west*wales*news*review

West Wales News Review — analysis with a sustainability slant

Housing Benefit Hides a Scandal

£39 billion is a high cost for exiting the EU.

Yes it is, almost £1,500 for every household in the UK.

But every two years, we pay more than that just in Housing Benefit.

The annual Housing Benefit bill in 2016-17 was £23.4 billion, according to the Office for Budget Responsibility. Welfare caps and the move to Universal Credit have cut payments, in 2017-18 to about £21.8 billion. The total for the two years is £45.2 billion.

So over 24 months, Housing Benefit rent subsidy payments are equivalent to each UK household shelling out more than £1,650.

Housing construction in Llanelli back in 2013 — but the way the housing market operates contributes to ever-widening inequalities.

Housing Benefit, dating from 1982 when Margaret Thatcher was Prime Minister, had the intention of helping families to afford to rent a decent home. Payments reached a peak in 2015-16. Since then, and against the background of 2016’s referendum result, government has been determined to cut obligations to make welfare payments.

There are 4.6 million households receiving Housing Benefit. It works out at an average of £4,745 each. That’s equal to almost 30% of the gross pay for a 40-hour week at the minimum wage of £7.83 per hour for adults aged 25+. It tells us that the minimum wage is too low for people to rent a proper home. Cuts to the benefit have led to more and more people sleeping on the streets and living in sheds, just like in a poverty-stricken Third World economy. If we didn’t have draconian planning laws, shanty towns would be appearing in our cities. We prefer to try and hide poverty, but we have reached the point at which that is no longer possible, and further cuts in Housing Benefit will make the scandal even more obvious and painful.

Margaret Thatcher’s decision to sell council houses is partly to blame. The associated decision to prevent councils from using sale proceeds to build more homes for rent is even more to blame. Measures like ‘Help to Buy’ have increased revenues for the major private housebuilders, evidenced in, for example, the £75 million bonus paid to Persimmon (now ex) chief executive Jeff Fairburn.

It would take a worker toiling 40 hours a week on the adult minimum wage 4,605 years to reach £75 million. This figure shows just how skewed against lower-income people the UK has become.

Housing Benefit has been a curtain shielding the impact of economic inequality from the wider public. In the immediate future, though, slashing benefits further cannot be the answer, unless we want more slums, more crime, more corruption, those companions of extreme inequality.

To start to redress the balance for housing, which must be done, we need a change in compulsory purchase regulations to make land cheaper – much cheaper — for local government and non-for-profit organisations to acquire.

Even in Carmarthenshire, where the local authority has taken advantage of Welsh devolution to restart a council housing programme, the open market in land is a painful barrier to try and cross.

The cost of providing housing has to reduce, and incomes need to rise, to create a new and more equitable balance.

PDR

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United Nations Condemns Poverty in Wales

Professor Philip Alston’s new report for the United Nations on poverty in the UK* is damning, and statistics back it up.

Specifically about Wales, he wrote:

“Wales faces the highest relative poverty rate in the United Kingdom, with almost one in four people living in relative income poverty. Like the rest of the United Kingdom, employment has not proven to be an automatic route out of poverty in Wales. In-work poverty has grown over the last decade, despite considerable improvement in the employment rate. Twenty-five percent of jobs pay below the minimum wage, and low-paid, part-time or insecure jobs are often disproportionately taken up by women, due to difficulties in balancing work and caring responsibilities.

“Faced with these challenges, the Welsh Government has determinedly shifted its focus to increasing economic prosperity and employment as the gateway to poverty reduction. A poverty-specific action plan and the post of the Minister for Communities and Tackling Poverty were scrapped in 2017, in favour of adopting a “whole Government” approach to poverty reduction. The new Prosperity for All Strategy, however, has removed the strategic focus on and the Ministerial responsibility for poverty reduction, and lacks clear performance targets and indicators to measure progress and impact.

“In the absence of devolved power over social security benefits, the Welsh Government’s capacity to directly mitigate the reduction in benefits is limited, thereby shifting the burden to low-income households. There is a wide consensus among stakeholders that the benefit changes are one of the structural causes behind the increase in poverty, rough sleeping, and homelessness in Wales. Parliamentarians and civil society voiced serious concerns that Universal Credit may exacerbate the problem, particularly in light of the Welsh Government’s inability to introduce flexibilities in its administration, unlike its Scottish counterpart.”

Plaid Cymru’s central answer to problems like this is Independence, but I see an inconsistency in wanting to exit the UK but remain in the European Union, an entity which struggles to be flexible, has improved workers’ rights but caters carefully for transnational corporations, frowns heavily on state support for the economy, and is managed by unelected officials. Not enough open democracy there, in my view. True independence means freedom to create and apply new policies, to develop a more self-sufficient, resilient economy, and to build a society fully accepting the limitations imposed by climate change.

The immediate blow to Wales, if the UK leaves the EU, would be financial. The EU is sending some £2 billion to Wales between 2014 and 2020, especially to support West Wales and the Valleys, the poorest regions in Northern Europe (and still poor!). Without the UK in the EU, that quantity of money would almost certainly be unavailable, because the UK is the third largest contributor to the EU after Germany and France, paying in 13% of the total, more than £1 in every £8 in the budget. Wales in, England out, would not solve this issue because the EU’s budget would shrink. The populations of Spain, Portugal, Italy and Greece, to name but four of the financially challenged, are hardly going to react happily if told to fill the budget hole left by a departing UK.

