Treasury insists the funding model for the Manx Development Corporation has not changed.

Property development company MDC was set up in March 2021 with the remit of being the catalyst for the regeneration of brownfield sites.

It operates at arm’s length from its sole shareholder, the Treasury.

MDC has developed proposals for a number of prominent government-owned sites in Douglas including the former nurses’ home on Westmoreland Road.

It has also submitted plans for ‘Westmoreland Village’, comprising 133 new homes, including housing for key workers as well as office space, retail units and a community pavilion.

Copies of the financial controls put in place as part of the shareholder agreement between the Treasury and MDC have been released under Freedom of Information. They include procurement policy and financial governance documents.

agreement

Also released has been a variation to the shareholder agreement, a document which has previously not been made public.

This extends the types of action for which MDC will have to seek Treasury approval. These include any new commitments under any debt financing arrangement or transaction or any amendments to their terms.

As a Treasury-owned arms-length limited company, MDC is not bound by the government financial regulations.

Henry Kennaugh, who submitted the FoI, claimed the shareholder agreement will allow the Treasury Minister to create ‘enormous’ debt without the vote or scrutiny of Tynwald.

He has written to Treasury Minister Dr Alex Allinson to outline his concerns that MDC and another arm’s length, government-owned company, the Steam Packet, have through financing arrangement become quangos reliant on government funding.

Mr Kennaugh said MDC projects were intended to be financed by attracting inward investment and if this is now no longer the case then Tynwald must ‘debate and reset the scope of the exposure to the taxpayer’.

But a Treasury spokesman insisted nothing had changed regarding the funding model.

He said: ‘The 2023-24 Pink Book notes the position regarding financing for Manx Development Corporation. The funding for MDC has followed this model to date and is intended to continue to follow this model going forward.

‘MDC will finance the costs of any project that is to proceed to full construction by way of commercial loan arrangements.

‘These commercial loan arrangements will reimburse any Treasury loans that have been advanced in relation to feasibility or pre-construction costs relating to that project.

‘The proposal to establish MDC as a wholly Treasury owned company, which was approved by Tynwald, did not include the potential for external private parties to invest in the company and potentially dilute the ownership.

‘The variation to the shareholder agreement that was agreed in February 2023 includes additional controls around transactions and decisions being made by MDC.

‘It extends the circumstances that MDC is required to obtain Treasury approval in respect of external borrowing that the company may seek to take on. The variation does not change the funding model for MDC.’

The company’s first-year accounts and directors’ report were laid before the April sitting of Tynwald.

They show in the year to the end of March 2022, the company, entirely funded by share capital, had net assets of £990,478 after making a loss of £178,523.

Expenses during the year included £69,675 on wages and £50,203 on directors’ fees.

The directors’ report notes that revenue streams will only come on line once sites are redeveloped and become available for sale or lease

It states: ‘As at the statement of financial position date, the company was entirely funded by equity capital.

‘As development activity progresses this will change to a mix of equity and debt funding. It is the intention of the company that, over time and through its development activities, it will generate retained earnings that may be remitted to its shareholder.’

lTreasury’s lack of transparency, opinions, page 18.