The state that we are in part three – is Wales failing?

Brian Roper

In the previous articles I analysed the performance of the Welsh government by reference to its current budget but even in Wales there is more to life than government and its works.

I continue now to frame the question posed at the outset in a wider context.

The private sector in Wales, as in all capitalist economies, is critical in fuelling tax revenues and providing employment.

With approximately half of the population in Wales not working and 30% of those who are being employed in the public sector it is highly likely that the wealth generating engine of the economy is under powered for the task in hand.

Inequality

The evidence is that “By international standards, the UK has very high levels of interregional inequality, and productivity gaps between the best performing and worst-performing areas have been widening since the early 1980s.

According to most measures, Wales is among the lowest in the productivity rankings of the UK countries and regions, and its wage rates are also below the UK average.

The Welsh economy has relatively few high-value, high-productivity services compared to the UK average, and depends to a greater degree on lower productivity services, manufacturing, tourism, and agriculture. It also has a relatively high proportion of small firms and lower-level skills” Albeit from a low base there is encouragement to be got from the fact that Wales saw a 5% increase in the number of businesses between 2021 and 2022, the largest of any country or region in the UK.

Wales has a small number of large companies which pose differing challenges to the economy.

It is frequently that there is a preponderance of small and micro enterprise which have received significant policy attention.

Low rates of growth

The evidence is that “Wales, in similarity to other parts of the UK, has a relatively small number of medium (and large) firms in the business structure compared to smaller firms, and by virtue of their size, these firms make a disproportionately important contribution to the economy in terms of turnover, employment and productivity. However, the report has found that medium-sized enterprises have recorded relatively low rates of growth in enterprise count and share during the past five years, providing some evidence of low rates of business evolution into medium-sized firms”.

The overall picture in Wales is patchy.

A full evaluation of the performance of the Welsh corporate sector would be a major undertaking not attempted in this article but nonetheless critical to a rounded appreciation of the functioning of the whole Welsh economy if regulatory and incentivisation policy is to be properly focussed.

Economic renewal

This is made more pressing by the finding that “The Welsh Government did not fully translate its vision for economic renewal into a co-ordinated programme of financial support to businesses… The Welsh Government has monitored individual projects separately but has not managed financial support to businesses as a programme…The Welsh Government has not demonstrated clearly how its financial support for business has contributed to the economic renewal objectives it set in 2010…The Welsh Government has a new economic strategy and is now beginning to overhaul its approach to providing financial support to business (Wales Audit office, Welsh Government Financial Support for Business, November 2018).

The third sector “…includes community organisations, self-help groups, voluntary organisations, charities, faith-based organisations, social enterprises, community businesses, housing associations, co-operatives and mutual organisations to name only a few. The third sector comes in a range of institutional forms, including registered and unregistered charities, Companies Limited by Guarantee (which may also be Registered Charities), Community Interest Companies, Industrial and Provident Societies and unincorporated associations.”

This sector comprising 32,000 organisations, contributes over £1.3 £Bn to the Welsh economy and is, these days, integral to welfare provision but the valiant efforts of the 938,000 volunteers to help their growing client bases cannot compensate for the inadequacies sketched above.

It is a very diverse sector with marked variations of “ Size and income, over half the charities in Wales are “micro charities” with an income of less than £10,000 p.a., while a quarter of charities have an income of between £100,000 and £1m; Social purpose and focus, including the arts, sports, health, anti-poverty work, community and education; and Governance and structure, including branches of large formal charities answerable to trustees in England, autonomous Welsh charities, affiliated and non-affiliated sports groups and unconstituted community groups. Some are run entirely by volunteers, while others have large numbers of paid professional staff” (Duncan Holtom and Sarah Lloyd-Jones, The role of the voluntary sector in shaping a new economy for Wales.

Public funding

The evaluation of the performance of over 32,000 organisations is beyond the scope if this article but since public funding is central to this activity must be considered elsewhere.

I offer below a brief commentary upon other aspects of life in modern Wales, this time without metrics, a task which lies outside the scope of this article.

In addition to the failures cited above there are the public failures of state and non-state actors (many of which are state funded).

Over recent years I think of:

S4C

Welsh tourism (Visit Wales), which the Welsh Affairs Committee report in 2023 says “punches below its weight” in attracting international visitors. It blames poor marketing, tour operators ignoring Wales and challenging transport connections” (House of Commons, Welsh Affairs Committee-  Wales as a global tourist destination, Fourth Report of Session 2022–23)

Certain government fixed asset purchases and sales (“Due to flaws from the outset, the Welsh Government and RIFW [Regeneration Investment Fund for Wales] cannot provide public assurance that the land and property portfolio sale achieved value for money”-Auditor General for Wales report, July 2015)

The purchase of an airport where returns remain elusive

The National Museum

The National Library

Literature Wales

The National Theatre of Wales recently defenestrated by the Arts Council of Wales (itself subject to periodic criticism)

The WRU which, at least temporarily, seems to have reverted to its core role

Alleged COVID underspending (March 2023 Report by the Senedd Public Accounts and Public Administration Committee (Papac) claims “significant funding was lost to Wales” as a result of the Welsh Government’s £155.5 million underspend in 2020-21)

The fragmented Independence movement of which I write with sadness since I renewed my membership of Yes Cymru the day before they displaced their first Chief Executive, to save money, I could have saved mine had I known.

The issues presented above matter to all of us.

In conclusion I revert to the beginning of this article…

Assuming that the general thrust of the argument is accepted my second question is “What are the causes of the problems identified above” and my third is “What can we do about it?”

These questions will be addressed in subsequent articles.