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The Welsh Government came under fire yesterday for plans to move out of its office in the Wales Office and lease new London premises at a cost of around £270,000 a year.

Welsh Conservatives accused the Labour administration of “empire-building at the taxpayers’ expense”.

A Whitehall source warned that the use of separate premises would send out a “negative message” about the ability of ministers at either end of the M4 to work together.

The Welsh Government plans to rent office space at 25 Victoria Street – a former base of the Conservative party.

It intends to give up its facilities at Gwydyr House, a mansion dating from 1772 which is the London home of the Wales Office, and an office at Portland House rented by its department for Business, Enterprise, Technology and Science.

The Welsh Government wants to use its new base to “promote international trade and investment opportunities; continue and develop relationships and visibility with the UK Government, embassies and other important organisations and public bodies; and provide a hot desk base for ministers and officials on official business.”

But the Whitehall source said: “I do think potential investors in Wales will say, ‘Hang on a minute – why aren’t the two governments representing Wales working together?’. And it’s not from lack of trying on our part.

“They have got this room which they pay a small rent for which was negotiated by the previous government. I don’t see any sense in them wanting to change the arrangements now.”

The source added that if the Welsh Government needed extra facilities or wanted to hold receptions, this was not likely to be a problem.

“I am sure we’d come to an agreement... Organisations have asked before if they could use the rooms and we’ve said, of course, yes,” the source said.

The source added that the Wales Office location was more likely to help meet the Welsh Government goals of building links with Government, embassies and other bodies, noting that the site faces locations including Downing Street, the Treasury and the Cabinet Office.

In December the Secretary of State for Wales Cheryl Gillan emphasised during a meeting of the Welsh Affairs Committee that ministers from Cardiff were welcome to make use of Gwydyr House.

She said: “They are of course welcome to come and use the facilities in Gwydyr House any time that they want to, provided that it does not interrupt the business of the department. They are very welcome guests.”

The Gwydyr House rent is understood to be less than a six-figure sum. A Welsh Government decision report states: “Commercial negotiations remain ongoing, though it is estimated that the annual running costs for the new office will be around £270,000 per annum.”

The Scottish Government makes use of facilities at Dover House, which is operated by the Scotland Office, andthe Scottish Government pays a percentage share of the overall running costs. In 2008-09 this was £201,871.

Paul Davies, the Conservative shadow minister for finance in the Welsh Assembly, said: “It is extraordinary, at a time when the NHS budget is being cut by 6.5% and schools are severely underfunded, that Welsh Labour Ministers have decided to lease some of the most expensive office space in Europe.

“The Welsh Labour Government already has office space at the Wales Office HQ and to set up a separate headquarters simply amounts to political posturing.”

Aled Roberts, a Liberal Democrat AM on the Public Accounts Committee, said: “Wasting £270,000 a year on office space in London when Gwydyr House, the Wales Office, in Whitehall is available for use, is beyond belief... I sincerely hope that this decision to move offices in not based on the fact the Labour Government is forced to share an office with a Tory Secretary of State – that would be highly offensive to the taxpayers of Wales.”

Matthew Elliott, chief executive of the TaxPayers’ Alliance said: “It’s barmy that the Welsh Government are snubbing property already owned by the Welsh office in favour of an expensive commercial property just down the road.”

A Wales Office spokeswoman said: “The Wales Office has had a long and constructive arrangement with the Welsh Government for use of office space in Gwydyr House. We will continue to help facilitate any events in Gwydyr House, should the Welsh Government wish.”

A spokesman for the First Minister said: “Given the utter mess the Tories are making of the economy – with growing numbers of unemployed, with unacceptably high numbers of young people unable to find work combined with negative growth – we make no apologies whatsoever for making sure we have the necessary facilities in place in London, to help grow the Welsh economy.

“The present office is wholly inadequate and is situated in a wholly inadequate building. It is a tiny office with no waiting room. Wales needs a trade and investment office to help attract new investors from London. The UK Government did not attack Scotland and Northern Ireland for having their own London offices. However, once again the Tories want to treat the people of Wales like children – but the people of Wales won’t stand for it.

“If we are to secure high-skilled, well paid jobs in the future – in the face of Tory economic incompetence – we need to sell Wales to the world. London is a major global financial and business centre and we need an appropriate presence there. The people of Wales deserve no less.”The present office is wholly inadequate and is situated in a wholly inadequate building. It is a tiny office with no waiting room.

“Wales needs a trade and investment office to help attract new investors from London... If we are to secure high-skilled, well-paid jobs in the future – in the face of Tory economic incompetence – we need to sell Wales to the world. London is a major global financial and business centre and we need an appropriate presence there.

“The people of Wales deserve no less.”

A Plaid Cymru spokesman said: “Plaid Cymru recognises the importance of maintaining a strong presence for the Welsh Government in London in order to promote Wales economically and politically.

“The current constraints on public spending means that keeping the costs down on this new set-up must be a top priority.”