Examination of Witnesses (Questions 140
- 159)
MONDAY 22 JUNE 1998
MR JOHN
FRENCH AND
MR JEFF
PRIDE
140. That of course is for capital spending,
is it?
(Mr Pride) Yes.
141. Are you allowed by law to provide assistance
with current spending?
(Mr Pride) There is a small scheme called A Small
Establishments Loan Fund which is a very small part, £100,000,
which we have not utilised for a number of years. It is complicated
in its application and generally applicants come to us looking
for upfront assistance with their capital expenditure which reduces
the risk for them.
Mr Livsey
142. Just on the question of threshold for grants,
is there a minimum figure for grant that you work to?
(Mr Pride) Yes. Up until April 1996 we were supporting
projects with a minimum capital spend of £4,000. We had a
directive from the Welsh Office for that to be increased to £7,000.
That is a total capital spend. Based upon that we can allocate
normally up to 25 per cent for the capital spend.
143. So in fact you are quite pitched to the
micro business?
(Mr Pride) Yes, indeed. Some two thirds again of our
investment goes to businesses with less than ten employees.
Mr Thomas
144. What other grants are available for tourism?
(Mr Pride) The Cardiff Bay project is an interesting
one perhaps, we see it as an example. Our investment went to a
European style health spa and certain costs to the hotel itself
at a cost of £2.6 million. The total project was costing
over £14 million and the bulk of the investment for the infrastructure
of the hotel was provided by the Welsh Office via Cardiff Bay
via an urban investment grant. Our investment came in to support
this added value to bring the standards up to something of international
significance which did not exist currently in Wales, therefore
making Cardiff a visitor destination for this European type health
spa. The spa itself cost nearly £2 million.
145. Are you talking about the Cardiff Bay Hotel?
(Mr Pride) Yes, I am.
146. With the swimming pool and the sauna.
(Mr Pride) This is the Sir Rocco Forte, St David's
Hotel Cardiff, not the Cardiff Bay Hotel.
147. Finally on the question of leverage, you
make reference to these figures, I think it is well into Section
5 of your submission.
(Mr Pride) Yes.
148. You talk about every pound of WTB grant
levers in an additional £5.80 from other sources.
(Mr Pride) Yes.
149. What are those other sources?
(Mr Pride) That would be private investment, other
public sector funding. If we took out other public sector from
those figures the leverage figure would come down to 1.5. If I
can give you an example again of the Royal Celtic at Caernarfon
which gives an example of partnership approach that we adopt.
The St David's Hotel, Cardiff is a partnership with CBDC, in Caernarfon
it was a partnership between the WDA, Gwynedd County Council and
ourselves on investment support. This is a total package of some
£1.2 million public sector support towards that project.
Our assistance was in the region of £400,000, WDA was £500,000,
Gwynedd was just over £400,000. Again it was a partnership.
We have to work in partnership, we do not have the resources.
As you can see by the figures inward investment is a very small
part of our overall activity. When we do get an investor we have
to work in partnership. Bodelwyddan Castle, a Warner product,
a very successful Warner product, in North Wales was again a partnership
between the then Clwyd County Council, WTB, and the WDA and indeed
ERDF funding.
Mr Caton
150. In the second memorandum you provided for
us you give us a list of projects approved. It seems the amount
you give out in grants varies considerably from year to year.
A £1.2 million difference in 1996 and 1997. Why do we see
that variation?
(Mr Pride) Reductions in budget.
151. Just a budget coming down.
(Mr Pride) We had a cash budget, I think it was just
around £3 million, but we have commitments from previous
years. We are allowed to commit forward 110 per cent. It is a
very complicated formula. If there is a reduction in the cash
budget available to the investment support scheme there is a ratcheting
down in the total available for allocation. We have lost nearly
a million pounds over the last two years in that budget, yes.
Chairman
152. The figures suggest a rise between 1996
and 1997.
(Mr Pride) The year before then, it has come down
since the mid 1990s.
153. Given that there was a rise between 1996
and 1997, and you have a cut as well.
(Mr Pride) Yes.
154. Can you explain the variation within that?
Do you have a lot of variation from year to year and, if so, why?
