Wednesday 18 December 2013

A toxic marriage

Welsh regional rugby is in crisis, and the four regions have now called for an independent inquiry into the way in which broadcasting and competition revenues are distributed. On top of that, the Scarlets have their own separate headaches, with the BBC reporting in some detail on the club's relationship with Carmarthenshire County Council.

The BBC report is important because its findings, carefully researched and fact-checked, bear out what critics of the council's deals with the club have been saying for years, only to be dismissed by senior figures in the council as the imaginings of a hardcore of malcontents.

The first part of the BBC story deals with the likelihood that the council has broken EU rules on state aid with the millions its has poured into the Parc y Scarlets venture. A formal complaint has now been made to the EU Commission which has said it will investigate.

The Commission has also confirmed that the council has never provided it with information on the various transactions.

For its part, the council is adamant that the legal advice it took back in 2007 concluded that the rules on state aid did not apply to the Parc y Scarlets scheme, although it has consistently refused to disclose what that legal advice was, and it has also refused to comment on whether it has sought legal advice on the matter since 2007.

In the worst case scenario, the Commission could force the council to demand repayment of the millions its has provided to the club. The problem with that is the club is nowhere near able to repay, and it is currently only able to stay afloat thanks to annual cash injections and debt write-offs.

The Chief Executive of Carmarthenshire County Council, Mark James, arrived in Carmarthenshire in 2001 fresh from the Princess Royal Sports Arena in Boston. "It won't cost the taxpayer a penny", councillors were told there. The project was subsequently the subject of a damning report by the English Audit Commission, but by then Mr James was long gone and had started the ball rolling on Parc y Scarlets.

It seems that Boston Borough Council has so far had to pay out £6.2 million, and the bills are still coming in. Compared with Carmarthenshire, however, Boston has got off lightly.

Of course, it takes more than one to tango, and it would be wrong to apportion all the blame to Mr James. Senior councillors in Carmarthenshire, several of whom still run the council, as well as senior figures in the Scarlets boardroom all played their part.

Back in 2004 the Parc y Scarlets deal was being finalised. "It won't cost the club a penny", they were told. Months later when more detailed costings had been worked out, the bill to the club was £6.2 million. Eventually the club contributed over £7 million, with the council funding the balance of £18.3 million.

Prior to that the club had owned its old home in Stradey Park. The club's nightmare was only just beginning.

Hindsight is a wonderful thing, but there was no shortage of warnings back in the period between 2004 and 2007. The council commissioned a report from Deloittes which listed all of the risks involved. The siren voices were all ignored.

What has happened since then is a spiral of increasingly bizarre deals and implausible claims, some of which have bordered on being pure fiction. Here is just a small sample:

  • The land on which the stadium was built had no value.
  • The land recently sold to Marstons was of no use.
  • The recent debt restructuring was "a better return than any other commercial investment" (Council press release)
  • The debt restructuring meant that the council was better off (after interest on a loan to the club was cut from 7% to 4%). The BBC report reckons that this has cost the council around £800,000.
  • "We have not given the club any money" (Western Mail article today), referring to the Marstons deal in which the club received around £600,000 of the £850,000 of the council-owned land.
  • Henry Davidson, the developers of the Eastgate complex in Llanelli, had concerns over the plans to build a pub next to Parc y Scarlets, we have been told, and so persuaded the club to open a bar in Eastgate, even though the club had no money to pay for it.
  • It was the Scarlets who "found" Marstons and so reaped a £30,000 finder's fee.
  • The Scarlets are contributing around £16 million to the local economy each year, according to a report commissioned by the council and the club. To put that into perspective, the Welsh Government recently estimated that the new national coastal path had attracted around 1.6 million visitors and contributed £16 million to the national economy in its first year.
What is not in doubt is that the Scarlets are important to Carmarthenshire and Welsh rugby, and nobody wants to see the club go down. It is also much too late to turn the clock back and undo the catastrophic damage the Parc y Scarlets venture has done to the club.

Whatever happens, and long after some of the current movers and shakers have moved on, the council and the sport will be left picking up the pieces for years and probably decades to come.

There is still a cross party consensus in favour of the Scarlets, but the shabby deals and ludicrous claims made by the council mean that the public's patience is starting to wear thin.

The best thing that could happen to the club would be for the people who backed the Parc y Scarlets scheme to accept responsibility and step down, with an open and honest cross party initiative to work out a bold new solution to safeguard the club's future, while removing the council from further involvement, even if that means further write-offs and losses.

Cllr Jeff Edmunds' recent decision to break ranks and disclose details of the Marstons deal is certainly a step in the right direction.


Anonymous said...