What could other political parties do? Labour’s long administration within Wales has achievements (especially during the Labour-Plaid coalition of 2007-2011) but has since become lacklustre, I would argue. The Conservatives offer a Tory-light agenda to suit the Wales electorate, but are unlikely to focus on reducing inequalities. UKIP’s presence in the Assembly/Senedd reflects the fact that in 2016 Wales voted to leave the EU. Beyond that, what does UKIP stand for? As for the LibDems, Education Minister Kirsty Williams is talented and hard-working, but their sole representative in the Assembly.

The statistics for households’ income and expenditure in the UK reinforce Professor Alston’s findings. Figures in Family Spending for 2016-17, from the Office for National Statistics, show that four households in ten struggle and often fail to make ends meet. These households have disposable incomes from nothing to under £473 a week, and little capacity to save.

Consumer credit in the UK soared 13% in the year to September 2018, to £215.198 billion outstanding, records the Bank of England’s Bankstats. That’s over £7,900 in outstanding consumer credit per household, at a time when interest rates are low. It will be fiendishly difficult to repay. Mortgage debt and consumer credit together are equivalent to £59,000 for every household, not just the 24% with mortgages.

And Wales is poorer than the UK as a whole.

Meanwhile, the recent chief executive of Persimmon Homes, Jeff Fairburn, received a bonus of £75 million for ‘success’ resulting largely from the UK Government’s ‘Help to Buy’ scheme for new homes, which is nothing more than a transfer from us the public into the private sector.

Mr Fairburn has since resigned, but the system which allows mega bonuses of this size tells us why four households in every ten in the UK, and a quarter of households in Wales, are financially insolvent at worst, insecure at best.

Solving this systemic failure requires fundamental reconstruction, not merely a little tinkering at the margins.

 

  *Statement on Visit to the United Kingdom, by Professor Philip Alston, United Nations Special Rapporteur on extreme poverty and human rights.  

London, 16 November 2018

 

PDR

 

One Flight to New York Burns Our Annual Personal Carbon Budget

Are you annoyed at appalling weather but don’t think it’s due to climate change? Do you cheer yourself up after Christmas by planning an exotic long-haul holiday?

I know people who say “All the time I can fly, I will,” on the basis that climate change is nothing to do with us, and if planes are going anyway, what’s the harm in getting on board?

Flying is, though, a huge contributor to our carbon footprint, about one tonne of carbon dioxide equivalent (carbon dioxide and other harmful emissions) for every FOUR HOURS. So if you are a family of five on the 8 hour 15 minute flight from London to New York, total CO2-equivalent emissions are 10.31 tonnes. If you all come back, 20.62 tonnes – over 4.12 tonnes each!

The sustainable level per person PER YEAR is about 1.5 tonnes. That’s a little bit more than the average for people in India.

The lifestyle changes we need to make are so out of kilter with dominant cultural norms as to seem extreme.  I think it’s extreme not to make changes, but although I do not fly, my progress towards a low carbon footprint is slow.

My footprint, according to the informative carbonindependent.org*, is 8.5 tonnes of CO2 equivalent. This is substantially less than the UK average of over 13 tonnes, but it’s still vastly more than 1.5 tonnes. To reach that, I would have to go without my economical (55-60mpg) almost 12-year-old Fiat (1.45 tonnes). Electric car? Currently not practical ten miles from the nearest town, due to lack of charging points.

No more new purchases of anything other than food (saving 2.19 tonnes). Become a vegan (save a further quarter of a tonne). If I did all this, and expanded fruit and vegetable production in the garden, I would still be emitting over 4.5 tonnes a year, and I wouldn’t be leaving the village much, just occasionally by bus. And bus services are vulnerable to further cuts in public subsidies.

The big problem for our household is heating, the bulk of my remaining emissions. The house began as a small row of tiny single-storey stone cottages. An upper storey of brick was added, and then a kitchen and bathroom two-floor extension of rendered block. The roof is tiled, and the heating is bulk LPG (liquefied petroleum gas). Fossil fuel. The thermostat is set on 17 degrees, which is not exactly tropical, but it really needs to be set lower still.

The fossil fuel for heating will have to go before I come anywhere near a sustainable level of emissions, but that change is likely to alarm economists who push for economic growth.  Not buying new stuff, not travelling, not flying, has minimal impact on economic growth if it’s just me, but the warming world requires us all to make similar reductions.

If we are all buying less, consuming less, we are creating more unemployment. At least, we are if we opt to keep the present economic model (which requires growth to function). So we are in a real bind. Just think what we have monetised to create the illusion of continuing economic growth — caring for other people’s children and elderly relatives, and including estimates for prostitution and drug trafficking  in national accounts, for example.

In a de-growth world there would still be more than enough work for everyone – such as in nursing, teaching, caring, farming, repairing, inventing – but the majority of these activities do not generate profits. There are a number of partial and local answers to this, including barter, time banking and local currencies, but no national or international frameworks into which they can fit.

Economics as usual means we will be incapable of ever living within the constraints of our one planet, but we cannot over-shoot for long without bringing about a collapse far more painful than an ordered low-carbon life.

The writing is on the wall. But will enough of us choose to read it?

PDR

*The carbonindependent.org website was launched in February 2007 by Ian Campbell and Margaret Campbell, and updated in November 2015.

