BBC Wales is running big with a story about long term loans being serviced by the Welsh Gov't, which it has persuaded the leader of Plaid Cymru to describe as a 'scandal'. Such is the attention given to this that we can but conclude that BBC Wales agree with her. So happens I was guest in the studio for Politics Show today, and know a bit (though I concede only a bit) about the background. And I'm struggling to see anything scandalous at all.
Begin with a bit of background. On 18th Dec 1967, the then Labour Gov't set up the Mid Wales Development Corporation. It was charged with doubling the size of Newtown from about 5,500 to 11,000. Head of this body was the inspirational Peter Garbett-Edwards. In passing, I should say that he inspired me to become involved in public affairs. He and his redoubtable mother were committed Liberals - which may have prepared me for today's coalition politics! Anyway, the MWDC set about building factories and the key worked housing to attract industry to move in. About the same time, Gov't established the National Loans Fund - which became and remains the Gov'ts 'borrowing and lending' account. In effect Gov't was lending the money to a 'quango' of its creation at terms which are now being described as scandalous. For the BBC story to have any credibility, we would need to know what other similar public sector deals were at that time. Was 60 yrs unusual for public sector housing loans? Was 14% unusually high in the 1970s. (I recall paying that rate on my farm account at 2% over base for several years) No-one then anticipated the 'Brown boom' and consequent financial crash which has delivered much lower interest rates.
Another supposedly 'scandalous' aspect of this is that the assets are not owned by the Welsh Gov't. This is plain silly. The MWDC assets moved to the Development Board for Rural Wales, and then to the Welsh Dev't Agency (following merger- I think) before being taken 'in house' by Rhodri Morgan's 'Bonfire of the Quangos. As far as I can recall, Plaid Cymru backed Rhodri to the hilt. Am trying to scratch my head about what else might have been done. The 'public benefit' is a Newtown twice as big at it was and a Mid Wales economy and population transformed from that of the mid-60s.
The housing developments built by MWDC and finished off by the DBRW,were only ever meant to be owned temporarily. Once 'New Town' powers were removed from DBRW in late 80s, the houses had to be transferred. Most went to Montgomeryshire District Council, with some going to Newtown Housing Association, a social housing landlord run by the tenants. Some have been sold under RTB scheme and a few under something called 'flexi-ownership', a rather complex partnership arrangement. Most of them are still owned by the Council (now Powys CC). As far as I can see, everything is just as it should be, and much the same as most housing authority schemes.
Couple of additional points. Firstly its supposedly 'scandalous' that the Welsh Gov't cannot pay off the debt early because the long term interest rates are so high. If lenders were required to allow borrowers to 'pay off' long term debts when interest rates dropped, the original terms would be much more onerous. These things are worked out by actuaries. And secondly, there's the matter of 'lessons' to learn. This may well be so. There were certainly plenty to be learned from Gordon Brown's disastrous rush into PFI schemes.
The reason this is an issue is that the Welsh Gov't may find itself with borrowing powers in the future. Before launching into this new world, I would expect the Welsh Gov't to take best advice it can get hold of, and do best deals it can - which I've no reason for thinking isn't what happened in the 1970s. And always remember if you borrow money, it has to be paid back. I'd welcome comment from anyone with experience from the 70's.