The Welsh economy needs radical solutions

Rhea Stevens reviews a recent debate on the Welsh Economy and the ideas pitched as potential solutions.

On a rainy Wednesday evening last week, over 60 guests shuffled out of the dark and rain into Bristows LLP on Victoria Embankment, London, to take part in a debate that asked that perennial question: ‘Why is Wales’ economic development behind that of the rest of the UK?’.

The event, a partnership between the Institute of Welsh Affairs, Cardiff University and Wales in London, coincided with the UK Government’s budget , or as Auriol Miller, the IWA’s Director described it, the “blink and you’ll miss it budget for Wales”. Perhaps frustration and dismay at the gloomy UK forecast we’d heard that day helped fuel the frank, challenging debate that offered, at times, bold and radical solutions to Wales’ challenges.

Diagnosis for Wales’ consistent economic lag was quickly agreed. Alongside well-rehearsed reasons, such as the closure of the extractive coal and iron industries, low productivity and a lower skilled workforce when compared to other regions of the UK, the panel agreed that economic challenges are not unique to Wales and should be understood as global forces. As one panellist, Lynne Miles, Associate Director and Economist at Arup, assessed:

“These are the great economic challenges of our time, not just in the UK but globally [….] Smaller towns and cities are struggling to cope with this, and Wales is an economy full of small towns and cities”.

Collectively determined to be constructive the panel – and at times the audience – pitched a wide array of solutions to improve Wales’ economic fortunes.  There was clear consensus that the big ticket items are a highly skilled workforce and improved infrastructure, though the steps panellists pitched to get us there were not immediately equally acceptable to the room.

The quick acceptance of Wales’ economic problems versus the very mixed reaction to individual ideas struck me as the heart of the problem: the challenges that Wales faces are so entrenched that only seismic, radical action can offer meaningful hope of improvement. But there’s a rub: those radical reforms are highly controversial, would benefit different communities of people in disproportionate ways and at different times, and are often politically unpalatable.

Wales needs big ideas for big challenges, so it seems to me they deserve a public airing. The standout ideas from the panellists which struck me as worthy of further debate all meet that criteria.

Professor Gerry Holtham, Hodge Professor of Regional Economy at Cardiff Metropolitan University, argued:

“The Welsh Government has been very easy to capture by the producer interest […] Health is 50% of the Welsh budget and given the demographic trends and the way things are going, if you remain with producer capture it’s going to be 60% and you won’t be able to do anything”.

“I think we’ve got to say, ‘look, we don’t need GPs. GPs are obsolete’. A computer program, it’s been proven, will diagnose 98% of ailments better than a GP because a) it’s up to date and b) it doesn’t forget anything. So I would employ nurses in health centres, with a  computer program and a phone line to a specialist”.

Murmurs of approval were met with sharp intakes of breath at the concept of such a fundamental reform to Wales’ beloved NHS.

Lynne Miles, as well as being Associate Director at Arup is the Deputy Director for the What Works Centre for Local Economic Growth. Her key advice to those hoping to improve regional economies was “don’t spread the jam too thin”. Lynne’s analysis was that national governments tend to apply public policy in a “spatially blind” manner and neglect to recognise that big cities are essential for a thriving economy. She argued:

“You really want to invest in your big cities and do what you can to grow and densify those cities. In terms of infrastructure and housing and all of those physical, tangible things, I’m strongly inclined not to spread the jam and to resist pressure to try and spread that to rural areas to appear to be treating everyone equally. I don’t think that does anyone any favours in the long run”.

Conversely, she also argued that much more is known about what works to develop people compared to places, and so skills, education and training are the areas where we should seek equity of access.

There was much concern in the room that highly educated young people move out of Wales, and that the 40% or so of Welsh students who go to university aren’t all staying in Wales to help build the nation’s economic performance. Dr Eurfyl ap Gwilym, IWA Trustee, suggested:

“The university students, if they graduate and if they worked in Wales for 5 years, we’d write off any debts they’ve incurred, in a structured way. Very often graduates, by the time they get to about 25 are starting to settle down and think “this place isn’t too bad after all, it’s a good place to bring up families and so on, so I’ll stay here”.

