Two weeks ahead of the 2021 Senedd election, Harry Thompson assesses the potential for agreement on economic policy between Welsh Labour and Plaid Cymru.
We are now two weeks away from one of the most consequential Senedd elections since the beginning of devolution.
A potent mix of a global pandemic thrusting devolved governance in Wales into the spotlight, the tectonic plates of electoral arithmetic in Wales shifting as some groups of working class people begin to find a political home in the Conservative party, and an unprecedented potential land-grab of ex-UKIP seats elected immediately preceding the 2016 Brexit referendum mean that no matter the result, this election looks to have profound consequences for governance in Wales.
Whether we see the party seat totals largely stand still, or the Conservatives capture constituencies that switched to them in 2019, most projections point towards Labour remaining the largest party – but missing out on a majority. The most optimistic projections for Labour see them retaining their current crop of 29 seats. However, even in this scenario they will likely have to reach out to other parties to govern – as current non-Labour Ministers depart the Senedd.
There is little prospect of Labour and the Conservatives attempting to form coalitions or confidence and supply arrangements in the Senedd. Constitutional issues and statements by the leaders make a deal between Plaid and the Conservatives look increasingly untenable. So Labour collaborating with Plaid has become a strong frontrunner for the composition of the next Welsh Government.
Whatever form this takes, it will require a set of mutually agreeable policies.
It is therefore worth examining their manifestos to see where the parties might work together to build Wales’ economy.
Labour have opted for a slimmed down, pledge card-led manifesto of promises tailored to the voters they are targeting. Recovery after Covid, a young persons’ guarantee, a fair deal for care, a greener country, safer communities, new jobs for Wales.
These pledges bring together topical issues on Covid and care workers, and seek to balance the environmental concerns of younger supporters with the concerns of their traditional supporters around security and economic opportunities for their children.
“The brute effectiveness of Boris Johnson’s ‘Get Brexit Done’ slogan will likely have cemented Welsh Labour’s instinct to put forward an easily-understood pledge card.”
This approach is also likely a reaction to past experiences, including the 2019 General Election. Leading pollster and strategist Deborah Mattinson sets this out in Beyond The Red Wall, her examination of traditional Labour voters who switched to the Conservatives in and leading up to the 2019 General Election. Mattinson stated that in 1997 she extensively tested a handful of policies that featured on New Labour’s pledge card, each symbolic of a wider policy intent but disciplined in its scope. By two weeks into the campaign, most voters in her focus groups could list all five pledges when asked what Labour would do in power, having learned them by heart. By contrast, the same question in the 2019 General Election received the vague response ‘spend more money’.
The contrast with the brute effectiveness of Boris Johnson’s ‘Get Brexit Done’ slogan will likely have cemented Welsh Labour’s instinct to put forward an easily-understood pledge card of value-indicating policies, under their Move Wales Forward slogan. They will be hoping a set of short sharp pledges will cut through to voters in Wales – and that opponents on their right will be less able to dismiss a lengthy manifesto as undeliverable.
By contrast, Plaid Cymru’s 126-page manifesto sets out a detailed roadmap to what would be a significantly different country if delivered in totality. In a recent interview with the Hiraeth podcast, Adam Price said Welsh Labour had run out of ideas, and that although he was open to working with other parties, a new direction for Wales was essential. Plaid’s manifesto seeks to provide a range of policy options to turn Wales in a new direction that can provide the basis of working arrangements with Welsh Labour.
A Community Bank for Wales
One economic policy that Labour and Plaid clearly see eye-to-eye on is the establishment of a Community Bank for Wales.
Plaid state that they will support the creation of a Community Bank to help domestically owned businesses grow their market share, help small businesses, and return local banking services to customers in areas which have lost their local banks. The Labour manifesto commits to creating a Community Bank for Wales, growing to 30 branches across Wales over the next decade. Although both proposals are light on detail, the creation of a Community Bank for Wales in the next Senedd term looks likely.
Youth Jobs Guarantee
One of Welsh Labour’s six key pledges is a commitment to guarantee everyone under the age of 25 an offer of work, education, training or self-employment. Although there is limited detail on this pledge, they state that they will deliver 125,000 apprenticeships as part of this guarantee, and will review and strengthen the Youth Engagement and Progression Framework to support young people at risk of disengaging from education and training.
