'Compromised' decisions behind £38.5m Cardiff City Deal's semiconductor site, say Wales Audit Office

A Wales Audit Office report has revealed that the Cardiff Capital Region City Deal pushed ahead with the IQE foundry without confirmation of Welsh Government funding.

Inconsistencies in the recording of meetings between the £1.2 billion partnership's regional cabinet – made up of leaders of 10 local authorities – were also found.

Senior figures within the City Deal say they had to move quickly to take grasp opportunity while the £1.2 billion partnership was in its ‘infancy’.

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Monmouthshire council led the foundry project from early 2017 as it had officers with prior knowledge of the compound semiconductor concept.

Monmouthshire council leader Peter Fox, whose authority led the compound semiconductor foundry project

On April 24 that year, the programme board heard that Monmouthshire had moved directly to a full business case for the project due to time constraints.

A final business case is typically preceded by strategic and outlines business cases, but the City Deal opted to carry out due diligence while the final business case was developed.

The WAO report says: “Because these stages were taken simultaneously rather than sequentially, each stage was not fully documented, compromising the City Deal partners’ ability to robustly scrutinise and challenge the proposal.

“This affected the transparency of the decision-making process.”

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After the meeting, Cardiff council requested the decision be deferred until after the 2017 local government elections to ensure the investment was ‘robust and defensible’ under challenge.

But the letter was not considered at a meeting on May 2 – two days before the election – when the project was supported by the regional cabinet, with Cardiff council abstaining from the vote.

Torfaen council leader Anthony Hunt (6th from left) signing the Cardiff Capital Region City Deal alongside nine other council leaders

The WAO said this decision was made without ministerial confirmation that Welsh Government would partly fund the project or lease the site to the City Deal.

Advice relating to tax implications, details of the cost breakdown, and external experts’ reports had also not been signed off.

Despite this, the cabinet agreed to finalise the project on July 14, increasing investment from £37.9 million to £38.5 million to accommodate the formation of CSC Foundry Ltd, a subsidiary company used by the councils to lease the building to IQE.

But the WAO say an exempt report showed the outstanding matters had not all been addressed fully.

“The regional is a public body and is required to publish its agendas and papers unless they are restricted,” said the watchdog.

Wales Audit Office say parts of the decision-making process behind the City Deal investment were 'compromised'

“However, the publicly available records of cabinet meetings on the City Deal website are incomplete and do not include any information relating to the July 14 meeting.”

The City Deal say lessons have been learnt from its first investment but maintains that it did not compromise itself during the decision-making process.

Councillor Peter Fox, leader of Monmouthshire council and vice chair of the regional cabinet, said: “The use of the word compromised suggests that the decision-making was flawed.

“We had to balance choices around action/inaction – and decided to be judged for the former, not the latter.”

Cllr Fox added that the ‘results speak for themselves’, with 42 technicians now working onsite, hundreds of regional jobs safeguarded and hundreds more promised through the tech cluster.

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Councillor Andrew Morgan, leader of Rhondda Cynon Taf council and chair of the regional cabinet, remains satisfied that the City Deal complied with Treasury guidance while assessing the scheme.

"In hindsight, it is difficult to see how we could have done anything differently and the report is silent on where and how ‘compromised’ process may have exposed us to greater risk," he said.

Cllr Andrew Morgan, chairman of the Cardiff Capital Region Cabinet, and leader of Rhondda Cynon Taf council

"This was an intense piece of work and I am satisfied that the expert due diligence enabled us to make the right decision for our economy and communities – now and in the future.

"It’s all well and good to have perfect systems and assurance – but these tend to mean very little to people if nothing gets delivered as a result."