Grants, graft and gravy

I have received several emails, most of them complimentary, following last week’s trip down Memory Lane which catalogued the succession of chancers and snake oil salesmen who have trousered large amounts of taxpayers’ money by promising jobs and prosperity in Milford Haven.

One critic suggested I should have placed more emphasis on the role of gullible Cabinet members who naively swallowed these unlikely stories, and a struggling door-to-door salesman asked if I could let him have their home addresses.

As it happens, while looking through my back numbers for something else, I came across another couple of examples.

One involved a chap called Ramjam Delilah Funkyboogaloo-Smythe (I kid you not) whose company Redpas Ltd wanted to set up a factory for some type of specialist printing and the production of foam toys at Withybush Industrial Estate.

It seems Ramjam changed his name by deed poll in order to impress his girlfriend.

Whether or not the girlfriend was impressed is not known, but PCC’s Cabinet certainly fell for the talk of groundbreaking technology and 14 well-paid jobs and awarded Redpas a grant for £35,000.

Clearly, the Welsh Government was also dazzled because it offered to throw a hundred grand into the pot, though, mercifully, Ramjam was only able to draw down £80,000 before Redpas Ltd went belly-up.

A similar tale unfolded with the company All-Purpose Finance Ltd (APF) which set up shop at Cedar Court on Milford Docks in 2006.

APF persuaded PCC’s Cabinet to give it a grant of £10,000 to support the 24 well-paid jobs on offer and loans were lined up from Pembrokeshire Lottery (£10,000) and our friends in Cardiff Bay (£100,000).

It was not long before the company changed its title and decamped to Bristol, but when Old Grumpy finally tracked it down on Companies House website the words “in liquidation” had appeared alongside its name.

Cedar Court also featured in strange tale of the relocation of Milford Library. It was built by Milford Haven Port Authority courtesy of a large grant from the Welsh European Funding Office (WEFO) – the same outfit that is in charge of the commercial property grants in Pembroke and Pembroke Dock which are the subject of a police investigation that has now lasted 18 months and counting.

One condition of the grant was that the property had to be occupied by private sector tenants otherwise grant monies would be reclaimed pro-rata.

For example, MHPA was forced to repay a considerable amount of money when Steve Crabb MP opened an office at Cedar Court.

Originally, it had been intended that Friday Ad would use a large part of the building but they purchased the Cleddau Bridge premises at a knockdown price following the closure of ITV’s call centre.

That left the MHPA with a rather large hole in its balance sheet, so the library was slotted in to fill the gap.

The rent was £25,000 a year and, as the library was not a private sector activity, the lease agreement contained a clause that PCC would indemnify MHPA against any potential grant clawback from WEFO.

This was estimated at £350,000, so, on the face of it, PCC was taking a huge risk.

However, when I asked a question about this at full council, I was told that there was no prospect of any clawback because MHPA had met all WEFO’s grant conditions. So quite why this indemnity was necessary is not immediately obvious.

One possible explanation is that WEFO had given PCC the nod that it wouldn’t be pressing for repayment, but the indemnity was slipped in to cover WEFO’s backside just in case some keen-eyed auditors raised the issue.

And it is not just the possibility of grants being given to shysters of various colours that taints the grant system. There is also the question of the misallocation of resources caused by “grant-chasing”.

Take the new 5,700 sq ft office block that has recently sprung up alongside the Johnston-Neyland road which was part funded by a £328,000 grant from the Pembrokeshire Development Fund (PDF).

Now, I wasn’t aware of any pressing need for new offices in Pembrokeshire, but even if there is it is likely to be shortlived as PCC seeks to justify its decision to splash out a couple of million on the former tax office at Cherry Grove by relocating staff from outlying centres.

The figures below; taken from a report on the Johnston development that went before Cabinet last January are worth close inspection:

Developer: Uzmaston Projects Ltd
Land West of Hayston Road, Johnston
5,700 sq ft Two Storey Office Development Stage 1 approval August 2014

Stage 2
Total Project Cost (exc Developers Profit) £790,118
Completed Project Value £318,350
Development Gap £471,768
PDF Assistance Requested £330,375.60 PDF

Assistance Recommended £328,553.10 (45% Eligible Costs)

What they show is that the project cost £790,000 but its market value is only £318,000 resulting in a “market gap” of £471,000.

This “market gap” is partly filled by a grant of £328,000, but that still leaves a deficit of £143,00 if the developer sold the property tomorrow. And that excludes any profit the developer might have expected to make.

Call me old-fashioned, but, if these figures are to be believed, this particular bit of “grant-chasing” doesn’t look like good business to me.

And I can hardly think that forking out £328,000, for what appears to be a white elephant, can be described as the prudent use of taxpayers’ money.