Dr ap Gwilym argued this would be a clear incentive for young people to plan their future in Wales after university.

Margaret Llewellyn, Non-Executive Director of Cardiff Airport, Chair of Network Rail Supervisory Board in Wales and Board Member of Visit Britain, offered one of the potentially more palatable solutions, since it is already used in some areas of tourism, such as a micro-fund which provides loans for small businesses in Wales.

“Do I think that the grant system is right in Wales? No. Totally and utterly no.[…] Where we give grant upon grant for one initiative or one idea after another, we really don’t get anything of top quality because we don’t understand what that is. It doesn’t work. I feel that whatever we’ve got should be loans. Even if people default after one or two years at least a) the person’s learnt the discipline of paying the loan back, and secondly, the money that’s come back in can be used for somebody else to start their business”.

Rachel Lomax, Chair of the event and former Deputy Governor of the Bank of England, observed:

“Wales has kept pace. There’s a levels problem, but things are not slipping back […] It’s very sad that the opportunities of devolution haven’t been seized more decisively, but its still only 20 years old [….] that’s not long in the great sweep of things”

Whilst varied in their approach, focus and style, each of these ideas departs from the status quo and proposes doing something differently. Each needs to be considered and evaluated in more detail to judge the potential effects they could have on the Welsh economy and its people.

Aside from the evidence and policy development, we need a broader public conversation about the scale of the challenges we face and the scale of change required to transform Wales into the prosperous, fair and economically vibrant nation we all want to see –  whoever we are, wherever we live and whatever we do. 

A summary of this article was originally published on Wales Online

Rhea Stevens is Policy, Projects and External Affairs Manager for the IWA.

6 thoughts on “The Welsh economy needs radical solutions

  1. Unless you set out all the specific problems and analyse how these might be addressed, either separately or together, and the extent to which they are amenable to change, there is little chance of achieving anything. All I ever see are conferences, meetings and discussions about the problems without any kind of real in-depth analysis, and certainly very little follow through. Just batting the problems into the long grass.

    So what are the problems. Well, first of all Geography. Most of Wales is a mountainous country and because of this it is regional, east and west and especially north and south. It is also connected to England which exercises a very strong pull in all manner of ways. We can’t deal with the problems of Wales in isolation. And then there is the problem of the North/South separation. Is the cost of ‘properly’ connecting the two worth it? And economically speaking would more cooperation with Bristol in the south and the Manchester/Liverpool area be actually far more beneficial? But at the cost of Welsh identity? Which brings me on to the Welsh language. Whatever the benefits it may bring, culturally and in other ways, there is a cost compared to doing business, a term I use in the widest sense to include time. This may not be large, but perhaps it could be ‘the straw that breaks the camels back’.

  2. Nice summary but I don’t see anything ‘radical’ here. Same old same old re-interation of the obvious. We want ‘action’ not ‘ideas’. That said at least there is still a ‘conversation’ going on. The problems aren’t ‘economic’ they are ‘social’. Do I have better ‘ideas’ then? Oops..Now you’re asking!

  3. Allow me first of all to congratulate Rhea Stevens on a well written, succinct report that appears to capture the essence of the meeting.
    Now the down side. The cynic in me asks why the meeting was held in London and why – again – the good and the great…
    We all know what the problems are and I for one am fed up of hearing them. We know! The sad thing perhaps is the irony and agreement past inward investment policy has been a glorious failure and to a large extent (Coal mining etc notwithstanding) is responsible for today’s sorry state of affairs – and this week the Welsh Government is opening even more offices around the world in a hopeless search for “investment.” We perhaps we can do with a few more Tescos…
    I got the impression from the Rhea’s report that this type of thinking prevails. Lynne Miles contribution that the challenges of Wales are global totally misses the point and is bluntly a cop out – Wales’ towns and villages provide the challenge, not despair. Presumably she is not aware of Porter’s maxim that economies should, and can, be built on skills and products that are essentially local., if only the interest, support and commitment were in place.
    The thinking continued. If “spatial blindness” is a sin, the I’m a sinner. More large cities and grand infrastructure projects is not the way forward. Interesting that these ideas are being presented by the Welsh Government when other countries have recognised such grandiose schemes are expensive and don’t work. Imagine a city starting at Llanelli and ending at the Severn…although there will be a billion pound M4 bypass (when’s the next when this one fills up?) and a beautiful but concreted Swansea Bay ruined to provide cheap(?) electricity for the monster city.
    Rachel Lomax is clearly living in a different Wales to the rest of us. Since devolution we have not kept up and have slipped back, take a look at the damning figures published in last Saturday’s Western Mail.
    Wales’ economic problems ARE different and ARE solvable with the right attitude, commitment and realistic twenty first century policies. I won’t hold my breath.

