk transfer and value for money can be assured. It concedes, probably through gritted teeth, that while the New Labour Private Finance Initiative (PFI) was based on good intentions with some patient benefit there were cases where it was a “costly mistake”. These new approaches will draw on the lessons learned from the PFI scheme and build on models currently in use such as the Welsh Mutual Investment Model (MIM). So what is the Welsh MIM?
When the scheme was launched in early 2017 the then Welsh Government (WG) Finance Secretary (Minister), Mark Drakeford, said its main purpose was to bridge the 20% capital funding loss over a decade that would result from the Tory Government Austerity Programme. While the Welsh Government had recently secured additional borrowing powers there was a cap on their scope and additional means would have to be used to invest in Welsh infrastructure. The Mutual Investment Model was a means to do with this.
The Welsh Government was always cautious about public-private partnerships with only about 23 Welsh PFI schemes, just 1.5% in capital value of all UK PFI projects. Consequently only about 1% of Welsh Government revenue was committed to servicing these contracts compared to the English NHS being lumbered with a £80 billion bill for £13 billion investment. In launching the MIM the WG was determined to learn from the lessons of PFI and the more recent Scottish Non-Profit Distributing Model.
The key aim of the Welsh MIM is to work with private sector partners to build and maintain public assets. And, as is the case with most PFI schemes, the asset would revert to the public sector at the end of the contract period. The use of the model is not meant to be a reflex, default method for capital schemes but it must be judged on how it delivers better outcomes and value for money. It would not include the provision of non-clinical services ( e.g. cleaning / catering) or specialist, expensive capital clinical equipment which proved very problematic in many PFI contracts.
In developing the MIM projects, the Welsh Government / public sector would be an active partner with the ability to secure up to 20% equity stake and to have a director on the project board. While leaving the WG exposed to some project risk, it also provides a means by which the public sector would benefit from the profits of the scheme. In additional regular reports would be published updating the public on the progress of the individual projects and the scheme overall.
In the provision of projects clear community and ethical standards will have to be met. From the outset, the WG intention is to ensure that the MIM promotes the public interest in the widest possible sense. Contracts must be compliant with Welsh Future Generations Act ambitions. In addition targets will include jobs created particularly for people who are not in employment, education or training opportunities including apprenticeships, engagement with local schools and graduate progression schemes. Local ethical sourcing, where possible, will be expected and promoted.
Contractors should adhere to the Welsh Government’s Code of Practice Ethical Employment. This includes the expectation that no one will be employed as less than the Living Wage. Trade union recognition and collective agreements will also be expected with no use of inappropriate tactics such as “bogus self-employment”, blacklisting or zero-hour contracts etc.
The MIM Report (2022-24) is now available. It shows that three schemes, including the re-development of Velindre Cancer Centre are being delivered, worth £1.4 billion. It provides a details of how the MIM is operating with more specific operations details on how the delivery schemes are structured and the progress that is being made both in terms of physical delivery and attainment of the other wider social objectives.
The Welsh Labour Government has sought to promote a “Red Welsh Way” in policy development to distance itself from the public service commercialism and marketisation which is taking place in other parts of the UK. Developing this Red Welsh Way does not always take place in the ideal circumstances of its own choosing and some pragmatic decisions have had to be made.
Developing public-private partnerships is rarely a risk-free option as we know from a whole range of examples such as the discredited PFI programme, HS2 roll-out or the Carillion collapse. The Mutual Investment Model has striven to learn from these earlier failures with the Welsh Government judging that the risk involved is offset by the potential benefits achieved and the safeguards it has put in place.
