Welsh government still paying loans for 1970s Newtown homes

Loans are still being paid by the Welsh government for a 1970s housing development in Powys, BBC Wales has learnt.

£11.6m is still owed for the homes in Newtown with responsibility inherited from the old Development Board for Rural Wales (DBRW).

The Welsh government says it cannot repay the loan early, before 2041, due to big repayment penalties.

Plaid Cymru leader Leanne Wood called the situation an "absolute scandal".

In the 1970s, the Mid Wales Development Corporation and its successor the DBRW funded a huge house building effort in Newtown by borrowing millions of pounds from a body called the National Loans Fund as part of a big push to double the population of the then new town through a huge construction programme.

But many of the loans were over a period of around 60 years and often at an interest rate in excess of 14%.

By the beginning of the 1990s the loans amounted to almost £20m.

But the DBRW no longer exists and its responsibilities - including any outstanding loans - are now the Welsh government's.

It has emerged that in the next financial year the Welsh government is still likely to owe £11.6m and it is due to keep on paying until 2041.

The houses have long been signed over to the council and a housing association, and many have been sold into private ownership through the right-to-buy scheme.

Speaking to the BBC Sunday Politics Wales, Leanne Wood said long-terms loans were problematic.

"This is the problem when you take out long term loans is that future governments can't be held responsible for what previous governments took out," she said.

"The legacy of the housing project in Newtown is absolute scandal. The amount of public money that has gone into that and there's no public asset at the end of it.

"What we've been basically doing is public funding private home ownership and that's clearly unacceptable".

Local Conservative assembly member Russell George said the right decisions were made at the time.

"I think it is a very strange situation where the government is paying off a loan of assets it no longer owns," he said.

"But whether these houses now are either in public or private ownership they were needed at the time and they're needed now.

"The lessons for future Welsh governments is that they need to be responsible for taxpayers' money but also need to work with private partnerships to support infrastructure projects".

The Welsh government says it tried to pay off the loans but the repayment rules would have made it too costly.

It said high interest rates were typical of the time and are much lower now.

And it added that future government borrowing will only be undertaken when the investments represent long term value for money.

'Careful in negotiations'

The Welsh government is set to get some limited borrowing powers and it is exploring other ways of paying for key projects like new roads.

Earlier this month, ministers announced a new scheme which would see it setting up a body to borrow £300m from the private sector to fund improvements to part of the A465 heads of the Valleys road.

It uses private money but unlike the private finance initiative (PFI) - another form of public private partnership to fund big projects.

Gerry Holtham, a Welsh government special adviser, said there is more in it for them and the public.

"There's a limit in the profit that private companies can make and if they make a surplus profit then that's shared back with the government. We think it's a good way to bring private capital in but ensure that the public sector gets a good deal".

Mr Holtham added: "It's very important therefore to be careful in negotiations and also to make sure that the projects you're spending it on are really worthwhile for the economy because you will be paying for them".

There is more on this story on BBC Wales Sunday Politics at 11:00 GMT.