From necessity to invention

 

Since becoming First Minister just under a year ago, a great deal of Mark Drakeford’s time has inevitably been devoted to Brexit. Interviewing him as chaos was mounting at Westminster, it was clear that Brexit permeates everything, not least because – in addition to the broader uncertainty it has created – there is still no clarity on its financial implications for practically everything the Welsh Government does.

 

Although the UK government announced in September that Wales will get £593m in extra funding next year, Drakeford is ‘not confident we can rely on that money at all’, and points out that it is less than Wales gets from the EU in a single year, never mind what would be needed to restore budgets to their 2010 level in real terms.

 

Nevertheless, there is a surprising amount going on that bears out how necessity breeds invention. We started by talking about the Welsh Government’s ‘social partnership’ approach, which Rhodri Morgan instigated after the financial crash and which Mark Drakeford now wants to update.

 

Mark Drakeford: Our social partnership model has been very successful. You can see the fruits of it in the debates that we had around the Trade Union Act, where we were able to roll back some of the assaults of the Cameron government on trade unionism.

 

And one of the reasons we won the argument was that we had employers providing evidence to Assembly committees explaining why the social partnership model worked for them, the way that it avoided disputes in the workplace, meant that health and safety obligations were properly discharged, developed high trust relationships between employers and employees, with government in the room as well.

 

So far, all of this relies entirely on the voluntary commitments everyone makes to agreements. As the world gets harsher and harsher for public services, relying entirely on voluntarism doesn’t sustain the trust that’s necessary around that table, that if something is agreed it will be delivered on the ground. And so we are committed to putting our social partnership model onto the statute book with the force of law behind it.

 

The key thing that does is reinforce the confidence that all the parties have that the efforts they make in social partnership bear fruit. That will make people more willing to invest. And social partnership is difficult. Where the critics get this completely wrong is that they think of confrontational relationships as somehow ‘tough’ and getting around the table as a soft option.

 

It’s exactly the opposite. It’s the easiest thing in the world to create confrontation if you want to. The real hard work happens when people have to think through common solutions to collective problems. And when that hard work produces an agreement, the parties to that agreement are entitled to know that it will stick.

 

The Fair Work Commission is a very important strand in all of that because we are determined that in Wales the solutions to these problems will not emerge at the cost of those least able to bear them. Driving down the wages and conditions of the lowest paid and the least advantaged in the workplace is not the way to solve these problems. The very practical proposals the Fair Work Commission has put to us will be part of the social partnership arrangements because we’re not prepared to solve problems in that way in Wales. 

 

Steve Howell: Critics might argue that some of the Commission’s proposals would push up business costs and make Wales unattractive to inward investors. What’s your response to that? 

 

MD: There are two answers immediately. The first is that an economic policy that’s based on the slogan ‘Come to Wales, we’re very cheap’ is not something that this government is prepared to consider. And, secondly, it doesn’t work. 

 

Those employers who demonstrate to their workforce how valued they are, who say ‘we are investing in you and in return we rely on the contribution that you make to this business’, those are the businesses that succeed. Businesses that say to their workers that you are the least important thing in this organisation, they simply don’t get the return from the workers that they need. 

 

You can see it in vivid detail in the social care sector. Parts of the sector have a 30% turnover of the workforce or more a year. No sooner have you got somebody in and trained them, than they want to leave and do something else. That’s hopeless for quality of service and business continuity, and it racks up huge costs.

 

SH: Social care is a sector in crisis generally. What’s your strategy for tackling that?

 

MD: When I first came into politics as a councillor back in the 1980s, Cardiff council was a monopoly supplier: we ran all the residential homes and provided all the domiciliary services. The effect of Mrs Thatcher’s reforms of the 1980s was that we now have a private sector monopoly.

 

What we are about is rebalancing that market. There are some sorts of domiciliary and residential care services that councils themselves are best-placed to provide, particularly the more specialist services. But we want to have more not-for-profit providers in the marketplace as well.

 

We’re working with the Wales Co-operative Centre to try to stimulate a not-for profit model where money that’s made is reinvested in the service. And there will be private providers too because we have some very good private providers in Wales. But it’s not a good position for a local authority when, as the purchaser of the service, they have no choice about it. That’s why we talk about rebalancing the market. 

 

SH: In effect, this is about capacity building and creating indigenous resources. In a similar vein, I gather there are plans for a community bank?

 

MD: Yes, this is about the Foundational Economy, which is much more important for us in the Brexit context than it was previously. Wales is vulnerable to the inward investment model you identified.  Many of the firms we have here have provided jobs over long periods of good quality, but global capital is in the end footloose, and Wales is always at risk of companies under global pressure trying to relocate elsewhere.

 

But you can’t locate social care elsewhere, you can’t run retail services that are not in that community itself, you can’t do food production other than where the food itself is produced. We think about 40% of the Welsh economy is that foundational stuff. So, in our Brexit preparations, we are aiming to strengthen the foundational economy: we have set up a fund, and we have had a fantastic response in terms of ideas and bids that have come into it.

 

The idea of a community bank – to go alongside the Development Bank for Wales – is to try to make sure we have on the high street financial services that meet the needs of micro businesses. When a high street branch closes, lending to those very small enterprises in the following twelve months goes down by 60%. And that’s a huge loss to those nascent businesses.

 

By putting a high street bank back, there will be somebody there who you can talk to, who can make a judgement about lending you money. It’s counter intuitive because the fact that branches are closing does tell you something. They’re not just doing it out of perversity. So why do we think we can fly in the face of that? We’ve been working very closely with the Royal Society of Arts who have developed the business model which we believe we can make succeed in Wales. 

 

We are providing some seed corn money from the Welsh government to move forward on two fronts: you need a group of people who have credibility in banking, because you have to get a licence. But you need community credibility as well: if this is going to work, Welsh citizens are going to have to be willing to put their money into this community bank and therefore we need people involved who people would regard as credible.

 

 

This article is an extract from the welsh agenda which is available exclusively to our members.

 

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