Septic News for Homes off the Sewer Grid

People living in the countryside of England and Wales often have to shoulder the whole burden of drainage from their home because there are no sewers nearby, and there is no obligation on water companies to provide them.

In addition, many rural residents will have to carry out costly improvements before January 1st 2020. How do you know if you will be affected?

There has not been much advertising or public information about the Environment Agency’s General Binding Rules for off-mains drainage in England and Wales, which were quietly announced in 2010. Of course, ignorance of regulations is not a defence if you break them!

Around one million homes in England and Wales are not connected to the sewer system, and most of these are likely to have septic tanks. From January 1st 2020, or earlier if the property is sold, it will be illegal (definitely in England) for a septic tank to discharge into any watercourse. If your tank does this, you will have to replace it with a new drainage system, costing thousands rather than hundreds of £s. Needless to say, there is no financial help for this. The official view seems to be that if you cannot afford to upgrade, you should not be living off the sewer grid.

The General Binding Rules are good for the environment, but ignore the repercussions if people lack the funds to upgrade, and in addition those who do not comply face potentially unlimited fines. Does the prevention of sewage contamination trump the rights of financially challenged households to remain in their homes? Is this an attempt to force the less-well-off out of the countryside, a modern version of the Highland Clearances or the Enclosure Acts? It seems wrong to me that it appears no pot of money has been put aside to help those on low incomes to make the mandatory changes.

If you are within 30 metres of a mains sewer, you must connect to it. For homes further away, If you have discharges of less than 2,000 litres of wastewater per day, you can use a septic tank or a sewage treatment plant with a drainage field. Over 2,000 litres a day, and up to 5,000 litres, you cannot have a septic tank but must use a sewage treatment plant.

Drainage firm WTE Ltd in Pocklington, East Yorkshire, winner of the Best Sustainable Sewage Treatment Equipment Manufacturer in the UK Award in 2017, has guidance on the costs involved.

If your septic tank discharges to a water course, you have to provide a ‘drainage field’ instead, which requires you to have a large lawn or area of land – around 100 square metres, I have been told – into which soakaway pipes are laid. A new septic tank may set you back around £800 to £1,200 and could be about £1,500 to put in. The big expense is the drainage field, some £5,200 for 100 metres of drains, according to WTE. That gives a total of £7,500 to £7,900.

Then there are annual costs of some £150 for emptying the tank, and putting money by to replace the drainage field after around 10 years. That’s about £520 a year at current prices.

Alternatives to septic tanks are more complicated. An extended aeration sewage treatment plant costs about £1,850 to £2,400, WTE estimates, and between £600 and £3,000 to install. They can be drained into a ditch, so don’t necessarily need a drainage field. They need electricity to work, typically between a minimum of 50p and about £3.50 a week, but can be more for large households. They need to be emptied and serviced annually, for a total of about £200 to £250 a year more. Several suppliers promote these as the most cost-effective option, but the systems still demand up-front payments of about £2,500 to £5,400 or more.

A traditional sewage treatment plant is another possibility. This also requires electricity, comes at a pretty hefty price and needs either a drainage field or discharge to a ditch. The system will set you back about £1,800 to £3,200, installation will be £2,000 to more than £3,000, and if there is no adjacent ditch, a drainage field will be around £5,200. It will be easy to say goodbye to up to £11,400 or so. The annual maintenance cost can be nearly £1,000 — £100 to £400 for emptying, electricity of £80 to £180, and £100 to £375 for servicing.

A filter treatment sewage plant does not need electricity but has a total cost of some £4,500 to £7,500 to buy and install, albeit a relatively low annual maintenance cost of about £250.

A reed bed filtering system is a huge financial stretch for all but the super-rich, costing approximately £16,000 to install, according to WTE, and over £2,500 a year to maintain, on the basis of complete replacement every 10 years.

Then there is the old-fashioned cesspit, a large holding tank without any waste treatment, which typically can need emptying every four to eight weeks, depending on usage, and this service may cost £1,000 to £2,000 a year, or more.

New systems will need planning permission and building regulations approval – more costs – and upgrades have to be signed off as meeting building regulations.

There’s a lot of technical information online, definitely worth reading if you could be caught out by the General Binding Rules.

Whichever way you look at it, off-grid drainage is far more expensive than paying your water company to use the sewer grid. If your system in Wales must be upgraded but you cannot afford it, now’s the time to contact your Assembly Member. It is of course environmentally desirable to reduce pollution, and the new rules are beneficial in this regard. Even so, putting all the costs onto homeowners, regardless of their financial means, smacks of injustice.

Information from Natural Resources Wales, the successor to the Environment Agency here, reveals that the January 2020 deadline is not as definite as it is in England. This is confusing because the General Binding Rules apply both in England and Wales, but is not the only confusion arising from devolution.

Natural Resources Wales stresses, though, that every owner of a septic tank or domestic sewage treatment system in Wales must register with them straight away, i.e. before January 2020. Permits may require upgrades to be carried out, and in some difficult conditions owners may need to apply for a discharge permit, costing £125 currently. See here  for more details on how to apply, and here for decision-making guidance from NRW.

PDR

For more information, see for example http://www.hutchinson.co.uk/resources/ea-general-binding-rules 

Latest Wellness Village Wobble

Three of the six directors of Sterling Health Security Holdings Ltd, the private-sector company sourcing investment for the proposed Wellness and Life Science Village at Llanelli, have now resigned.

