'Potential conflict of interest' after minister backed firm

An ex-minister had a potential conflict of interest when she approved £3.4m of support for a Swansea firm which later went bust, a former watchdog on standards in public life has claimed.

In 2013 and 2014 Edwina Hart decided to support Kancoat despite being told it had a "weak" business plan.

Sir Alistair Graham said possible jobs for her constituents led to the potential conflict.

Welsh Government said the support was "consistent with the ministerial code".

It said this was because the company was based outside the minister's constituency.

Mrs Hart, who stood down at the last election and was previously AM for Gower as well as the Welsh Government economy minister, declined to comment.

Kancoat, which was based at the old Alcoa factory in Waunarlwydd, was set up to coat metal used to make food cans and other products.

It was based less than half a mile outside Mrs Hart's Gower constituency.

A Wales Audit Office report revealed the company owes the government £2.6m - it created 12 jobs but ran into difficulties when it struggled to maintain its supply of steel.

Sir Alistair, who chaired the UK's Committee on Standards in Public Life from 2004-7, said: "Paragraph 4.4 of the ministerial code urges ministers to take 'particular care' to avoid any conflict of interest.

"Given the minister's constituency as an assembly member is next door to where Kancoat is based, her constituents would be likely to benefit from any new jobs created.

"She was therefore facing a potential conflict of interest, or a perception of a conflict of interest, between her role as a assembly member and her role as a minister.

"The code of conduct for ministers makes it plain that ministers have to take particular care to avoid placing themselves in a potential conflict of interest or even a perception of a conflict of interest.

"It's important that ministers can stand above any decision and not be conflicted by possibly having a political interest as an assembly member."

Kancoat created 12 jobs but ran into difficulties when it struggled to maintain its supply of steel

Paragraph 4.4 of the ministerial code, which sets out standards for ministers' conduct, states: "Where ministers have to take decisions on their own portfolios which might have a particular impact on their own constituencies or electoral regions, they must take particular care to avoid any possible conflict of interest.

"Where ministers are uncertain about whether a conflict arises between their ministerial and constituency/regional responsibilities they should consult the first minister, for a decision as to how the business is to be handled."

Between May 2012 and February 2014, Kancoat was given a mix of loans and grants, totalling £3.4m, by the Welsh Government, in decisions signed off by Mrs Hart.

The Welsh Government's own financial due-diligence reviewer raised concerns about Kancoat's financial projections in February 2013.

The review said Kancoat's business plan "appears weak and inconsistent" and the project was identified as high risk.

Despite this Mrs Hart:

• Approved a grant of £778,000 in March 2013

• Signed off a £500,000 grant and £800,000 loan in August 2013

• Approved a £200,000 grant in November 2013

• Approved a £500,000 commercial loan in February 2014

The company went into administration in September 2014.

A request for support had previously been turned down by the government's investment arm Finance Wales due to an "unacceptably high" risk.

The firm was given £3.4m over two years by the Welsh Government

A Welsh Government spokesman said: "Where ministers have to take decisions on their own portfolios which might have a particular impact on their own constituencies or electoral regions, they must take particular care to avoid any possible conflict of interest.

"In this case, the company concerned was not within the former economy minister's constituency.

"The decision she took was therefore consistent with the ministerial code."

The Welsh Government previously said the decision to support Kancoat was based on projections that more than 30 jobs would be created.

It also said it had since reviewed its procedures and made "a number of key changes".

Welsh Conservative economy spokesperson Suzy Davies said: "We certainly need to find out, bearing in mind it's such a borderline case, if she spoke to the first minister about this.

"If she'd exercised good judgement she certainly would have."

The Welsh Government declined to add to its earlier statement.