Is there a problem with Economic Planning in Wales?

The first thing to say about the new Economic Action Plan (EAP) is that it is a vast improvement on the current plan.  Indeed, since at present there is no economic development plan for the Welsh economy, almost any attempt to fill the void is to be welcomed.

The Welsh Government has always had difficulties implementing economic strategies.  The last attempt to produce an EAP for Wales floundered soon after devolution when it set specific targets for GDP growth: Winning Wales (2001).  However, when these targets proved difficult to achieve, the plan was quickly shelved.  

Since then we have had a series of ignominious economic strategy papers.  These have turned out to be mostly wish lists, with no specific economic targets and little accountability.  The most ill-fated of these was probably Wales: A Vibrant Economy (WAVE; 2005).  This was published immediately after the announcement, in 2004, that the WDA was to be abolished.  

However, in 2005, there was still optimism that devolution would deliver an economic dividend:

“The Assembly Government’s growing range of devolved powers, short decision chains, close partnerships, local knowledge and willingness to engage will help in building an ever stronger competitive advantage for Wales.” (WAVE, 2005).

Unfortunately, WAVE achieved nothing and since then, as Wales’s relative prosperity gap has persisted, various strategy documents have come and gone – arriving with much fanfare but disappearing without impact.  The current EAP is certainly more ambitious than previous plans:

“we intend building an economy on strong foundations, to supercharge our industries of the future and empower all our regions to become more productive.”

So, has the time come for renewed optimism about the delivery of that elusive economic dividend?  Certainly, there is much to like in the new EAP.  

Firstly, the EAP is honest about our current economic challenges and this is to be welcomed:

“Wales faces a productivity issue, with output per hour worked in Wales the lowest of all UK nations and regions.  This lower productivity is the main driver of the Gross Value Added (GVA) gap between Wales and the UK.”

The EAP is also clear on some of the solutions:

“Investments in human capital, infrastructure and physical capital; innovation and science; enterprise and competition all have a part to play.”  

EAP aims to do things differently.  It will focus more resources on the ‘Foundational Economy’, it will update the current sectoral approach and it commits to a more coordinated regional focus for economic policy.  The problem is that the mechanisms proposed to achieve these laudable aims are not very convincing.  

For instance, in order to realise some of these investments the EAP proposes to introduce a new ‘economic contract’ with employers.  Firms seeking financial support from the government will need to invest in skills and the wellbeing of their employees and also commit to reducing their carbon foot print.  This is a good start, but firms with growth potential should be doing this sort of thing anyway?  So, this new ‘contract’ is little more than a welcomed rationalisation of the current grant application process rather than an economic action plan.  

More worryingly, even where the EAP appears to be breaking new ground, it does so in a very half-hearted fashion.  The main new idea for raising productivity is to introduce three ‘Chief Regional Officers’ across Wales to underpin a new “Regionally Focussed Model of Economic Development”.  These will “add value by bringing partners together to understand the issues in each region and the interventions needed from us.”  

Unfortunately, this falls well short of the adequately resourced regional delivery vehicle needed to raise productivity across Wales.  Presumably the three ‘Chief Officers’ will be existing civil servants, promoted from within the Department of Economy and Transport.  So the current bureaucratic approach to economic development in Wales can be expected to continue – i.e. a risk averse approach that is focused on process and compliance, rather than on delivering outcomes.  

The problem is that delivery of projects like the Metro and Valleys regeneration, all require cross departmental mechanisms within the Welsh civil service and it is well known that the Silo mentality within WG means that most projects are long drawn out, often diluted and decision making is postponed until it is often too late to get either value for money or economic impact.

Much of the advice given to the Cabinet Secretary in the run up to the new EAP (by the CBI, EEF, FSB and others) emphasised the need for economic resources and decision making to be devolved to the Welsh regions.  The conclusion of many business organisations in Wales was that the centralisation of power in Cardiff Bay has not delivered the economic dividend that was promised.  

Instead of three ‘Chief Officers’, what is probably needed is a more holistic economic development strategy, implemented through dedicated Regional Delivery Companies (RDCs).  These RDCs would need to be one-step removed from the Civil Service and possess the commercial skill set and resources to make timely decisions and deliver outcomes.  Each RDC could have a Chief Executive who would be subject to scrutiny by Assembly Committees and would be jointly responsible to the WG, the LAs and the City Deal organisations.  

Indeed, to ensure accountability, each RDC could be given an annual remit letter by the Cabinet Secretary, highlighting the main KPIs that need to be met for investment, jobs, growth etc.  This approach could create the capacity at the City Region level to maximise the regeneration opportunities of projects like the Metro.  The RDC, and its Chief Executive, could then be held to account by stakeholders for failure to deliver the performance required.   

This is the major weakness of the new EAP – it simply does not include any KPIs.  Targets are completely absent and there is no implementation plan so there will be no way to assess the EAP’s progress over the next few years.  Indeed, who will be held to account, in say five years’ time, if the EAP goes the way of WAVE and similar economic strategies of the recent past?

This lack of accountability could be particularly problematic for the Welsh Economy given that the next five years will see us Exit the EU.  Irrespective of the long term impact of Brexit, there is likely to be increased economic uncertainty in the run up to the transition period in 2020.  Hence, this EAP is likely to face much stronger headwinds than those faced by its ill-fated predecessors.   Let’s hope that in the face of this uncertainty the EAP proves flexible enough and remains adequately focused to build the strong economic foundations that it has been tasked to deliver.   

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