They are cardiologist Dr Phyllis Holt-Dickmann, Swansea entrepreneur Kevin Smith and former Carmarthenshire County Council leader Meryl Gravell. The appointment terminations of Dr Holt-Dickmann and Mr Smith were announced in September, and Mrs Gravell’s just last week, on November 6th.

Sterling Health Security Holdings, owned by Phyllis Holt-Dickmann and Franz Hermann Dickmann, is Carmarthenshire County Council’s private-sector partner in the £250 million ‘Wellness Village’ plans for low-lying Delta Lakes, on the coast at Llanelli.  The company is a resurrected version of the dissolved Kent Neurosciences Ltd, the county council’s original putative partner in the project.

The three remaining directors are Franz Dickmann, James Dickmann, and Rupert Knight Harrison.

Kevin Smith’s entry on the professional website LinkedIn says he is the founder or co-founder of six technology healthcare and wellbeing ventures since 2000. He attended Penlan Comprehensive School between 1975 and 1980, and then Swansea Institute of Higher Education, where he studied mechanical engineering. He did not serve on the board of Kent Neurosciences, but the Dickmanns did.

Sterling Health Security Holdings had a negative value of £137,722 at October 31st 2017, according to the published accounts, and the company is dependent on a loan from the directors.

The director who seems to specialise in finding finance is Rupert Knight Harrison, also managing partner of Tower Growth Management LLP, a small company started in November 2016 and showing a marginal operating loss of £4,019 in its first trading period, to December 31st 2017.

Rupert achieved the International Baccalaureate in 1978 at UWC Atlantic College, St Donat’s Castle, Llantwit Major, speaks German, has bachelor and masters law degrees from the University of London, and barrister experience at the Inns of Court School of Law.

So far, any major successes in attracting investment into the Wellness Village have not been publicised or quantified.

The Llanelli project was thought up before Hywel Dda University Health Board revealed its money-saving plans involving the removal of acute and emergency care from Withybush Hospital, Haverfordwest, and West Wales General, Glangwili, Carmarthen. Hywel Dda has overspent its budget by more than £150 million in the past three years, has both acute and chronic difficulties in attracting permanent staff, and is also a partner in the Wellness Village, alongside Abertawe Bro Morgannwg University Health Board and Swansea University.

Just a thought, wouldn’t it make better use of resources to invest in protecting the existing, under-funded health services in West Wales, instead of seeking to promote a speculative new venture?

PDR

Liquidators Hunt Down Destinations of Corran Cash

Investors’ heavy losses

Liquidators for Kayboo Ltd, the bust company originally set up to develop The Corran Hotel and Spa at Laugharne, Carmarthenshire, have identified 441 unsecured creditors, owed almost £11 million. The total amount lost by investors is reckoned to be around £17 million.

The liquidators’ costly work has been complicated by the cavalier financial practices employed by Kayboo.

Robert Dymond and Lisa Hogg, of Sheffield solicitors Wilson Field, reported this summer that there are “various investigation issues that the joint liquidators are currently reviewing, including the pre-packaged sale of the business, the dissemination of funds, potential misselling of the investments, and failure to register the property titles at the Land Registry”.

Investors in The Corran thought they were buying whole hotel rooms or fractions of rooms in a hotel undergoing major expansion, but a proposed development of holiday lodges was refused planning permission and hundreds of investors received nothing at all. (For more on the history, see for example here, here, here and here.)

The liquidators say they analysed more than 10 bank accounts of the companies and associated parties. ‘The companies’ refers to Kayboo and sister company East Marsh Operational Co Ltd, which ran the hotel side of the business.

 

“Highly complex and time-consuming task”

“It should be noted that the companies utilised a number of bank accounts that were not held in the companies’ names, which has in turn made the tracing of funds through the companies a highly complex and time-consuming task,” the liquidators reported. “Our analysis revealed numerous intercompany transactions and payments to connected parties and individuals.”

Those connected parties and individuals are not being named yet because “the investigations may lead to legal action and therefore there is limited disclosure of information in order not to prejudice any subsequent legal action”.

So far, the liquidators have traced £12.39 million of investors’ funds coming in to the numerous bank accounts. The figure excludes payments in by cheque because the cheque originators are not shown on bank statements.

The exotic travels of payments from investors included:

  • £2.276 million paid to “a corporate entity connected by way of common shareholders and directors”. That entity is now in a creditors’ voluntary liquidation. A director offered the explanation that ‘payments were paid to the company to facilitate the distribution of investor payments on behalf of the company’.
  • Another £1.884 million went to another connected corporate entity, also in creditors’ voluntary liquidation. Kayboo’s liquidators submitted a claim to the corporate entity’s liquidators, only to be presented with a counter-claim for £1.391 million for “legitimate commission agreements” outstanding when Kayboo was folded.
  • The liquidators also refer to “commission payments made to numerous other parties”.
  • £1.768 million went to a non-connected corporate entity also in creditors’ voluntary liquidation. This liquidator of the non-connected entity said the payments were genuine commissions .After considerable reluctance, this entity’s records were provided, but were “not as comprehensive as anticipated, given the level of transactions with the companies”. The next step was to be an analysis of bank accounts to try and determine if the funds received in were paid out to “any connected parties”.
  • A particular individual connected to Kayboo received £649,290. That individual proffered an entitlement to sales commission and said they were still owed around £500,000!

