Auditors examine Circuit of Wales public money awards

The Wales Audit Office is examining how public money was awarded and spent in connection with the £425m Circuit of Wales scheme, BBC Wales has discovered.

The company behind it was given a £2m grant and £7.35m bank loan guarantee to help it progress plans and find private investors for the Ebbw Vale racetrack.

The scheme has stalled because the company has yet to find all the private investment it needs.

Monmouth MP David Davies has called for a halt on further money for the scheme.

Mr Davies, chairman of the Welsh Affairs Select Committee, told BBC Wales' Week In Week Out programme he wanted a halt on any public funding until the Wales Audit Office completed its inquiries into a dossier of evidence he received from a whistle blower.

It raises concerns about how public money has been used by the Heads of the Valleys Development Company which was set up to deliver the project by developer Michael Carrick.

Mr Davies said: " I think they should say to Michael Carrick 'it's down to you if you have private investors out there willing to back the scheme, bring them forward let us know who they are'.

"At least £9m has gone into this scheme of public money and I think that it's time they started to find out what's happened to that money and not put any more money into it."

A spokesman for the Auditor General for Wales, Huw Vaughan Thomas, said he was examining the use of public money on the project to date and certain aspects of the Welsh Government's support for the scheme.

The development has promised to bring 6,000 jobs to Blaenau Gwent and to boost the local economy by £50m a year with the construction of the state of the art racetrack, business park and hotels which the company says will attract 750,000 tourists a year.

The racetrack would host major events such as the Moto GP

Mr Carrick confirmed almost £23m worth of work had been done on the scheme by private companies and professionals who are working at risk - which means that they have yet to be paid, and unless the circuit is a success, they may not be.

In the last two years Mr Carrick has said he had investors lined up but refused to name them. When challenged about this he now says the company is delivering the project in a different way in order to attract different, longer term investors.

The Welsh Government awarded the company a £2m development grant and has confirmed that in 2014 it knew the company did not have any confirmed investors when it underwrote the £7.35m bank loan which has since been used to pay the company's debts.

The Welsh Government says it did so in line with its policies and procedures and that it can seek recovery of the £7.35m but that as yet it has not done so.

Week In Week Out found one firm, Aventa Capital Partners Limited which is owned and run by Mr Carrick, has been paid £967,000 by the Heads of the Valleys Development company to help find investors.

Mr Carrick was asked why Aventa paid for around £35,000 worth of gardening work to be carried out on Mr Carrick's mansion. He said it was an administrative error and an office expense. He also refused to go into detail about what the £967,000 had been used for, saying it was for services.

In April Mr Carrick asked the Welsh Government to completely underwrite a £350m deal with investors Aviva. The economy minister at the time, Edwina Hart refused, saying it was too big a risk for the public to take.

Mr Carrick went back to her successor Infrastructure and Economy Minister Ken Skates in July asking for 75% of the costs and again was told to go and find more private sector money in order to reduce the risk to the public purse.

It is understood the company is now asking for 49% of the costs to be underwritten. This would mean that if it was a success the Welsh Government would receive approximately £4m a year for the next 30 years.

But if it failed once the circuit is built, it would be liable for losses of up to £210m which would have to be paid over a 35-year period.

Two weeks ago the company announced a merchant bank, Kleinwort Benson, is now helping it look for another £100m of private investment from specialist investors.

It has said it is confident it will find the money, but without underwriting from the Welsh Government the scheme may not go ahead.

• Week In Week Out "A Safe Bet?" is on BBC One Wales at 22.35 GMT on Tuesday 1st November.