Urgent Question: Kancoat

Urgent Question: Kancoat

 

Russell George

Will the Cabinet Secretary make a statement following the Public Accounts Committee’s report into the Swansea-based firm Kancoat?

 

Ken Skates

The Cabinet Secretary for Economy and Infrastructure

Yes. I and my officials have assisted the Public Accounts Committee at every stage of its considerations of this issue. I have received, and very much welcome, the committee’s report and will be fully responding to it.

 

Russell George

Can I thank the Cabinet Secretary for his answer? The report produced by the Public Accounts Committee raised some very serious concerns, I would say, Cabinet Secretary, over the conduct of the Welsh Government, as yet another substantial pot of taxpayers’ money—£3 million—has been lost. There are some questions over accountability, and this is sadly not the first time that taxpayers’ money has been wasted by the Welsh Government. We’ve had numerous other questionable decisions, including the regeneration investment fund for Wales, Kukd and Triumph. I certainly do not believe that Governments should not take risks; I certainly believe they should, but they should do so in a balanced way. In relation to Kancoat, time and time again, the expert advice given to the Welsh Government warned that the company had a weak business plan and was a high-risk investment. So, can I ask why, in your opinion, Cabinet Secretary, was the advice ignored—also bearing in mind, of course, that the Government’s investment arm, Finance Wales, rated it as being unacceptably high risk? What is your determination on this, given the changes I know that you’ve made in your department since you’ve come into post, and is it your view that the department you inherited was simply not fit for purpose? Have you mentioned—? You’ve mentioned in recent statements that you’ve now put new procedures in place; what are these new procedures? I think that’s the crucial question here. And finally, where do you think accountability lies? Is it with your predecessor, or is it with officials?

 

Ken Skates

 

Can I thank the Member for his questions? We are learning at all times and, indeed, my predecessor made changes within the department when she inherited it. Indeed, my predecessor introduced the investment panel procedure to strengthen oversight of investment considerations and to ensure that where risk was being considered an informed decision could be made. The deputy permanent secretary is on record as saying that, in this instance, the investment panel got it wrong and, therefore, provided advice to the Minister that was wrong. But I think, and the Member recognises the fact, that we have to balance risk against opportunity. And it is, as the First Minister has already identified, a case, a fact, indisputable, that in the previous Assembly term, during which time my predecessor oversaw record growth, the success rate of businesses supported by Welsh Government was more than 97 per cent. That compares incredibly favourably to the Welsh average and, indeed, even better to the UK average. So, I think it is actually a very proud story that we have to tell about the business support success of Welsh Government. Nonetheless, not all businesses survive, not all businesses succeed. We will do what we can to help businesses thrive, but there will be cases, especially in the context of the post-financial crash, where businesses were established and where the economic climate was not such that it was stable and enabled the forecast growth to be achieved.

 

We do have a number—and the Member recognises this—of procedural changes that have been implemented. I’d happily write to all Members with details. In fact, as the leader of the Conservatives, I think, wishes to know what they are, I will offer them now: consideration of commercial loans now forms part of the investment panel procedure; the senior management team must now ratify any recommendation by the investment panel for commercial loans above £1 million; as part of the financial approval process, a standalone appraisal of all projects involving commercial loans must now be undertaken; the monitoring of loans has moved to the central monitoring team—that was an agreed departmental protocol; loan applications are more robustly assessed for their ability to repay by undertaking appropriate financial due diligence; a further change in procedure, which the WAO recognised was a standardised approach to risk assessment, has been introduced to ensure consistency across funding schemes, and where multiple interventions are being considered, they are now considered by a single body, with appropriate advice from the property leadership team. There are other procedures that we have introduced in the fourth Assembly. There are further procedures that I’ll be introducing as well.

 

In terms of the recommendations that are made by the committee, and I do value the work of the committee and, indeed, the report that’s been produced, I think it would be very difficult to disagree with any of those recommendations that have been made that are relevant to my portfolio. Whilst I will be responding in due course to all of the committee’s recommendations, I can say that I already accept a number of the recommendations and, indeed, I’ve already implemented some.