The money gushing to commission agents suggests that precious little was left to actually build the hotel. The whole venture appears designed as a money-spinner, but for its creators and not for investors.

Investors in fractions of hotel rooms were also paying for the administration of the companies set up to manage those fractions. The liquidators found £355,000 paid to one entity for administration of the fractional companies formed to manage leases of rooms in The Corran. This seems extremely generous considering that only THREE leases had been registered when Kayboo’s financial frailty resulted in its failure.

Kayboo made several other payments, detailed in the liquidators’ report, chiefly to entities “now subject to insolvency proceedings themselves”. The task of obtaining any redress for misled investors seems immense.  Apart from the rapid, apparently deliberate, syphoning away of investors’ monies, the liquidators’ forensic work is expensive, ranging from £500 an hour for directors and insolvency practitioners down  to £130 per hour for secretarial and support work.

 

Hotel bought back for £150,000

In October 2016 Keith Stiles, a director of Kayboo, managed to convince HBG Corporate Ltd of Preston, Lancashire, the insolvency practitioner that Kayboo chose, to let him buy the hotel back for just £150,000 in a ‘pre-packaged’ deal, through a new company, Glendore Real Estate Ltd, incorporated in February 2016. The directors in addition to Mr Stiles were Paul Manley and County West Secretarial Services Ltd, of which Mr Manley was also a director. Glendore now is at risk of being struck off the register of companies because its accounts have not been submitted. The original directors have resigned and the sole director currently is a Mr Paolo Di Petro. Plustocks Ltd, which took over the hotel operations from East Marsh Operational Co Ltd, was dissolved in April 2017.

Investors’ anger at Glendore’s super-bargain purchase was an important factor in their decision to oppose the decisions being made by HBG, and to secure alternative liquidators who are readier to listen to their concerns.  HBG appeared to be treating the insolvency as the failure of a hotel business, not as the failure of an unregulated investment scheme.

 

Money-losing pensions

Many investors put in money via SIPPs, self-invested personal pensions, or SSASes, small self-administered schemes for directors and companies. One of the names linking The Corran with pension investments is Rowanmoor, of Salisbury, Wiltshire, part of the Embark Group since July 2016. The major shareholder in Embark Group is Richard Wohanka, among whose directorships are Scottish Widows Group and several other companies within the Lloyds Banking Group, and other well-known active and defunct financial services institutions.

The name Rowanmoor has also cropped up in connection with fractional property sales by The Resort Group in the Cape Verde Islands, because the fees they charge have perplexed pension investors who are losing money on their illiquid and often nebulous purchases.

 

Who owns The Corran now?

James Brown, known as Jamie Brown, brought The Corran, then Hurst House Hotel, into the headlines for the wrong reasons when he was staying there in 2011.

Glasgow-born Jamie had apparently made large sums of money through property deals in Portugal and retired aged 36. He developed a cocaine habit which destroyed his nose.

He was arrested in December 2011 while driving a convertible Bentley. Police found cocaine hidden in the roof, and in Hurst House retrieved three unlicensed guns – a 9mm semi-automatic Walther PPI pistol, a 9mm Tula Tokarev semi-automatic pistol from Russia, and a rifle. There was also a stock of ammunition.

In September 2012, aged 45, he received a five-year prison sentence.

The Corran is at present in the hands of Corran Resorts Ltd, a new company dating from November 23rd 2017 and with a registered address in Riverside Business Park, Swansea.

The owner of Corran Resorts Ltd now, in October 2018, is a Mr James Brown, born in December 1966 and currently 51 years old.

 

PDR

Investors Fleeced in Financial Wild West

Lack of protection for individuals investing in new hotels and holiday resorts is a serious problem, emerging from a financial Wild West where it is unwise to rely on any law at all. Often investors are at the bottom of the pecking order and receive little, if anything, after everyone above them has taken a cut.

West Wales News Review has reported several times on the plight of investors in The Corran Resort and Spa, Laugharne, Carmarthenshire (here, here, here and here for example), who lost some £17 million net, and also on hotel investments in Wales sold by Northern Powerhouse Developments (here), including unbuilt properties in the Afan Valley where the site did not even have planning permission (here).

In many hotel investment schemes, people can purchase what they think is a fraction of a room or apartment.

Some key persons in The Corran saga appear in other complex fractional deals sold to private investors. One is David Bates, chartered accountant of Heswall, Wirral, Merseyside. Hundreds of fractional investment property companies were registered to Mr Bates’ address until this year, when there was a sudden, mass switch to Milestone House, Nursery Court, Kibworth Harcourt, Leicestershire, an address of tax consultant David Warren Hannah, founder of Cornerstone Tax Ltd.

David Bates is, according to Companies House, a director of only two companies currently instead of around 1,570 previously. That large number of mainly fractional property companies included Dunas Beach Apartment 107 Ltd.

Dunas Beach is a resort on Sal island in Cape Verde, an independent group of islands in the Atlantic just over 300 miles west of Senegal. Andrew Walton, who has contacted West Wales News Review, had thought his July 2011 investment in Dunas Beach Apartment 107 Ltd had purchased one-eighth of an apartment. The purchase was off plan as at that time the resort had not been built.

