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A “creative workaround” to limited borrowing powers has delivered an extra £1.1bn for Wales while avoiding the same “crippling” pitfalls as PFI, the finance secretary has claimed.

Speaking in the Senedd, Mark Drakeford explained £1.14bn for projects including the new Velindre cancer centre and A465 works “simply would not have happened” otherwise.

The Welsh Government designed the mutual investment model (MIM) – an alternative to the controversial UK private finance initiative (PFI) policy – as a way to leverage private finance due to a scarcity of funding for longer-term infrastructure.

Prof Drakeford told Senedd Members the Welsh Government’s capital budget has totalled around £15bn this term, so the model has bolstered spending by 7.5%.

Arguing the government’s decision to reject PFI has been vindicated, he said: “Wales suffers neither from the stranded assets that have occurred in England nor do we face the ongoing disputes that surround the return to public ownership of facilities from PFI stewardship.

“Most of all, we have not faced the crippling impacts on resource budgets that PFI repayments have caused and continue to cause elsewhere.”

‘Made in Wales’

Prof Drakeford said the additional £1.14bn includes £590m to complete the dualling of the A465 and £312m for 21st-century cancer care at the Velindre NHS trust.

He told the Senedd the “made-in-Wales” approach is different from earlier PFI models because the Welsh Government takes a stake of up to 20% in each MIM scheme.

This ensures the public interest is represented on boards and enables the public sector to earn a return on investment in infrastructure that can be recycled, he said.

Addressing concerns about long-term costs, the former First Minister explained repayments will equate to a “manageable” 0.4% of the day-to-day budget even at the peak.

He said: “In this year, we are providing £50m in revenue to support the borrowing through the mutual investment model. At the moment, that will rise to £100m in the most expensive year of the scheme and that’s in 2028/29.”

During Tuesday’s (October 7) statement, he added that modelling suggests every £1 invested as public equity in a MIM project will earn more than £3 in return.

‘PFI-lite?’

The Conservatives’ Sam Rowlands supported the “innovative” way of investing in modern schools, hospitals and roads though he pointed out that public bodies in Wales did use PFI.

He warned that PFI models were “supercharged” under Tony Blair’s UK Government after being launched by John Major, saddling future taxpayers with a £215bn commitment.

Plaid Cymru’s Heledd Fychan expressed concerns about constraints on Welsh Government borrowing, with councils having greater flexibility, leading to the creative workaround.

Rhys ab Owen, who sits as an independent, similarly criticised “pitiful” borrowing limitations, with Cardiff and Swansea councils’ combined powers exceeding the Welsh Government’s.

Labour’s Mike Hedges asked: “Is the mutual investment model PFI-lite? While the worst excesses of PFI – … such as the £20 to change a light bulb – will not occur, it is still a long-term commitment that will have an effect on revenue budgets for a long time.”

Prof Drakeford said the Welsh Government always seeks to exhaust the cheapest money first and MIM is the last form of borrowing ministers turn to. But he stressed: “This is a choice between using this form of investment or not being able to invest at all.”