Plaid have listed an extremely similar policy – the Welsh Youth Job Guarantee. This policy differs from Labour’s in that it guarantees secure employment on at least a Real Living Wage for every 16-24 year old not in full-time education. Plaid aim to do this by creating a National Employment Plan to set out the jobs that need to be created to meet the Youth Guarantee. The plan will focus on jobs and training places in health, social care, childcare and education, construction, and the low carbon economy.
This policy is a microcosm of what we are likely to see in a broader sense. Labour have presented a slimmed down manifesto tailored towards emanating deliverability and credibility, and Plaid have offered a more detailed and ambitious programme aimed at moving the dial. On the Youth Jobs Guarantee, both parties agree with the concept but post-election negotiations are likely to see Plaid attempting to push Labour in a more ambitious direction, offering a Real Living Wage and attaching a National Employment Plan that directs the guarantee towards its priority sectors.
The IWA has called for the creation of a single Ministerial portfolio combining Economy, Environment and Transport. Although decarbonisation has to be embedded in all areas of government, bringing these portfolios together would help ensure that Ministers and the Welsh civil service are working closely to shared priorities to decarbonise Wales’ economy and transport systems in a way which drives prosperity.
Welsh Labour has titled the economy section of its manifesto ‘Building a Stronger, Greener Economy’, and the partial merging of these manifesto pledges signals a step in the right direction.
Much of Labour’s economy offer is predicated on delivering initiatives already in progress – such as the Tech-Valleys programme, plans for metros in North Wales and Swansea Bay, taking forward the Burns Commission report for Newport, and further detailed proposals on transport. However, outside of the transport arena, concrete proposals on transitioning to a green economy are somewhat thin, other than new pledges to create a Tidal Lagoon Challenge, and supporting Wales TUC proposals for union members to become green representatives in the workplace.
Plaid Cymru have pledged a £6bn Green Economic Stimulus – the Welsh Green Deal – comprising £4bn of extra investment in infrastructure and £2bn for the foundational economy. The party would task the National Infrastructure Commission, in conjunction with the Future Generations Commissioner, Development Bank, local government and others to set out a detailed schedule of investment projects contributing to a range of economic and social priorities.
“Plaid Cymru are certain to look to demonstrate where they have moved the Welsh Government.”
This spending is predicated on Westminster granting additional borrowing and reserve drawdown powers. In the likely event that this request is rejected, the party envisages the spend being covered by a national Green Growth Deal in conjunction with local authorities to build on City and Growth Deals, greater use of Financial Transaction Capital, use of the Mutual Investment Model, investment by the UK Infrastructure Bank, and exploring a Welsh Green Bond.
Post-election negotiations will likely centre on finding a mutually agreeable compromise between the focus on ambition for Plaid and the focus on deliverability for Labour. Labour have proposed a £500m Wales Flexible Investment Fund to support economic recovery that could be used to support Plaid’s priorities. To justify supporting a rival party in government, Plaid will need easily demonstrable policy wins. This and their nation-building instincts mean that proposals for Ynni Cymru, an energy project development company, could be an appealing proposal in negotiations.
Welsh Labour’s strong focus on transport infrastructure and Plaid Cymru’s wish for a green economic stimulus could also make transport infrastructure a potential area for agreement. However, Plaid Cymru are certain to look to demonstrate where they have moved the Welsh Government, rather than simply supporting its current transport infrastructure plans, as Welsh Labour’s manifesto does.
Much of Plaid’s vision for economic development is contained within the ‘Building the Nation’ section. It criticises Wales’ current strategic planning regions, describing them as led by Westminster priorities such as City and Growth Deals, and the Shared Prosperity fund. It proposes replacing Welsh Labour’s four planning regions and Corporate Joint Committees with six strategic regions – the Valleys, Arfor, Clwyd, Powys, Swansea Bay and the South-East. Two of these would have new regional development agencies – Arfor, and Cymoedd (for the Valleys). Plaid also advocates creating Industrial Innovation Clusters, a National Innovation Body, and an Office for Regional Development and Investment within Welsh Government.
Labour has pledged that each region should be able to develop their future economies with coordinated regional transport and land use planning. With Labour progressing plans for local authorities to work together in Corporate Joint Committees, and Plaid looking to create new strategic planning regions, there are clearly opportunities to find common ground. Plaid’s proposals for specific clusters, bodies, and offices also provide tangible negotiation ‘wins’ for the party, none of which Labour would have an immediate ideological aversion to.