But Dunas Beach Apartment 107 Ltd seems to own nothing at all. The last published accounts, dated April 30th 2017, show it has no value and no assets. Neither does it have shares, therefore investors cannot own shares in it and cannot receive dividends. The company is limited by guarantee, a legal form generally adopted by non-for-profit organisations. If the company fails, its members are required to contribute only a pre-determined amount.

Companies House lists the controller of Dunas Beach Apartment 107 Ltd as Robert Jarrett. He is the founder of The Resort Group plc, a British man with a home in Gibraltar, where The Resort Group is registered. He founded the company in 2007 and on Sal bought land for two beach resorts, Tortuga and Dunas. The Dunas Beach resort opened in 2014, managed by Melia Hotels International.

Mr Walton says he was told verbally he would receive between 5% and 7% annually on his investment of £21,179.11, so between £1,059 and £1,482. Over seven years that would be between £7,413 and £10,374. A return of 5% to 7% would be excellent in today’s climate, but not so high as to flag up, automatically, a ‘too good to be true’ warning.

The reality is somewhat different, though  –  a loss of just on £1,045.

His investment is a SIPP, a self-invested personal pension. He was alerted to the possibilities of a SIPP investment in commercial property by Consumer Money Matters Ltd. This firm introduced him to Real SIPP LLC, owned by CIB (Life & Pensions) Ltd. Real SIPP sold him one eighth of what he thought was a hotel room, but which turned out to be membership of a company without any assets.

Consumer Money Matters went into administration in October 2015. Real SIPP was dissolved in September 2017 and CIB (Life and Pensions) in February 2018. Rowanmoor, part of the Embark Group, took over administration of Real SIPP’s portfolio, including Andrew Walton’s pension.

The gross ‘room revenue’ from Mr Walton’s ‘apartment’ has Melia’s operational costs deducted. Rowanmoor charges fees, and The Resort Group takes a cut. Dunas Beach Apartment 107 Ltd also charges a fee (although it does not appear to have any turnover at all).

The investor is right at the end of the line and in Mr Walton’s case, he is paying out instead of receiving any income.

He is not alone. The magazine FT Adviser reported on June 28th 2018 (‘Offshore investor returns eaten up by Sipp fees’) on the plight of a number of investors in property built for The Resort Group. They are making losses and unable to get their money back or sell their investment. Even if a marketplace in membership of fractional companies were established, a queue of buyers is unlikely.

Fractional property investments are not regulated, so it is definitely Buyer Beware. Investors may qualify for a portion of net income from ‘their fraction’ of a room, apartment or villa, but do not own any physical asset at all. They are probably presented with figures, but it is pretty much impossible for them to know if those figures are genuine.

In Mr Walton’s case, the fees charged by Rowanmoor are greater than the net revenue apparently due to him, so his pension investment has lost money and he does not know if he can ever recover his capital.

Comments on Trip Adviser indicate that the Dunas Beach resort is far from crowded. Reassuring noises from The Resort Group suggest they expect room occupancy rates and therefore income to increase, but they may be over-optimistic about the attractions of holidaying on a small island known for salt pans and moon-like scenery. Holidaymakers go for the beaches and sun – there’s not a great range of activities on Sal, which is less than 19 miles long and is under eight miles at its widest point.

Investors like Mr Walton, who were persuaded to put pension money into unregulated products divorced from actual assets, have a case to claim mis-selling. He contacted the Pensions Ombudsman in December 2016, and some months later was told an adjudicator would investigate. That adjudicator went on sick leave and by February 2018 had left, so Mr Walton had to start all over again, with no result yet.

As at The Corran, investors in Dunas Beach and hundreds of other fractional investments are confronted by opaque, obscure arrangements which appear deliberately designed to prevent oversight of investment performance.

Investing in fractions of other people’s holidays seems a very good way to ensure you won’t be able to afford a whole holiday yourself!

UPDATE

Investors who have lost money in pension transfers into unregulated ‘products’ are raising funds to engage a firm of private investigators.

Businessman Outmanoeuvres Council

Ffynnon Luan, a rather dilapidated but grassy green 35-acre smallholding near Maesybont, Carmarthenshire, was up for auction in 2014. The buyer was local businessman Andrew Thomas, whose farm at Blaenpant, Maesybont, has featured several times in West Wales News Review (here, here and here, for example, showing how successfully he has outmanoeuvred the county council).

This is what Ffynnon Luan looked like from the air before Mr Thomas acquired it.

Ffynnon Luan farmhouse is in the central zone of the photo above the strip of woodland, and surrounded by small hedged fields. The photo was submitted with an agricultural planning application. 

Then this happened — scraping away the surface on a Ffynnon Luan section of the carboniferous limestone ridge south of the river Tywi. Carboniferous limestone is, of course, a valuable rock, used for roadstone and aggregates, and for making cement, and when ground-up it helps desulphurize flue gases.

Surface scraped at Ffynnon Luan. Photo from Google Earth. 

Ffynnon Luan had a new road, about 3.5 metres wide 550 metres long, constructed across the farm to the B4297 Dryslwyn to Gorslas road, as an addition to the original access onto a single-track lane. Mr Thomas’s planning consultants, JCR Planning, told Carmarthenshire’s planning committee as part of a retrospective application (the work had already started) that “it is proposed to solely use this access for heavy vehicles transporting livestock, feeds and implements to Ffynnon Luan as part of the restoration of agriculture at this holding”. Without the new road, vehicles would have to use the lane, which lacks passing places and is flanked by deep drainage ditches, JCR Planning argued.

