First Minister calls for borrowing powers to boost economy

John Osmond reports on a conference which yesterday examined the interface between the private and public sectors in Wales

Carwyn Jones yesterday called for the Welsh Government to be granted borrowing powers to bring it into line with the devolved administrations in Belfast and Edinburgh. Speaking at the IWA’s National Economy conference in Cardiff the First Minister said, “Soon we will be in a position where we will be the only level of government in the UK that can’t borrow.”

Pointing out that even Community Councils had borrowing powers he said that, as a result of the UK Government’s Comprehensive Spending Review,  the Welsh Government was facing a 40 per cent cuts in its capital spending over the next three years. As a result there was an urgent need to find alternative ways to fund the many infrastructure projects Wales needed.

He didn’t wish to pursue private sector funding of projects, along the lines of the Private Finance Initiative which he said delivered poor value for money. On the other hand he said he was keen to collaborate with local authorities and encourage them to use their borrowing powers.

This theme was taken up at the conference, held in association with PricewaterhouseCoopers, by Gerald Holtham, chairman of the Welsh Government’s Independent Commission on Funding and Finance. He said, “We will have to borrow more if we’re going to sustain public investment in Wales.”

He argued that the Welsh Government should be collaborating with local authority consortia to raise substantial sums to invest in infrastructure projects to which an income stream could be attached. He mentioned the M4 relief road, which he said should be tolled,  and major port improvements to service major wind power developments in the Irish sea. Another possibility would be the proposal for a Metro to connect the Valleys with Cardiff and Newport.

Most local authorities were under-borrowed. The Welsh Government had no borrowing commitments on its book and just 1 per cent of its £15 billion budget could easily service borrowing of up to £2 billion. This could be used to service loans taken up by local authorities.

However, he warned that if this were to happen officials in the Welsh Government would have to change their attitude to local government. “There is a tendency for attitudes of what you might call democratic centralism to operate,” he said. “This is not appropriate if we are to create the necessary collaborative relationships.”

Holtham added that in the past there had been little awareness within local authorities of the potential their borrowing powers had for giving a major boost to their  infrastructure if they acted collectively. He gave the example of the A465 heads of the Valleys road which still awaited dualling for the whole of its length. He pointed out that it ran through six local authorities who between them could have easily borrowed the several hundred million or so cost involved.

Speaking to audience representing a wide range of business interests Carwyn Jones said he had been very concerned at that the lack of initiative amongst the SME sector in Wales in successfully bidding for contracts for the Olympic Games developments. He pointed out that while Scotland had won contracts worth £22m and Northern Ireland £17m, Wales had only succeed in securing a paltry £0.5m.

He said he believed the issue for Welsh business came down to confidence. “We have the ability to compete but we don’t believe we can,” he said. “Unless we crack this issue of confidence we will never be in a position to solve the underlying problems of the Welsh economy.”

On a positive note the First Minister said he had noted a good deal more international attention being given to Wales since the Yes vote in the referendum earlier this month. He said that in the last week Wales had received visits from the Chinese and American Ambassadors and from the Indian High Commissioner. “I don’t this is a coincidence,” he said. “Wales is establishing as a place with which the world can business.”

He said the successful Ryder Cup at the Celtic Manor in Newport had also done a great deal to put Wales on the map. “It sent a message out to investors that Wales is a place worth looking at,” he said. I think levels of interest in Wales are greater now than for many years.”

John Osmond is Director of the IWA.

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