‘Mutual investment model’ to bring £500m to schools over 15 years
DOZENS of new schools and colleges could be built across Wales over the coming 15 years because of a £500m new funding mechanism adopted by the Welsh Government.
Using the “mutual investment model”, the Government will work in partnership with private sector companies to deliver between six and 10 new projects during the first two-year period.
The first school to be built will be a right-through, combined primary and secondary school in Flintshire.
Others will follow in sequence from the 21st Century Schools programme, developed by the Welsh Government in partnership with Welsh local authorities.
Since an election manifesto commitment in 2011, ministers have been committed to exploring a number of alternative funding methods to circumvent austerity measures imposed from Westminster.
Sources said the model had been carefully developed to avoid the kind of mistakes made in the Blair years in England, when Private Finance Initiative (PFI) schemes saw the public sector entering partnerships with the private sector to build schools and hospitals that ended up costing far more than expected.
In Wales, the Welsh Government will have a financial stake in Wepco, the company set up to oversee the school and college projects.
Wepco will be chaired by S4C chief executive Owen Evans – a former director general covering education in the Welsh Government – on a parttime basis.
The aim is that schools and colleges that would otherwise have had to wait for years will be built sooner.
In a report to the Senedd, current Finance Minister Rebecca Evans said: “Earlier this year, I welcomed the report of the Finance Committee into sources of capital funding and its recommendations regarding the mutual investment model. A lot has happened since that time.
“Hard on the heels of a decade of Westminster-imposed austerity, from which our capital budget has barely recovered, a pandemic has struck Wales – twin threats that we must address by delivering projects that will drive forward our economic recovery, creating employment, training and supply chain opportunities.
“The Mutual Investment Model (MIM) will help us do just that, accelerating investment in projects that would not otherwise have been affordable.
“Our strict approach to the use of MIM remains unchanged. We use conventional capital first to fund public infrastructure and we will we use every penny of it. We’ll then use our limited borrowing powers. We have also enabled local authority and housing association borrowing to maximise support for the urgent needs that our communities face. But even that is not enough to cover those urgent needs.
“We have developed a carefully designed model to meet those needs in the face of a decade of austerity, which we must remember began with dramatic cuts to capital budgets at a UK level.”
Ms Evans said that at the end of September, the Welsh Government established the Welsh Education Partnership Company, known as Wepco.
“Wepco is a joint venture between Meridiam, our private sector delivery partner, and the public sector. Wepco will be responsible for facilitating the design and delivery of up to £500m of
additional investment in new educational facilities using the standard MIM contract.
“There are currently around 30 schools and colleges in the programme’s pipeline to be delivered over the next seven years – a crucial investment in our future generations in the wake of austerity, delivered during a pandemic that would not have been possible without this funding model.
“Each project will be competitively tendered by Wepco, through platforms such as Sell2Wales, providing opportunities for construction contractors and the wider supply chain while maximising job opportunities for people in Wales. Wepco is contractually required to commit to minimum levels of engagement with the local supply chain on every project.
“Work has begun on the first MIM school, a new all-through school in Flintshire, which will colocate two existing schools onto a single site, ensuring the efficient use of public funding alongside the delivery of community benefits.
“An important innovation of the MIM is a public sector shareholding of up to 20% of the risk capital in each scheme. This shareholding provides transparency whilst ensuring that the public sector participates in any return on investment.
“The Development Bank of Wales (DBW) is using financial instruments to make significant contributions in areas extending beyond business support, including housing, energy and tourism. So, given its expertise, the Welsh Government determined that the Development Bank of Wales would act as the public sector shareholder in MIM schemes, carrying out due diligence on proposed investments and managing the investments over the long term.
“As the public sector shareholder, the bank will nominate a director to the board of each MIM project company.
“DBW will monitor the performance of each investment, provide expert oversight and ensure early warning of potential issues that might impact on the recoverability of the investments.
“The successful deployment of the mutual investment model is making an important contribution to our efforts to kick-start the economic recovery.
“Wales is at the forefront of international efforts to modernise the concept of public-private partnership.”