PAC Report Highlights Serious Failings in IDB Backed Inward Investment Project
Date: Thursday, 01 October 2009
Reference: PAC 02/09/10
Poor project monitoring; a worrying lack of transparency; and fundamental lapses in the appraisal of an Industrial Development Board (IDB) backed project meant it yielded few benefits for the taxpayer. That’s the key finding from a Northern Ireland Assembly Public Accounts Committee report, published today, on its review of assistance to Valence Technology.
Speaking at the launch of the report, Paul Maskey MLA, Chairperson of the Committee, said: “ The Committee has profound concerns about how the IDB handled the Valence project. The widespread nature and extent of the shortcomings, which occurred over a 14-year period, mark this as one of the most disturbing cases that this Committee has examined.
“The Committee is particularly disappointed that well-established procedures designed to protect taxpayers’ money were repeatedly ignored, and important lessons from earlier failures were not taken on board.”
The Committee found that over the nine-year period to 2003, there were several critical points at which the IDB should have called a halt to the project for re-appraisal and, if necessary, either re-negotiated the contract, or terminated the project. However, on each occasion, the IDB failed to do so and continued to provide funding.
In March 2001, the IDB agreed to increase the grant from £5 million to £11 million. This was despite significant cause for concern. Valance’s losses amounted to some $250 million (£176.18 million). Manufacture cost $57 per battery but the selling price was $12. And days after receiving £3.9 million of the raised cap, Valence announced 320 redundancies at Mallusk, leaving only 97 workers in the plant.
Mr Maskey said: “Job creation levels at Valance were very disappointing. Against a target of 660 new jobs by March 1998, employment briefly peaked at 417 in 2001, with average employment levels being much lower. Moreover, a very substantial proportion of the workforce comprised agency staff rather than permanent workforce, due to the uncertain future of the project. The Committee was also disappointed to learn that only around one quarter of the Valence workforce came from areas of economic and social disadvantage.
“ This report is an indictment of a management culture within IDB which acquiesced in ignoring the rules, ignored crucial lessons from earlier projects and circumvented its own control process. It is clear that, from beginning to end, there were serious lapses at a senior level in IDB’s handling of the project.
“However, the Committee recognises that none of the current senior management team in the Department of Enterprise, Trade and Investment and Invest NI was involved in the appraisal and management of this project. We note the assurance from the Department that lessons have been learned. The credibility of this assurance is crucial if Invest NI is to earn the confidence of elected representatives. The recommendations in this report are intended, therefore, to reinforce the process of cultural change and underline the key lessons which the Committee expects Invest NI to have taken on board.”
Notes to Editors:
1. In 1993, IDB offered Valence Technology a package of capital and employment grants of over £27 million, together with a factory investment of almost £5.6 million, to establish a new large-scale facility to manufacture batteries using a new lithium based technology.
2. The report examined the 14-year history of the major inward investment project, handled by the former Industrial Development Board (IDB) from its offer of funding in 1993, through the company’s subsequent relocation to China in 2003, to the completion of clawback in 2007. Only £5 million of the £15 million invested was recovered by IDB.
3. Standing Orders under Section 60(3) of the Northern Ireland Act 1998 have provided for the establishment of the Public Accounts Committee (the Committee). The main statutory function of the Committee is to consider accounts and the reports by the Comptroller and Auditor General for Northern Ireland (C&AG) laid before the Northern Ireland Assembly.
4. The C&AG is head of the Northern Ireland Audit Office (NIAO) and is empowered to investigate any area of expenditure and has a statutory right of access to all files and papers in Departments and public bodies.
5. The PAC Committee members are:-
1 With effect from 04 March 2008 Mr Thomas Burns replaced Mr Patsy McGlone.
2 With effect from 20 May 2008 Mr Paul Maskey replaced Mr John O'Dowd.
3 With effect from 1 October 2007 Mr Mickey Brady replaced Mr Willie Clarke.
4 With effect from 21 January 2008 Mr Ian McCrea replaced Mr Mickey Brady.
5 With effect from Tuesday 27 May 08 Mr Jim Wells replaced Mr Ian McCrea.
6 With effect from Monday, 15 September 08 Mr Jim Shannon replaced Mr David Hilditch.
7 With effect from Monday, 15 September 08 Mr George Robinson replaced Mr Simon Hamilton.
8 With effect from 29 June 2009, Mr Patsy McGlone replaced Mr Thomas Burns.
9 with effect from 18 September 2009 Rt Hon Jeffrey Donaldson replaced Mr Jim Wells.
10 with effect from 18 September 2009 Mr David Hilditch replaced Mr George Robinson.