The UK is a state of inequality

Rhun ap Iorwerth calls for a fundamental change in UK political and economic models

The UK is a state of inequality. Despite some headline figures on spending per head, disproportionate investment between the ‘haves’ and ‘have nots’ tell the story of an unequal union.

Take research and development (R & D) spending for example.

As Plaid Cymru’s Chief Advisor on the economy, Eurfyl ap Gwilym, points out in his article The UKs broken Economic and Fiscal model the world is changing and the economy is changing with it. The knowledge economy is becoming more and more important, and in that context investing in research and development will be vital. After all, that’s how we generate new ideas and new technologies, and roll out new skills that will be the basis for a new generation of businesses.

There are a number of sources for R&D investment, including business, higher education, government and research councils. Business is by far the biggest source of R&D expenditure. It tends to be concentrated in certain sectors – such as defence and pharmaceuticals, and geographically.

But spending on R&D in Wales is staggeringly disproportionate.

Recent annual figures show UK higher education research and development spend in total of around £6.5 billion. Break that down and we see spend per person in Wales to be £86. In London and the home counties of England, it’s £275 per head. That means that almost 60 per cent of the total R&D spend in higher education happens in the south-east of England.

Institutions in the so-called ‘golden triangle’ between Oxford and Cambridge and the London universities, can highlight their track record in R&D and in doing so they’re able to beat off much of the competition and claim a lion’s share of funding.

But it would be wrong to suggest that Welsh Government couldn’t influence how much more money we could draw into Wales. Perhaps it is time now that Welsh Government really started to make the case for creating a Welsh pool of R&D funding for Wales – a protected fund – into which our universities could apply for funding in order to increase expenditure in this sector in Wales.

But it’s not just education.  Let’s look elsewhere. Let’s look at direct UK Government R&D spend in Wales.

In 2016, of the £2.2 billion spent on research and development by UK Government, £54 per person was spent in London and the Home Counties, just £5 per person was spent in Wales.

Yes, you read that correctly. £5 per person was spent in Wales on research and development by UK Government.

R&D spend as a percentage of GDP was 1.69 % for the UK, 1.04% for Wales and 2.07% for the EU. In other words Wales funds R&D at a level which is half the EU average.

Yes, this shows that successive Labour and Conservative UK Governments have failed to direct investment to Wales. But it tells me also that the Labour Welsh Government is failing to make the case for Wales’s share of R&D funding to the detriment of Wales and Welsh jobs.

This distorted pattern of public expenditure has persisted for many decades. Examples of the much higher spending in London over the past fifty years include: the Victoria and Jubilee underground lines; the M25 orbital motorway; HS1 which is soon to be followed by HS2; the Docklands Light Railway; and Crossrail 1 which is due to open in 2019 and is expected to be followed by Crossrail 2.

London stands out like a sore thumb with much higher GVA per head allied to high public spending.

We need to be aiming for parity with other parts of the UK.

The principal economic levers that affect Wales are, to the extent that any level of government controls them, in the hands of the UK Government. Such levers include: target inflation rates (set by the UK Government and implemented by the Bank of England); the structure and levels of taxation; and public expenditure including capital investment. However, Welsh Government must accept its responsibilities in university funding, skills development, public procurement, and facilitating the provision of funding for Welsh business.

Another role for the Welsh Government is working in close collaboration with the Wales Office to ensure that Wales receives a proportionate share of spending in those areas not devolved to Wales but allocated directly to the nations and regions of the UK by UK Government. Evidence suggests they are both falling short in this vital task.

If those advocating Brexit really believe the UK will be economically better off, their challenge is to formulate and implement an economic strategy that ensures much greater economic equity across the nations and regions of the UK.

However, many of us fear that the consequences of Brexit are likely to push regional policy even further down the priorities of any post-Brexit UK Government.

I and my Plaid Cymru colleague Ben Lake MP recently launched a report on safeguards that should be built into UK Government’s so-called ‘Shared Prosperity Fund’, and I intend shortly to say more on the issue of potential future models.

Without a fundamental change in UK political and economic models we can expect little improvement in the relative performance of national and regional economies outside London and its immediate hinterland. While Brexiteers may proclaim their aim of stopping the UK becoming a ‘vassal state’ of the EU are they content for much of the UK, including Scotland and Wales, to remain in such a position within the union?

All articles published on Click on Wales are subject to IWA’s disclaimer.

Rhun ap Iorwerth is Shadow Economy Minister

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