(Mr Pride) We have a cash budget and we then allocate
up to 100 per cent of that cash budget. The cash budget, let us
say, is £3 million, 110 per cent would be 3.3. We allocate,
and each year we have allocated up until last year, that full
110 per cent but if the budget is reducing, the cash budget, we
have to be very careful on forward commitment because that will
effectively reduce the amount that we can allocate in future years.
It is very, very complicated but it does vary and it is dependent
upon the cash budget. Each year—I have been with the board
since 1989—we have spent all the cash that has been given
to us. Our budget is over-subscribed. We have to prioritise and
we do that in the context of a strategic framework.
Mr Caton
155. Even within that, there does seem to have
been a marked reduction in the number of smaller grants given,
is this a deliberate policy?
(Mr Pride) The Welsh Office, as I referred earlier,
in April 1996, advised us that we had to increase the minimum
threshold level of capital expenditure up from £4,000 to
£7,000. That did have an immediate impact on the number of
small projects that were coming forward. In addition to that,
and as I said earlier, the budget in real terms has declined substantially.
We have had to prioritise and follow what we see as the priorities
for investment. The number of smaller projects has declined, as
has the number of projects overall declined. We have had to come
down, cut our cloth and prioritise given the reduced level of
resources we have available.
156. It is not that you decided to concentrate
on some things that need a bit more investment?
(Mr Pride) Yes, it was partly that. Since three years
ago, I think, we have been given private sector leverage targets
and the larger projects do generate higher leverage and private
sector investment. There has been a change to that. Primarily
I would argue—not argue it is the case—a reduction
in the number of small grants—In those early years, that
you referred to, there were one off grants for trying to introduce
teletexts and computers in farmhouses. There were wash hand basin
schemes. There was a lot of these minor schemes, which were pilots
to address a specific deficiency in the product base. We have
not had those small grant pilot schemes in recent years.
157. Can you give us some examples to give a
flavour of the range of things where you do grant aid?
(Mr Pride) You have seen the major inward investment
projects we have invested in. Last year my chief executive referred
to the Integrated Programmes, our resort and historic towns programme
we have, where we have 13 programmes located around Wales focusing
on developing a specific area in conjunction with other public
agencies and local authorities. We have six resorts and seven
historic towns. The George Hotel in Brecon was a hotel which we
felt was in desperate need of investment and to meet the needs
of the programme. Because we see it as being a flagship historic
town we invested in the George Hotel, Brecon. The Sea Bank Hotel
in Porthcawl, a traditional seaside resort. We have been investing
there in the Integrated Development Partnership for some three
or four years now. The infrastructure with the support of WDA,
and again it is working alongside the WDA who put the infrastructure
in, our grant regime is really the only grant regime in Wales
that can go into the business itself so we invested in the Sea
Bank Hotel. Those are two medium sized service accommodation projects.
In addition to that, to give you examples, we invested in visitor
management at Beaumaris which is one of our historic schemes.
We invested in environmental work in Caerleon, another one of
our historic towns. We invested in small guesthouses and B&Bs—CefnGwym
Farm in Caersws. There is a whole range from very small visitor
attractions, such as Folly Farm in Pembrokeshire. There are visitor
attractions, service accommodation, self-catering caravans, visitor
amenities, signposting, general landscaping, it is a whole range.
158. You say in the memorandum you encourage
development only to fill a market gap or to attract new markets.
Some might argue that it is worth encouraging development even
where there is no market gap in order to stimulate competition
and maintain quality. Would you accept your approach does little
to improve the competitiveness of the industry?
(Mr Pride) We have to work within the ministerial
guidelines. The key ministerial guideline we have to address is
displacement. We have to make an assessment whether a project
coming in without an identified marketing strategy to attack a
market gap, if it is just going to be put there and displace a
similar business just down the road, that is a waste of public
money. The Government tells us that and we have to apply and address
that. Where a business comes in, it has a fully thought out business
plan, knows exactly where they are going, they have identified
that market gap, we would only put investment in there. There
may be some displacement but what we would then argue is that
the added value of increased business spend coming in as a result
of that investment outweighs the level of displacement.
Mr Paterson
159. We were told by the Federation of Small
Businesses in Wales that small business people often find the
process of applying for grants in general too time consuming to
be worthy of the trouble. Do you have a full take up of your grant?
(Mr Pride) Yes.
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