If every Councillor who voted for the 2007 finance deal stood down, the front benches of all 3 political parties would be devastated.It was a recorded vote and all the current group leaders thought it was a great deal at the time and all groups voted for it almost unanimously.
Notable absentees at the 2007 vote were Tegwen Devichand and current Llanelli AM Keith Davies who attended the meeting, went for lunch and stayed away. No Plaid member voted against it, but some independents [no longer Councillors] and 3 labour members did, Councillors
Eryl Morgan, Peter Cooper and Bill Thomas had the guts to say no.
There was massive pressure on all the Councillors "to save the Scarlets" and by all accounts very heavy briefings to the senior Councillors and group leaders by officers to persuade them to take the risk.
The big question is at what point do these people decide that enough is enough and to cut their losses?
The council's official position is that all is well and in theory they could toss the Scarlets another bone tomorrow!

Cneifiwr said...

Thank you Anon. As I said in the piece, I think there is still a cross party consensus in the club's favour. Whether the public will buy it for much longer is another matter - the BBC report contrasts the support being given to the club with the cuts facing ordinary people wanting to take part in sport, rugby included.

There is no doubt that a lot of councillors were persuaded into going along with the plan, but only a few had their hands on the levers along with a small number of senior officers.

If the Scarlets is to have a future, the first step will be to recognise that there is a problem, and those who sold the plan and continue to spin fairy stories can have no part in sorting out the mess.

Anonymous said...

It's shame the team is not called Llanelly or Sir Gar, to my mind at least the area would get some sort notice if that were so.
We do not call the Welsh team TEAM HI HO SILVER or TEAM THREE FEATHERS.

Anonymous said...

Or maybe "James United"

Anonymous said...

It seems to me that Cllr Caiach has referred the question of possible EU illegality to the European Commission out of frustration arising from the inability of elected councillors to get straight answers from the Pyongyang-like mandarins (if that’s not mixing my metaphors) in County Hall. I doubt she is worried that other clubs in the EU are not operating on a “level playing field” in terms of business competition.

From my viewpoint it seems that the Council has got completely out of its depth in supporting the Scarlets. Perhaps the attraction has been that senior officers and Council members get a huge amount of political and personal kudos being seen as big supporters of the club, but also, effectively, as uncritical and undemanding financial backers. I expect that they and their posh guests are welcomed with open arms every time they strut through the VIP entrance of Parc-y-Scarlets on the way to the hospitality boxes. Maybe I’m wrong – perhaps no councillor or officer has ever received any hospitality from the club – perhaps someone can tell me.

But the whole support package seems like a massive vanity project, and the political message to more junior officers may well have been “Get this done – don’t quibble about technicalities or penny-pinching”. Even if all was done with absolute due diligence, I wonder whether Carmarthenshire officers, or even the District Valuer’s staff, had (with all due respect) sufficient experience of complicated large-scale commercial transactions to match the expertise and negotiating skills of the top-gun chartered surveyors and lawyers who were no doubt engaged to act on behalf of the Scarlets in drawing up these deals.

It’s easy for an anonymous armchair keyboard-warriors to make all sorts of wild accusations and suggestions of impropriety or incompetence. But the facts in this case are so incredible, and the amounts of public money at stake are so great, that the public deserves a better account than the Council has offered so far. The refusal to share even a 6 year old legal opinion with one of its own councillors is contemptuous; the public spotlight now brought to bear on this matter is of the Council’s own making.

Jac o' the North, said...

One aspect of this saga that has not been mentioned is that many fans refused to make the emotional switch from Stradey. With the result that attendances at Parc y Scarlets are very poor. Making the region ever more dependent on public generosity.

So it could be argued that the move from Stradey was a disaster all round.

Something else that occurs to me is that the region was due to make a lot of money from the new houses built on the old Stradey Park. What's happened there?

Anonymous said...

Scarlets reality check not blank cheque

Cneifiwr said...

Jac, that is another huge subject.

There are several blogposts about Stradey Park on this blog. Unfortunately the Blogger software is playing up, and so the search facility does not currently work, but you can Google it.

Anonymous said...

That rugby club has got somehow to distance itself from
Carmarthenshire county council or it has had it.The
Council is despised by nearly everyone I know,their
Support will never increase the way things are.

Anonymous said...

Anonymous said...

Thanks for the link, Anon 19th 04:39.
I was at this particular farce. Critics of the proposal were shouted down. I perceived a general environment of adulation, which in fact is hinted at in the line from the minutes themselves: "Many members paid tribute to the officers involved in preparing the report and for the opportunity of receiving a presentation from the Scarlets representatives". FFS.