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.

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