Why levelling-up should be ditched and the money spent on education

Martin Shipton

Around 25 years ago, as devolution dawned, there was much excitement about the EU regional aid money that would be coming Wales’ way.

There had already been a taste of it in the pre-devolution era, but the big prize now was the decision to grant the majority of Wales what was known as “Objective One” status.

Civil servants had devised an artificial region called West Wales and the Valleys that would be entitled to the highest level of financial aid from the European Commission.

The boundaries of the region were drawn to ensure that it met the sole criterion for qualification: that its GVA (Gross Value Added – a variation on GDP) per head was less than 75% that of the EU as a whole.

Achieving the coveted status could hardly be worn as a badge of honour, signalling as it did significant deprivation, but what seemed to matter at the time was that the money coming to Wales was expected to bring prosperity with it, especially to communities that had lost relatively well-paid jobs with the closure of the mines.

Looking back now, many of us expected more from the EU money than it was able to deliver, at least in the short term. Nevertheless, the most heat generated at the National Assembly during its first year was over the rather arcane issue of Objective One “match funding” – the extra money the UK Government was expected to chip in to top up the cash coming from Brussels.

Gordon Brown, who was Chancellor at the time, took the view that Wales was getting enough funding already and he wasn’t prepared to stump up any more. In the rarefied world of Welsh politics this spelled massive trouble for Alun Michael, the Assembly’s “First Secretary” and widely seen, rightly or wrongly, as a stooge of Tony Blair who had unfairly deprived Rhodri Morgan of the Welsh Labour leadership.

With no match funding forthcoming, the three opposition parties, who had more seats than Labour, ganged up to oust Michael and he was replaced by Morgan.

Flowed

The European money flowed and in the early years the emphasis was on getting it spent rather than ensuring the schemes were of the highest quality. The best projects were those that helped improve the skills of those who were either at the lowest end of the labour market or outside it altogether.

A lot of schemes involved community-based initiatives that may have provided some jobs while they lasted, but once the funding came to an end there was nothing left as a legacy.

In retrospect this amounted to an earlier form of “levelling up” years before the term was officially adopted.

The idea was that the poorest part of Wales – most of the country – would be levelled up towards the EU average. Unfortunately that didn’t happen. We know for sure that it didn’t because after the first Objective One period of seven years came to an end, West Wales and the Valleys qualified for two further seven-year periods on the same basis – that its GVA per head was still less than 75% of the EU average.

In fact, qualifying for the second and third periods was more difficult because the average was based on an EU that had got bigger, with several relatively poor eastern European countries now included in the calculations.

In the later tranches there was more emphasis on spending money so it would increase prosperity. A number of new college buildings were built, for example, and more apprenticeships were created. Yet it was difficult to demonstrate that prosperity was actually increasing.

Some argued that the economic situation in Wales’ poorest areas would be even worse without the EU money, and it was fair to say that the Conservative-led UK Government’s austerity agenda had a hugely negative impact on local economies. But high hopes that European aid would prove to be “transformational” were nowhere near being realised.

New era

Brexit has taken us into a new era of regional aid. While the Welsh Government was previously in control of the distribution and monitoring of EU funds, the UK Government decided to elbow it out and deal directly with local authorities.

Instead of allocating money on the basis of need, as the European Commission had done, Westminster introduced a competitive element, forcing councils in effect to bid against their neighbours.

A huge row also developed over allegations that Wales was being shortchanged, and that a Tory promise that Wales wouldn’t lose a pound in regional aid funding because of Brexit was being broken.

This argument, rather than a discussion of the merits of the “levelling up’ schemes themselves, as they were now officially designated, dominated the attention given to the issue by politicians and the media.

For Jeff Jones, a former Labour leader of Bridgend council and chair of the Welsh Joint Education Committee, the emphasis has been wrong.

He said: “Years ago there were concerns about the way European money was spent and now history is repeating itself. I looked at a list of the projects approved for Bridgend county borough and I don’t see how they are going to improve prosperity. They’re giving out grants of between £30k and £50k to tart up shops in Maesteg, where I live. Meanwhile another large pub in the main street has been closed.

“The new system of distributing grants is all about pork barrel politics. They’re spreading the money around in an untargeted way and the local MPs get a photo opportunity to give the impression they’re doing something.

“You get announcements that so much money is being spent on such and such local projects, but no one comes back, say, four years later to assess what the impact has been on local prosperity. The answer would almost certainly be zero.

“In Carmarthenshire almost £17m has been allocated for a cycleway. So far as I can see, it’s of no economic value.”

For Mr Jones, “levelling up” money would be better spent on education.

“There are two ways to spend money that will result in improvements to the economy and greater prosperity,” he said. “Infrastructure and education. I don’t agree with the Welsh Government’s anti-roads policy, which gives the impression that Wales isn’t open for business. But I also think that spending money on education would be better than on these ill-thought-through projects that add no extra value.

“I’m hearing of schools that are facing budget cuts and having to think about cutting teachers and other staff. They could do with the extra money. It makes no sense to cut teachers’ jobs while wasting money on schemes that won’t bring prosperity.”

Levelling up

Wales’ relationship with successive versions of “levelling up” has not been a happy one. Objective One funding did not live up to the high hopes that had, perhaps over-optimistically, been invested in it. But while we were in the EU, there was at least a fair and transparent system that decided which regions would get funding.

In the post-Brexit UK we now inhabit, we have to observe the grotesque spectacle of deprived council areas competing with each other for the attention of a Tory Minister in England who must decide who gets the thumbs-up for a cash bonanza. Yes – it really has come to this.

To a large extent I agree with Jeff Jones – certainly on his point that the money would be better spent on education. Regional aid money should be handed over to the Welsh Government and allocated accordingly. It’s time to cut out the gimmicks and insist on grown-up politics.