Removing the surface of farmland is not what most of us understand by agriculture, but Ffynnon Luan has received only agricultural planning permission, for the road and for a recent steel-framed building to house 100 beef cattle, for which an application was submitted in 2017.

This is the building.

Lots of space for heavy lorries and wagons, and a large multi-purpose building. 

The scraped land is green again, according to a local resident, but lorries still go backwards and forwards along the broad farm road. In 2015, a year after Mr Thomas bought the property, a neighbour wrote to Carmarthenshire County Council complaining about “noise, disturbance and the danger of lorries going at speed, back and forth to the site, carrying earth and boulders”.

Mr Thomas is a long-established businessman who owns AJT Recycling Ltd, with a scrap materials yard in Fforestfach, Swansea and shareholders’ funds of almost £920,000 at the end of November 2017, almost double the previous year’s total.

The issue is not so much what is happening on Ffynnon Luan now, but the fact that the farm has not received planning permission for anything except purely agricultural activities.

Even if some believe that planning controls are unnecessary, is it fair to turn a blind eye in some circumstances but not others? I have only to think of the case of Mr Andrew Redman, who was forced by Carmarthenshire’s planners to remove a livestock shelter on skids from a field, although usually such shelters do not require permission.

PDR, expressing a personal opinion

 

Did Austerity Push Wales Towards Brexit?

All those £ millions from the EU, yet Wales voted for Brexit! “What ingratitude,” I can imagine the mutterings in Brussels and Strasbourg. “Don’t they know where their bread is buttered?”

With around €3 billion coming into Wales from the EU between 2014 and 2020 – about €1,000 or £885 per person – the ‘No’ vote was inexplicable, surely? Well, direct subsidies paid to farmers are about £235 million a year, so the wider public can be excused from not noticing them. That leaves £442 million or so, not far off £150 a head, in annual ‘structural funds’ which are intended to improve the Welsh economy.

Most of the money goes to West Wales and the Valleys, the least affluent parts of the country, and there is no guarantee at all that the UK government will replace it.

I have heard it said that EU money has been spent unwisely because West Wales has stubbornly refused to become more prosperous. I have tried to consider this in a little more detail, albeit in microcosm, and in June and July looked at the projects in Pembrokeshire – right out west – which have benefited from LEADER funding since 2014. The LEADER scheme (Liaison Entre Actions de Développement de l’Economie Rurale, or Links between Actions for Developing the Rural Economy) in Pembrokeshire is managed by PLANED, the Pembrokeshire Local Action Network for Enterprise and Development. I put the projects into a spreadsheet and was quite startled by the result.

Almost £1 million was destined for ‘new ways of delivering non-statutory local services’ during the years 2014-20. At the half-way stage, 78% of that had been allocated, compared with just 19% of a similar amount for ‘pre-commercial development, business partnerships, and short supply chains’.

Non-statutory local services are exactly what local authorities have been struggling to provide. Pembrokeshire increased council tax by 12.5% for 2018-19 to compensate for a £16 million funding gap. There is definitely no money for expanding services to keep a step ahead of the needs of an ageing population. This is where European money comes in, shoring up struggling public services rather than developing the economy and creating well-paid jobs for local people.

We have, for example, a project for elder and end-of-life care which has received £14,909; £27,458 for a care prevention programme; £9,840 towards the employment of a community development worker; £14,963 to investigate how to support refugees; £176,227 for the development of a preventative care agenda; and several more. Worthy projects all, but focused on community health and cohesion rather than on economic development. Most of the recipients of LEADER cash in Pembrokeshire, 77% overall, are voluntary ‘third sector’ organisations and another 16% are public-sector bodies. Private sector firms amount to only 7% of the total.

One can argue that the European money is mainly replacing what would have been done in the past by local government and the NHS, before austerity hit, and that this is one factor contributing to the ‘No’ vote because people did not notice any improvements in their lives resulting from EU membership.

Austerity probably contributed more than many politicians imagine to the Brexit decision.

PDR

 

Who Can Best Lead Plaid on the Long March Beyond the Heartlands?

Who has the best chance to take the whole of Wales forward into an equitable, resilient future?

That’s the question I’m asking myself, a party member, as the Plaid Cymru leadership election nears its end.

Yesterday’s hustings in Carmarthen, which almost filled St Peter’s Civic Hall with Plaid members, was right on the doorstep of challenger Adam Price’s Assembly constituency of Carmarthen East and Dinefwr, but the applause was shared between all three contenders. Maybe support for Adam was sometimes louder, but not overwhelmingly so. Plaid members are very polite and gave all three an attentive hearing.

Dramatis personae

Adam Price (50 in September 2018)  He tried unsuccessfully to persuade current leader Leanne Wood to accept joint leadership so that there would be a man and a woman at the apex of the party, before deciding on a leadership challenge.