“A scaled-down version of Prosperity Wales that allows the Welsh Government to outsource risky or unpopular but necessary investment decisions could have appeal to Labour.”
It is on the recreation of an independent economic development agency for Wales that most heat may arise in negotiations. Although the debate has moved on from calls for the recreation of a like-for-like replacement for the Welsh Development Agency (WDA), Plaid have called for the creation of Prosperity Wales. The party envisages this as an arms-length all-Wales development agency, focusing on objectives such as developing a stronger base of medium sized companies, place-based development, university-business collaboration, decarbonisation, procurement, inward investment, manufacturing-led exports, tackling inequality, management training for SME staff, and more.
Labour has resisted calls to recreate an arms-length economic development agency since it first brought the WDA in-house two decades ago. Clearly, a governing party will have an interest in retaining powers over economic development, and ideologically Labour often has a centralising instinct regarding economic policy. The party was founded by trade unions to improve conditions for workers, so handing economic levers to a non-political agency may grate with this muscle memory. Many in Welsh Labour also see the time and effort needed to establish a new agency as an opportunity cost and distraction from urgent recovery action needed post-Covid. Others see a risk of eroding the ability of parties of all colours to make economic pledges, if decisions are made outside government.
In a recent event with the National Institute of Economic and Social Research, Professor Sir Tim Besley of LSE (influential in the creation of the National Infrastructure Commission in England) stated that economic development agencies such as the WDA can be made to work. However, the detail matters. Besley stated that independent institutions work when they have the capacity and expertise to develop competent policy, and where they are created to address a clear political failing.
There is a political problem that Labour may feel an arms-length body could solve. There is an increasing feeling in Welsh Labour that they are too tied to the cost-per-job metric of investment, handing money to the immediate gratification of flighty multinationals offering immediate job announcements in deprived communities, at the expense of longer-term investment in growing domiciled Welsh businesses.
A mutually beneficial political deal could be found here. Perhaps a scaled-down version of Prosperity Wales that allows the Welsh Government to outsource risky or unpopular but necessary investment decisions could have appeal to Labour. Their concerns over handing away powers could also be assuaged by embedding concerns such as equality and fair work in the new organisation’s remit. This model could have political appeal to both parties and form the basis of joint working.
Clearly, a centrepiece of joint working will be the Youth Jobs Guarantee. However, there is also significant overlap outside this pledge. Welsh Labour have pledged a Social Partnership Act, progressing the Fair Work Commission’s recommendations, and strengthening the Economic Contract. Plaid have also pledged to encourage employers to adopt modern working practices and embrace remote and distributed working, use Fair Work commitments in procurement, and tackle low pay through advisory, sector-based social partnership bodies. The significant overlap on proposals for employment mean this could be the easiest area to reach consensus in any negotiation.
“Across all areas of economic policy, negotiations are likely to focus less on a clash of world views and more on scope.”
To summarise, there is clear potential for joint working between Welsh Labour and Plaid Cymru on the economy. Even a full coalition between the two parties appears eminently achievable, based on the significant alignment of values on the economy.
This means that across all areas of economic policy, negotiations are likely to focus less on a clash of world views and more on scope, with Welsh Labour attempting to rein in Plaid Cymru’s plans to look more like the Welsh Government’s existing ones, and Plaid Cymru attempting to achieve visible policy wins that will set Wales on Adam Price’s ‘new direction’.
A platform of centre-left economic thought with a nation-building bent appears to offer both parties a way forward, as it did with the One Wales Coalition. Election results may well limit the scale of the two parties working together. Labour ending on 29 seats may see the party seeking to govern as a minority administration with some horse trading of policies to Plaid during budget negotiations. From the point of view of a coherent programme for government, with Ministers accountable, and steering the civil service towards effective delivery – this is arguably less desirable than either a simple majority or formal coalition government.
Conversely, Plaid Cymru may decide that it is more politically advantageous for them to position themselves as an opposition party rather than one that props up a government they are critical of. However, joint working between the parties could offer Welsh Labour the ability to make its experience of government in the next Senedd term more comfortable, with Plaid Cymru able to advance its nation-building agenda and nudge Wales to that new direction.