  4. The secret of wealth is no secret, and it is the same for individuals, companies, regions, and nations – sell to others what they want, or what they need or think they need, at a price which covers your costs.

    Do this and everything else will follow. Fail to do this and everything else is more hot air.

    So instead of asking what we need, we should begin by asking what others need.

  5. ‘There was much concern in the room that highly educated young people move out of Wales, and that the 40% or so of Welsh students who go to university aren’t all staying in Wales to help build the nation’s economic performance..’

    I would be more concerned if they didn’t leave! Leaving is the intelligent response to the status quo in Wales. We have 20+ years of evidence that the WG and their assorted advisors and hangers on have little or no idea how to bring about beneficial economic or social change. Most of the improvement they inherited from the Welsh Office + WDA development in the 80s and 90s they have lost or damaged and produced a NUTS1 Region which is consistently at, or near, the bottom of every meaningful league table in existence. Wales is not competitive in any meaningful way except along the border and there the competitiveness largely comes from cross-border co-operation. In the Fro Wales is neither welcoming to, nor competitive for, outward looking inward investment. Wales doesn’t have any USPs or other desirable benefits to encourage businesses to relocate without some kind of soft-money incentive.

    For years now there seems to have been a flow of economic activity from the private sector to the public, or public funded, sector. Most of the so-called EU money has gone into public sector developments – many of them being loss-making or moribund vanity projects and white eliffants. Gwynedd absolutely excels at this. One has to ask just what kind of business plans are being put forward in order to try and justify sometimes multi-million pound investments when the logic behind them often adds up to nothing more concrete than empire building in the public sector. These non-performing vanity projects are actually sucking the life out of the economy – they remove capital, revenue, and personnel that could otherwise be better used to add value to the private sector.

    But does the private sector actually consider Wales to be a viable place to invest any more? I know I wouldn’t! No amount of soft-money could persuade me to invest in Wales now. When I see businesses moving in I always look for the soft-money and then wonder if they have been told the truth about education, health, transportation, 3rd rate broadband, social cohesion (or lack of it…), and other things a business needs around it to keep the management and workers happy. There’s more to life than scenery but at least it’s mostly free! Box-fillers are everywhere but the key component Wales no longer stacks up for are the higher level specialised employees with high mobility and high aspirations. The lack of continuity of education ALONE is now a deal-breaker.

    All the evidence available to me – from statistics and from talking to economically active people inside and outside Wales over many years, is that the over-riding thing which is making Wales uncompetitive is the Welsh language. Particularly in education. Policies enacted to promote and facilitate the language have damaged education almost beyond comprehension and WG policy is for much more of the same – the only way is down. Without access to high-end education, and continuity of education with England, Wales will never attract meaningful inward intelligence or investment from England, or beyond where English is the L2. It’s that simple. Ranking Wales as a discrete entity in PISA has opened up this failure to international scrutiny.

    It is abundantly clear that people who have English as their L1 do not want to move their kids into Welsh schools. Wales is an OK place to move to until I tell people what their kids will face in schools – especially in Gwynedd and Anglesey where there aren’t any Schools. The usual initial response is shock – are you sure it’s really like that? Are you sure there’s no English-medium primary education? Yes – I’m completely sure. And the rest of Wales is rapidly following them into a parallel universe facing private sector oblivion.

  6. Yeah investment in Wales is increasing. Yes there are a minority of English people who will not move to Wales because of the Welsh language. In my experience English parents don’t have a problem with sending their children to Welsh Medium schools. Don’t forget England is in the same position as Wales in its PISA levels

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