Can any political party turn around the Welsh economy?

Jonathan Edwards

Way back at the start of devolution, the first National Assembly had an economic target of raising Welsh Gross Value Added (GVA) to 90% of the UK average.

There was such a definitive focus on economic rebuilding because creating a political structure to help improve Welsh economic performance after the ravages caused by Thatcherite deindustrialisation was central to the argument developed to win the devolution referendum of 1997.

While there are a host of statistical ways of measuring economic performance, and I will leave the economists and academic social scientists to bash it out amongst themselves, GVA is a key productivity metric and gives us an idea how different geographic areas are performing.

In other words it’s safe to assume if GVA is comparatively low then the geographical area in question faces significant economic challenges.

At the time of the creation of the National Assembly, Welsh GVA was 72.4% of the UK average. Today, after a quarter of a century of devolved governance, the latest figures I can find from 2022 published by the Welsh Government notes Welsh GVA as 72.1% of the UK average.

Not only has performance remained stagnant at best, Wales finds itself at the very bottom but one of all UK countries and regions.

During the last 27 years the Welsh Government has assumed more powers over the economy, yet it remains true that the main economic levers remain under Westminster control.

However, the failure to make a dent in the GVA deficit between Wales and the UK average indicates that devolution hasn’t delivered on its founding promise to the people of Wales. The GVA target was quickly dropped in Cardiff Bay.

I very much agreed with Rhun ap Iorwerth when he stated in a speech at Cardiff University in 2024 that his first economic policy proposal was to reintroduce an ambitious target to close the GVA gap. While targets themselves are abstract, their purpose is to give a clear direction to the work of government and help measure the success or not of policy.

They indicate a seriousness to get to grips with Welsh economic decline, without which there is no real possibility of dealing with the major social problems we face as a country, be it poverty or ill health.

The party’s manifesto writers, perhaps mindful that they will soon be holding the Welsh Government reins, have quietly dropped any mention of closing the geographical gap with the rest of the UK.

A new Fiscal and Economic Commission will be set up to help compose internal Wales targets and measure success but gone is the specific aim of improving Welsh performance compared to the rest of the UK.

Specific targets

Similarly, none of the other parties commit to a specific target to improve Welsh GVA comparatively to the UK average. All the main protagonists have interesting ideas and there is much symmetry between the parties. Regrettably it is difficult to say with confidence that anyone contesting the election has the imagination to overturn the economic fortunes of our country.

Glaringly missing from all manifestos is a clear vision of how Wales needs to position itself for the Artificial Intelligence economic revolution that is currently accelerating at speed.

Wales will either find itself at the head of the curve or trailing in its wake, and it is the responsibility of those who seek to lead us to make sure that the people of our country are ready for the transformative changes ahead.

On a side note, readers may be interested to learn that in Albania, Prime Minister Edi Rama last year appointed a Cabinet Minister made up from the work of AI named Diella. Diella has been tasked with the issuing of public procurement contracts to make sure they are 100% free from corruption.

The key point being that AI is about to wipe out a whole range of knowledge-based jobs and logistical/manual jobs down the line as robotic abilities improve. When the political parties emphasise skills and education, what exactly is the economy we are preparing our young people for?

Considering the implications for public revenue generation, the next Welsh Government is going to have to think very quickly about how an AI based economy will impact on taxation.

Data centres 

Does the Welsh Government for instance use the abundance of electricity generation capacity in Wales to secure investment for data centres and other AI infrastructure and then find a way of taxing the assets directly?

If this is the plan, how will the planning system support development and will our elected members have the backbone to withstand the NIMBYism that dominates political discourse in our country.

Political parties obviously want to try and fight elections on their chosen ground; it is understandable that they don’t want to venture onto terrain that they probably don’t understand.

However, these big changes are fast advancing. If the next Welsh Government doesn’t get its policy right, there will be little hope of advancing from the bottom of the UK economic performance table.

Jonathan Edwards was the MP for Carmarthen East & Dinefwr 2010-24