MP for Carmarthen East and Dinefwr from 2001 to 2010, he was far from an anonymous figure, being often in the news and especially for seeking to impeach Tony Blair for taking the UK to war in Iraq on a false prospectus. He was not afraid then – and is not now – of sticking his head above the parapet. He had high visibility as a politician on the national stage, and secured several awards including ‘Communicator of the Year’ in 2007. He did not seek re-election in 2010, instead travelling to the Kennedy School of Government at Harvard University in Cambridge, Massachusetts. Then in May 2016 he returned to politics in the Welsh Assembly, winning the seat for Carmarthen East and Dinefwr vacated by Rhodri Glyn Thomas’s decision not to stand again. He has a vision for an independent Wales by 2030.

Leanne Wood (46)  Elected leader of Plaid Cymru in 2012 in a contest against Elin Jones (the current Presiding Officer of the Assembly) and Dafydd Elis Thomas, Leanne gained UK-wide exposure in the general election campaign of 2015, appearing on debate platforms alongside Nicola Sturgeon of the SNP and the other main UK party leaders.

An Assembly Member since 2003, she was list member for South Wales Central until winning the constituency seat of Rhondda in 2016 – a huge achievement because Rhondda was Labour through-and-through and still has a Labour MP, the former Church of England vicar Chris Bryant. Leanne is a republican socialist who foregrounds community action and a sustainable green future. She is not a fiery orator but speaks from the heart.

Rhun ap Iorwerth (46)  Rhun was victorious in the 2013 by-election for an assembly member to represent Ynys Môn, replacing Ieuan Wyn Jones, who resigned for career reasons. He’s a highly experienced TV journalist and communicator, and as he says, now has the largest majority (9,510) for any constituency member of the Assembly. Born near Pontypridd, his childhood was in Meirionnydd and Anglesey, and he travelled widely in his work. As recently as June 12th Rhun was quoted as saying he had no plans for a leadership challenge, but he had changed his mind by July 4th. He seems less specific than Adam or Leanne about what he would or would not do as leader, and refuses to rule out a deal with the Conservatives.

Helen Mary Jones, who rejoined the Assembly in August after the resignation of Simon Thomas, was in the chair.

 

Plaid’s western ribbon

No qualms about the capabilities of all three as leaders, but do they all have an equal likelihood of expanding the Plaid vote outside the Welsh-language heartlands of Carmarthen, Ceredigion, Gwynedd and Môn, the western coastal belt except for (largely English-speaking) Pembrokeshire? Plaid’s Westminster MPs – Jonathan Edwards, Ben Lake, Liz Saville Roberts and Hywel Williams – have constituencies forming a ribbon south to north from Ammanford to Caernarfon.

The challenge is to break out beyond this heartland to the rest of Wales where the majority of people live, to win in the cities and the old industrial valleys. Leanne has shown she can do this. She is not from Welsh-speaking Wales, she has already expanded the party’s influence, but in a country dominated by the Labour brand for decades, that’s a slow process. In English-speaking Wales, there are still many people who regard Plaid as the Welsh-speakers party, a sort of political Cymdeithas yr Iaith. In the hustings yesterday the great majority of members present, I would guess 80%, did not use translation equipment, indicating that they were fluent Welsh speakers. Even in Carmarthenshire fewer than half of adult residents have full Welsh-language competence, so the gathering was demographically different from the population at large.

What about English speakers?

Most people living in Wales cannot speak Welsh. They amount to 72% of all aged 3+according to 2017-18 figures. Among young people and adults aged 16+, 81% cannot speak Welsh fluently, and Plaid will have to appeal to this majority if the party is to win more seats in the Assembly. At the last elections in 2016, Labour won 34.7% of the vote, the Conservatives 21.1% and Plaid 20.5%. Plaid holds only 10 of the 60 seats, while Labour has 29. Just five of Plaid’s 10, including the three leadership contenders, are constituency winners, and the other five, chosen by proportional representation, sit for regions.

No surprise that Adam and Rhun are impatient to expand the vote. Rhun stressed that the party must broaden its appeal, Adam urged more dynamism. By implication they were accusing Leanne of being too narrow and too static. But would a leader from the Plaid ribbon in the west be the best placed to persuade urban Wales to change allegiances, and even join the party?

The final question at the hustings was from a young man who said he joined to do politics in a different way, but was aware of the perception that Plaid is for Welsh speakers. How would the three change this? Rhun said the party is for everyone, Adam felt it has always been inclusive. Leanne stressed an international outlook, defence of minorities, the dangers of the rise of the far Right. She has a more comprehensive Left agenda than her challengers, I think, based on communities making their own decisions within a framework that has to be sustainable. People know where she stands. She has ruled out, for example, any coalition with the Conservatives. Adam positions Plaid as equidistant between Conservatives and Labour, maybe not the easiest position to define, and would not want a coalition with either. Rhun will not rule out a Plaid-Conservative agreement, but what would that mean for green, equality-promoting policies?

Conflicted choices

I am conflicted about the choice. Rhun is driven and determined, Adam has the power of oratory and the broadest political experience, but both are associated more than Leanne with Welsh-speaking Wales. Leanne’s politics appeal the most to me personally but is Wales ready for green co-operative socialism right now? Even so, I think Leanne has the best chance of continuing to widen Plaid’s appeal to English-speaking urban Wales, but for that to work the whole band of Plaid AMs has to be right behind her.

A Plaid with wider support across the nation will, ironically perhaps, be better placed to promote the future strength of our priceless Welsh language, culture and heritage.

For sure, Wales will not achieve comprehensive independent policy-making without the enthusiastic participation of both Welsh speakers and English speakers, across cities, towns and rural areas alike.

PDR

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