Why Alun Cairns’ ‘Western Powerhouse’ is a diversionary exercise designed to undermine Wales

Alun Cairns. Picture by Cabinet Office (CC BY-NC-ND 2.0)

Eurfyl ap Gwilym

There was a muted response to the recent speech by the Secretary of State for Wales calling for the establishment of a ‘Western Powerhouse’ to facilitate stronger economic growth by promoting closer collaboration between the cities of the south of Wales and those in south-west England.

Mr. Cairns claimed that the forthcoming abolition of tolls on the Severn crossings could be the catalyst for such a powerhouse. But there was no mention of this proposal in the following day’s Western Mail nor in the Financial Times.

Why was the reaction so muted? Was it due to the complete absence of any detail or to the failure to commit any funding to the project?

In assessing such a proposal, a number of factors need to be considered including: cultural; social; and economic. The purpose of this article is to focus on the economic issues.

Given the parallels being drawn by Mr Cairns with the Northern Powerhouse it is instructive to look at what is happening in the north of England following its launch by the then Chancellor of the Exchequer, George Osborne, in 2014.

The purpose of the powerhouse was to stimulate much stronger economic growth in northern England by bringing about closer collaboration between the urban centres of that region and to redress the massive imbalance between the economic performance of northern England and that of London and south-east England.

In the case of the Northern Powerhouse the UK Government has allocated £3.4bn to deals to ‘unlock growth’. Three of the key strands of the ‘powerhouse’ are:

  • improving transport links within the region
  • investing in science and innovation
  • the devolution of powers.

Investment

How is investment in transport links progressing? Well, so far not so good with many of the planned improvements cancelled or downgraded.

Chris Grayling, the Transport Minister, said in July 2017 that it is now unlikely that the railway line between Manchester and Leeds will be fully electrified. He also cast doubt on whether the planned two additional platforms at Manchester Piccadilly station would be built.

It was also announced that the electrification plan for the Midlands main line was to be scrapped and 122 InterCity Express trains ordered would be changed to less efficient bi-mode trains with diesel engines added to run on non-electrified lines.

In this at least Chris Grayling appears to have anticipated the ‘Western Powerhouse’ and acted accordingly by downgrading the modernisation of the Cardiff to Swansea line.

Research by IPPR North has shown that current and planned expenditure on transport infrastructure per head of population is £1,943 in London compared with £427 in the north of England.

To rub salt into the wound a 12-month delay in the second phase of HS2, the leg north of Birmingham, has just been announced and the director responsible has left.  There are increasing rumblings that this northern leg will never happen.

Spending

In the case of science and innovation, as the world moves increasingly to being a knowledge-driven economy investment in research and innovation is important.

Both as a source of new ideas and inventions that can be commercialised to form the foundation of the next generation of business and also as a means of equipping people with the requisite skills for the new economy.

This is why the UK Government saw such investment within the northern region as a key element of the Northern Powerhouse. However, direct spending in 2016 by the UK Government and through its funding of the research councils was £22 per head in the ‘Northern Powerhouse’.[1]

This compares with £42 per head in the south west of England, less than £5 per head in Wales and a heady £547 per person in London.

Combining Wales and the south west of England would average out such spending to £28 per head of population, a figure much closer to the ‘Northern Powerhouse’ than to London. Is this what Mr Cairns has in mind?

Powers

To be fair there has been some progress in terms of the devolution of powers in the north of England through the direct election of mayors in cities such as Manchester.

But the powers devolved pale into insignificance when compared with the current devolution to Wales and even more to Scotland.

The UK Government is displaying, as we know all too well in Wales, a reluctance to devolve powers outside the Westminster/Whitehall nexus.

Resources

Mr Cairns claims to be seeking ‘to seize the opportunity’ of the abolition of the Severn Crossing tolls to create an economic region that ‘can compete’ with the Northern Powerhouse and the Midlands Engine and with the economy of south-east England.

According to the ONS[2] the Northern Powerhouse region generated a fiscal deficit of £41bn in 2016-17. The Midlands Engine region fared little better generating a deficit of £20bn. London generated a surplus of £32bn.

What these figures underline is the failure of successive UK governments to address the dreadful economic imbalances across the UK and the need for a radical realignment of economic strategy to rebalance prosperity across the UK particularly in the wake of Brexit.

If the ‘Western Powerhouse’ is to be more than the marketing campaign or a one-off event that Mr Cairns protests it is not, then where are the additional resources to be invested in such an initiative?

Professor Dylan Jones-Evans has noted that the current transport provision for road and rail between south Wales and the south west of England is not ‘fit for purpose’.  So far no additional resources have been committed to the Western Powerhouse by Mr Cairns or his colleagues in the UK Government.

No concrete proposals or even ideas have been mooted: ‘We need to seize the opportunity’, ‘we need to light the blue touch paper’, and ‘It’s got to be driven by you the experts’ appears to be the sum total of his contribution.

Omnishambles

These objections and doubts are not to question the benefits of cooperation between businesses in south Wales and south-west England but why is Mr Cairns concentrating on this when the economy of Wales is imperilled by a Brexit that leads to our ejection from the Single European Market?

Is Mr Cairns fighting tooth and nail to ensure that we remain in the Single Market? Is he pressing his cabinet colleagues for a radical change of direction in UK economic policy?

Even if the economic case for the ‘Western Powerhouse’ made sense there are, of course, other important considerations. The abolition of VAT on the Severn tolls has already led to an increase in traffic which as well as adversely impacting the environment will lead to further congestion along the M4 well before any relief road is built around Newport.

House prices in Monmouthshire are rising as Bristolians who cannot afford houses in their home city seek out cheaper housing and drive up prices in south Wales. This will adversely impact local people hoping to buy their own homes.

Additional pressure will be placed on local public services and given the way Wales is funded via the Barnett Formula these increased demands will not be fully reflected in increased funding levels.

Furthermore, a large increase in commuter traffic between Monmouthshire and south-west England will change irrevocably the social and cultural structure of this part of south Wales.

One suspects that the ‘Western Powerhouse’ is a diversionary exercise designed to undermine the integrity of Wales and to divert attention from the omnishambles that is the current, Brexit-stricken UK government.


[1] Gross domestic expenditure on research and development, UK. ONS March 2018.

[2] Country and regional public sector finances: financial year ending 2016 to financial year ending 2017. ONS    August 2018.


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