10 ways to float the grounded ship of the Welsh economy and set sail
Adam Price, Plaid Cymru leadership candidate
The greatest ideas seem very simple and obvious when they are explained. Before that the problem can look hopeless.
It is like that with Wales and its tattered economy. For too long we as a country, with a Labour government, have drifted, we’ve settled for managing things the way they are, never challenging things, never pushing the boundaries, never trying new ideas.
This has had a damaging and detrimental effect on our great nation – but this can change.
A few years ago I co-wrote a publication called The Flotilla Effect which described how small country economies succeeded as a fleet of small boats. These days with Brexit on the horizon we may feel we’re aboard the Titanic.
But let’s not start with describing the wreckage, lets describe the new vessel-to-be with us all aboard and feeling the wind in our sails.
1. Investment bank (first float the boat)
Establish a Welsh investment bank with £2 billion to lend. We’ve never had one before. Instead we have had a greedy mean little institution with a stingy ambition of lending just £80 million by 2022.
It wants all the money it lends back quickly and with lots of interest. Our investment bank will want it back over the long term and pass on the very low interest rates to lenders.
The present arrangement leads to businesses that are successful selling to foreign buyers then the tax and most of the benefit leaves the country.
So how do we get £2 billion? It won’t cost us anything. The first billion comes from the grants we pay out being turned into loans, gentle long term ones.
The second comes from Welsh pensions, just 7% of their £15 billion. If they are reluctant, the Plaid government could guarantee the interest.
This half could fund green infrastructure giving us benefit for decades or even centuries to come.
And a huge bonus: At present much of our grant aid goes to so-called ‘anchor companies’ which are rarely Welsh, so the benefit leaves the country.
Instead we can become economic gardeners ‘planting the seeds and watering the roots’ of the companies grounded in this country. We can start with the top 300 and the fast growth 50 for early fruits.
The ripple benefits of lending locally are many times the benefit of grant aiding global corporations where the money disappears.
2. Infrastructure (get it ship-shape, build the slipway)
Wales has been utterly neglected in the UK in terms of its infrastructure. We will put that right, and yes it will be the first bit of fresh money, but be patient: We spend £1.3 billion a year on infrastructure. That is 2% of GDP.
A good guide is to spend 5%, rather like what you might set aside for house maintenance to remain in a good quality house.
The Welsh government has next to no debt. Spending £8.25 billion on infrastructure will transform our economic environment and prepare us for the long-term green future.
And we will remain within a cautious 5% of revenue budget, the same as the well managed Scottish budget.
This sum is twice the entire income we’ve had from the EU since 2000. :
- It would fund the original exciting vision of the Metro for south Wales – the £3 billion version not Labour’s cut-price, refurbed Tube train travesty.
- It would fund a full-scale Metro for Swansea Bay and the western Valleys too, and a Western Rail Corridor linking Carmarthen with Aberystwyth and Caernarfon.
- It would fund a programme to develop the A470 – with its spines to Bangor, Llandudno and Wrexham – as an iconic fast link between the south and the north, the One Wales Highway.
- We would ensure 1 gigabit internet speed as standard nationally.
- We would create a new parallel energy grid for Wales powered by wind, tidal, hydro and solar.
This does 2 things: Improves GDP by 1% a year for 10 years and transforms our future.
Vitally we would set up a national infrastructure company to ensure this money was spent efficiently on short supply chains and local workers.
What happens now is that the money is hollowed out by consultants and expensive finance companies, delivering nothing worthwhile. Foreign contractors seize the rest and local companies are paid late and little.
Again we are learning from Scotland. Instead of these money sponges we have the bank and their engineers, a public company with local builders and architects working together.
All paid well but honest sums, likely to be spent locally, trebling the benefit to the economy.
3. Energy – and water (power it)
Wales has vast potential to be a renewable energy powerhouse – much as we were in coal a hundred years ago.
Currently, however, our natural resources are largely untapped – or where they are, as in offshore and onshore wind – it is the taxpayers of other European countries that reap the benefit.
