The Labour government in Wales has confirmed plans to establish a public-private partnership to dual the last remaining single carriageway section of the A465 Heads of the Valleys road.
After Carillion’s demise last month, shadow chancellor John McDonnell said Labour would end the ‘scandalous rip-off of outsourcing’ and would not sign any new private finance initiative (PFI) deals when in government.
However, this week, Ken Skates, Welsh transport secretary and Labour AM for Clwyd South, explained to the Welsh Assembly how a new public-private partnership would enable the Welsh Government to complete A465 dualling while capital budgets were under ‘unprecedented pressure’.
The 11-mile dualling between Dowlais Top and Hirwaun is estimated to cost £428m in 2016 prices, excluding VAT and inflation. The Welsh Government is also committed to building a new section of motorway around Newport at an estimated cost of more than £1.3bn, excluding VAT and inflation.
The Welsh Government has developed its own form of public-private partnership called the Mutual Investment Model. Skates said the MIM places risk with the party most able to deal with it.
‘Therefore construction risk is passed to the private sector and we pay for a service, rather than directly for construction, so in the case of A465 the ability to use the road, which is maintained to an agreed standard,’ he said.
‘Welsh Government does not pay for this service until it is operational, incentivising the contractors to deliver to programme. Deductions will be made to the annual service payments if the operator doesn’t meet stringent operational requirements, which we will actively manage.’
He also said the MIM addressed concerns about windfall gains by allowing the public sector to share in the private partner’s profits. ‘The MIM removes soft services from these contracts, which led to expensive, inflexible contracts and was a real bone of contention in the old PFI model.’
A public inquiry into the A465 scheme is planned for April.
