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On Welsh Politics

  Les Broad

  Copyright 2011 Les Broad

  COMMENTS ON WELSH POLITICS

  WHAT IS WRONG WITH WALES?

  A Personal Opinion Of The Principality's Economic Development Strategies In Action

  Wales is not a rich country. It has riches in its countryside, its scenery and its coastline, it is home to the Welsh who are a warm and hospitable people but its economic performance leaves much to be desired. The withdrawal of The Children's Society, although not a business, from Wales typifies attitudes as it was met by wailing, gnashing of teeth and at least one high profile resignation instead of anyone recognising the move as an implication of devolution and grasping it as an opportunity - after all the Society's infrastructure in Wales still existed and that infrastructure could have been taken over by a separately registered charity with identical aims and the same staff and financial supporters (by now probably lost to Wales).

  The incident demonstrates all too clearly that Wales is simply too used to playing the victim and receiving handouts; it doesn't have the mindset to run its national affairs as a cohesive whole. The purpose of these thoughts is to offer, from a personal perspective, some circumstances which might contribute to this, and what might be done to make things a little better.

  There are restrictions imposed by geography and the existing communications infrastructure. Mountains, by and large, tend to stay where they are - movement on geological timescales is of no great value to the present population - and any grand design for the future of the country should recognise this. Wales is, partly as a result of its geography, not well served by road or rail. The A55 from the English border to Holyhead is a fine artery, when great chunks of it aren't closed, and industrial development is creeping along the North Wales corridor. That will bring its own problems as imported management puts pressure on a housing market already inflated by what might clumsily be called the non-indigenous population. The authorities in Wales, however, seem blinkered and only capable of seeing this influx of population as a problem, ignoring the opportunity that it represents. Many of these people have spare capital and ways can be found - can be quite easily found - to encourage investment of part of that spare capital in the stock of locally owned small businesses.

  The transport links are primarily the already mentioned A55, the M4 corridor across South Wales and the central routes to Aberystwyth and Cardigan Bay. Anyone who has ever driven from one end of Wales to the other knows that it is not easy - England has the M1, M6 and A1, dualled from London to the Scottish border, and Scotland has its share of equally good roads. Even the A9 has enough dualled sections to make it a pleasure to use. Wales has the A470, for most of its length no better than a country lane. Rail links in Wales are slow and expensive, and most unlikely to improve, and the country is really too small to make regular air transport worthwhile. Unless, that is, some really determined entrepreneur can duplicate the sort of services that island-hop in various parts of the world.

  If Wales is going to see a significant increase in its gross domestic product it is going to be by playing to its strengths, by embracing new ways of doing business and by adopting a "yes we can" spirit instead of the woefully prevalent "there's a rule that says we can't" attitude. There are plenty of budding entrepreneurs in Wales, just as many as anywhere else, and all they need is a little help.

  The obvious question is where is that help coming from? Much has been made of the Objective 1 funding that Europe has seen fit to give us. But let us think about this carefully, and in particular where all those pounds came from, perhaps by following the route of just one pound. We'll start, by way of an example, with a publican in, let's say, Bala. He makes a profit and pays some tax to the UK Government, including that pound. Next, the Government passes it on, with millions of others, to the European Union (when exactly did we the people authorise Government to do this?). At the same time Wales, or at least a large part of Wales, has applied for and been given Objective 1 status. At this point we should sit back and reflect for a moment. While that pound was in the publican's hands he had a perfectly free choice of what he could do with it. He could have spent it on his business, or given it to charity. He could have invested it, perhaps in a way that would have won him a tax advantage. Instead it went in tax. But now that pound has come home to Wales as part of the Objective 1 package. So, we seem to be back where we started, don't we?

  Absolutely not. All this European money comes with conditions. It can only be used for certain things, and some really useful things are totally forbidden. To see what the practical effects are for someone wanting to start a business we must think about what he needs to get that business started. Underpinning everything is money. But Europe says its money, which now seems to fund every one of the myriad schemes on offer, cannot be used for working capital. And what is every entrepreneur's biggest problem?

  Working capital. Objective 1 money might be a coup for the country, but it isn't going to provide direct help to those with the ideas that will increase our stock of small businesses.

  So our budding entrepreneur is left with the business support agencies that proliferate in Wales, and comes up against all sorts of problems. First, we should try to establish who these organisations are, and what their role is perceived to be. Sitting at the top of the tree is the imperious Welsh Development Agency, affectionately (or otherwise) known as the WDA. Its staff have been known to say some weird and wonderful things, such as "the Agency isn't really geared to support small businesses" or, remarkably "the best business advice I can give you is to go to Sunderland". Really. It does all the headline-grabbing work in organising major inward investment projects, which create lots of jobs and have spin-off socio-economic benefits to the area in which these investments are located. But the cost per job created is usually high, the company moving in is rewarded with all manner of grants and other financial help and there is usually a need to import senior and (at best in the short term) middle management. Despite these downsides inward investment is perceived, politically, to be a good thing. And so it is, all the time that the global economy is in a fit enough state for our inward investors to thrive.

  When those conditions change our inward investors must look at their production capacity. We can imagine the scene in some far-flung boardroom, say Tokyo, Munich or New York. The sales director insists the market for whatever their product might be is diminishing and the company is overproducing. The chairman dictates that capacity must be cut and wants to know where. The finance director announces "Well, we invested twenty billion yen in our Japanese plants, half a billion dollars in our US plants and millions of marks in Germany. But those nice people in Wales gave us the factory and lots of subsidies, so we'll close that one". We've seen this happen in Wales and elsewhere in the UK; surely the economic development of Wales is too important to be decided in a German, Japanese or American boardroom? There is also the question of retention of profit. It isn't exactly rocket science to devise an international corporate structure that circumvents our somewhat simplistic corporate tax regime, so while the UK Government might collect lots of tax and National Insurance from the employees of our inward investor the corporation tax is unlikely to be a realistic proportion of profits derived from UK activities.

  For all its faults the WDA does offer some constructive help through various programmes. It doesn't market those programmes terribly well and keeping track of what's available and what's closed down is pretty nearly impossible. The Agency also has an unfortunate history of supporting lame ducks. It's not so very long ago that a quite well known Welsh theatre company adapted a play to make it more topical and as a result it included, as a reply to a question about the health of a business, the
immortal line "well, the WDA gave us a grant. We've closed down now."

  We used to have, working alongside the WDA, the Training and Enterprise Councils.

  Nobody ever managed to discover what these entities were supposed to be doing so they were swept away and replaced by ELWa. Nobody knows what they are for, either. For all practical purposes this institution can be ignored since it seems to have no practical purpose.

  We still have the Local Enterprise Agencies (each referred to as an LEA as civil servants are so fond of mnemonics) and the County Council Economic Development