Early in 2015 a number of people from a range of backgrounds in both the private and public sectors were invited to a dinner to discuss Wales’ economic issues. The document used to promote discussion is given below; the dinner was operated under Chatham House rules so details of the those present together with their comments remains under wraps. As the text below is exactly that distributed, some figures are already out-of-date as more recent statistics are available.
Headline statistics for Wales frequently paint a depressing picture, one of a country seemingly unable to reverse decline seen over many years. The ONS bulletin published earlier in 2014 has Wales with the lowest GVA per head of all the regions in the UK: at £15,401, it represents 72.3% of the UK average. Moreover, the latter figure has been in decline for some time, painting a picture of an economy that’s getting worse. Wales’ fiscal deficit – that is, the excess of public spending over tax receipts – remains stubbornly high and, for 2009-10, was estimated at just over £6,000 per head.
Other statistics paint a similarly gloomy picture. Compared to England, PISA scores are lower. The same is true for pass rates at GCSE. Life expectancy increases are lower. The percentage of people of working age in employment has been consistently lower over the last five years. Lending to SMEs appears to be stagnant. Rates of entrepreneurship are lower. Meanwhile, sickness rates of those working in the NHS are nearly a percentage point higher in Wales than in England. Wales also has a higher percentage of the working age population employed in the public sector than both England and Scotland.
Against this dark backdrop, paradoxes abound. Cardiff is one of the fastest growing cities in Europe. A Money SuperMarket report ranked it as having the best quality of life of the twelve cities it assessed. Of the UK’s major cities, Cardiff has the second highest percentage of degree-qualified people of working age. Both Cardiff and Swansea feature home-grown and established communities of tech start ups (Cardiff Start and Swansea Start respectively), created to support both entrepreneurs and entrepreneurship.
The paradoxes extend beyond the cities. TripAdvisor ranked Rhossili Bay as the best beach in the UK. In terms of SME financing, a Pembrokeshire-based startup producing small, smartphone-controlled drones found 8 times the capital it required via crowdfunding. In terms of innovation, a Tywyn-based startup was lauded in the Financial Times recently for its production of a fridge that can operate for days without power, potentially providing a game-changing means of delivering vaccines to developing nations.
What, therefore, is happening in Wales?
There is certainly no denying Wales’ economic malaise. A variety of initiatives have been tried over the years to change this; interestingly, 2015 marks the 40th anniversary of the speech in Blackpool at which the then Prime Minister, Harold Wilson, announced the creation of the Scottish and Welsh Development Agencies (the WDA itself came into being a year later, in 1976), both intended to promote regional business development. As a country now in receipt of its third round of structural funding from the EU, Wales’ progress has been, at best, painfully slow.
The economies of countries can change, and can do so fairly quickly. 2014 saw the 25th anniversary of the fall of the Berlin Wall and the effects of those 25 years have been profound in and beyond mainland Europe. Estonia and Poland are now hailed as well-performing countries; Croatia, while growing, still suffers from high unemployment, an issue exacerbated by the financial crisis of 2008. Emerging markets have suffered vicissitudes, as amply illustrated by the Asian Crisis of 1997, and are the perennial subject of speculation. Meanwhile, we all live with the story of Russia on a daily basis. Wales, in comparison to all these countries, looks like it’s trapped in quicksand.
Do headline statistics really capture the essence of Wales?
GDP – and, by extension, GVA – have limits to their usefulness, particularly at a regional level. It is a heavily politicized measure but one that continues to be used largely because no single, adequate metric has been able to supplant it. At its core it values consumption and not sustainability; given Wales’ reliance on its natural environment, is GDP growth really a measure we’d like to maximize?
Obstacles exist, irrespective of the preferred measures. At a recent presentation in Cardiff Business School, eminent academics said economic progress in Wales is impeded as a result of a lack of investment in economic analysis. Simply put, the statistics required to make informed judgment don’t exist. How can Wales’ administration clearly define borrowing needs – and if it were able to approach the capital markets, how can it do so with confidence – when it cannot measure its requirements?
The academics remarked that, by way of comparison, the US published such statistics because there’s clear demand from both the private and public sector. How can the demand in Wales be more clearly articulated?
What will become of Wales?
So: plagued by long-term decline, dogged by a lack of pertinent figures for clear policy making, cast into the shadows by enterprising and developing countries – is this Wales, and is the outlook for it bleak? A seemingly trite but honest answer is: it depends. It depends on our vision for Wales and the contribution we each make towards that vision.
What is Wales? Is it a nation with a single identity or a collection of regions with a plurality of identities, each with its issues that need addressing? The heterogeneity implied by the latter is certainly borne out by the existing range of available stats, some of which – for example, long-term sickness rates – show significant, and quite depressing, variation. What is the vision for Wales as a whole? Is it to compete favourably on an international stage in science and technology? To have an enterprising culture that rivals Silicon Valley? To be a leader in renewably energy production? To be an exciting place to live? Or to be all of these, and even more? Whatever the choice, we need to aim high. But is there a Welsh psyche – a deep-seated fear of failure, whatever failure may be – that constrains our ambitions? Or are parochialism and tribalism the two greatest impediments to realizing any ambition?
Current management-speak includes the much-used term “elephant in the room”. Is Wales’ elephant in the room the issue of money, of paying for any vision? Have the seemingly interminable discussions about the Barnett formula obscured the blunt reality of the implications of a persistently high fiscal deficit?
What is the role of civil society in achieving a vision for Wales?
Adam Smith talked of civil society. It’s one of Niall Ferguson’s “four sealed black boxes” in his discussion on how economies die. It has no single definition, although Helmut K. Anheier – founder of the Centre for Civil Society at LSE – suggests the operational definition: “Civil society is the sphere of institutions, organisations and individuals located among the family, the state and the market, in which people associate voluntarily to advance common interests.” The World Economic Forum says civil society is a “vibrant, diverse and evolving space, which is increasingly innovative in its attempts to solve societal challenges and support local, national and global governance.”
Where, and what, is civil society in Wales? Regional media is much diminished compared to that in years gone by, and does not represent the breadth of political view or challenge seen in the UK’s national media. The third sector, as noted in a report by the Bevan Foundation, has been so reliant on state funding that its focus has been on service delivery rather than advocacy. Think tanks, like Gorwel, are thin on the ground: somewhat amusingly Gorwel fits Anheier’s definition perfectly of people associating voluntarily to advance common interests. If we take Anheier’s definition, and accept that any innovation to solve societal challenges will itself result in challenge to, and counter-challenge from, the state, then civil society is in poor shape: change is needed, but how and from whom should the change originate?
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