Even the much-vaunted tidal lagoon project was led by a company from Gloucestershire.
A publicly owned Welsh energy company is a must for the 21st century. It would re-energise renewable energy in Wales and deliver electricity at competitive prices for the consumer.
Step one is for our own national energy company to buy energy from new locally owned renewable projects. Long term contracts mean we can buy cheap and provide cheaper power to our people
Step two is to invest in our own publicly owned renewable generation and transmission and distribution network to create a new decentralised grid, offering a cheaper, more efficient and higher quality service than the foreign-owned companies that currently dominate electricity in Wales.
Step three is storage including using our geology (mine shafts, pumped storage) and innovations. This will open the door to high value exports leading to either a sovereign wealth fund as in Norway or the money for a universal income.
The same principle should apply for water which can be exported using the return trips of LNG tankers.
4. Low income tax (get the crew paid)
Land value tax on industrial, commercial and residential (not agricultural) land can replace business rates, council tax and dramatically lower income tax.
This will make Wales the place to live and earn. Lowering it by 9p in the pound leaves £250m per annum to invest in our underfunded schools and colleges to transform our education system.
5. Job guarantee (and working)
A job guarantee at a living wage for the young and in deprived areas. We can employ anyone who is out of work for 90 days with a workforce company of our own to do socially worthwhile work or by paying for internships in accredited companies.
6. Skills and training (and skilled)
Give the Cinderella of education her ball gown and value vocational training, using the 1p in £1 mentioned earlier. Work with employers to shape training to their 5 year plans. Bring back the polytechnic and HND, they worked well, and combine with in-work training.
Combine the skills and education departments in government, ending wasteful competition.
Learn from the colleges getting it right (e.g. in Carmarthen and Ceredigion), create a Welsh medium FE college for the south east too and firmly establish parity between the academic and the practical, which is long overdue.
7. Making universities universal not lonely towers (find new lands – innovate)
Innovation can spread through society helped by our universities. Innovation not just in technologies but new ways to work together, organise and care for people.
We can trial a non-specialist university where students learn about everything and specialist ones going into depth e.g. in software.
The Mondragon University for Cooperatives could build a branch here. A loan forgiveness scheme in return for working in Wales can reverse the brain drain.
We know it works: In 2014, government invested £150m on knowledge exchange in England, £17m in Scotland and £4m in Northern Ireland but nothing in Wales.
Income from the knowledge economy grew in all these regions (up to 30%), while in Wales it fell.
8. Regional development (keep an even keel)
Our country has economic potholes, areas of no progress like the Heads of the Valleys.
Creative distributed investments will turn them into springboards: A bilingual ecotown in the west, a free port in Milford and other harbours, a city of the future to test new technology, and turning tourist tailbacks into a flow of traffic and cash through a congestion charge in Snowdonia.
Local development agencies and cooperative banks will provide vision and investment.
9. Our complementary currency – (plug the leaks)
The Welsh government issues its own currency, it can be crypto and blockchain like Scotcoin, or a tax rebate in years to come, or an IOU – government will redeem through goods or services, instead of tax payment, or a combination of these tools.
This will help Welsh money recirculate, multiplying its value every time it is spent as it cannot leave the country. This can counteract austerity, refuel the Welsh economy, and make business more competitive as the currency will trade at a discount.
10. The Foundational Economy – (mend the hull).
Change focus from inward investment to local businesses supplying the basics that are essential to life – food, utilities, construction, retail, education, health and social care, and housing.
Promote house building to support real needs and aspirations for the long term future, not just to line developers’ pockets.
To any fair-minded person the bulk of these policy proposals will appear eminently practical and workable, and capable of upgrading Wales’ economic performance. Indeed, they are common sense.
The question arises, therefore, why hasn’t a programme such as this been implemented during the twenty years that we’ve had democratic devolved government?
The answer is that Labour, opposed to devolution for so long, it never really had a clear idea about what it was for. It has been at the helm without a map or a compass.
We’ve drifted for far too long. As we face uncharted waters, Wales needs a new leader to chart a new course.