PURE GENIUS

They say the simple ideas are sometimes the best ones and when it comes to simple ideas that make a real difference, the Irish are natural winners.

Last week, I came across what can only be described as pure genius, if Guinness will forgive me for using that phrase.

The Irish Government has recently launched a new Irish Innovation Centre which will be a launchpad for Irish technology companies as the Emerald Isle struggles to come out of recession. And where have they based it?

Is it in Dublin or Cork or Limerick?

No, they have opened it up in San Jose, California, in the heart of Silicon Valley.

As a result, Irish companies can now gain access to venture firms, bankers, customers, suppliers and employees in the World's most innovative and entrepreneurial environment.

The centre also has access to the Irish Technology Leadership Group (ITLG), which provides companies access to a “built in” network of successful Silicon Valley business executives from global technology companies such as Cisco and Intel Logitech.

Irish high-technology firms will now have a bridgehead into the heart of the US innovation community not only through access to office space, but also high level consulting, advisory services and, significantly, access to the network of individuals in industry and academia within Silicon Valley.

Most importantly, with 40 per cent of the $18 billion of US venture capital invested in Silicon Valley, the new innovation centre is also a shop window for Irish technologists looking for potential investors. As the press release for its launch stated, “Young companies who want smart money should be coming here...this is not about real estate – it’s all about access to technology, capital and connections.”

As those behind the new venture have suggested, it is critical that nations like Ireland with a good technology base make better use of their diaspora overseas, in the same way that Israel does so effectively. As one said, “We’re not going to get 30 Googles but if we got one or two we’d be very happy. You know what? That’s fine, that’s what happens in Silicon Valley all the time.”

The Irish Innovation Centre is not the only way in which the Irish are building links with arguably the most innovative region in the World. Later this year, a group of executives from Silicon Valley technology companies are heading to Limerick for the third annual “Silicon Valley Comes to Ireland” event. As part of the event, Irish companies will be given an intensive review by the visiting entrepreneurs and an opportunity to showcase their ideas to leading venture capitalists.

The question is why is Wales not doing the same? Where is the "out of the box" thinking that can begin to make a real difference to our economy?

With Wales’ richest man, Mike Moritz, running Silicon Valley’s most successful venture capital firm, one would have thought that we would have taken advantage of this link by now, especially if we could find a way to highlight the best of Welsh innovation and technology.

Why doesn't the Welsh Assembly Government, working in partnership with the university sector in Wales and some of our leading innovative companies, establish a Welsh Centre to showcase the most innovative technologies emerging from both academia and industry. Better still, why not brand it as our first Global Technium, and thus linking the centre to the network of incubators we have in Wales?

What have we got to lose by doing so?

At least it would show that we are able to take the best of Wales to the World. And imagine if we announced such a project during Ryder Cup week. It would echo around the globe  and demonstrate that we are serious about recreating the economic future of this nation.

Fox Hole Girls Protest For God - Jesus Loves Strippers Too!

Fox Hole Strippers Protest Harassment of Warsaw Ohio Church Members

I can just picture that first Sunday in early August 2010.

Fox Hole Strip Club - Strippers Protest Church Members

"Mommy, Mommy look... How come those girls get to wear their bathing suit?"

Please allow me to introduce Angel and Candy Cane. Fox hole strippers protesting the members of a Warsaw church in the state of Ohio.


These nice young ladies work as entertainers at the Fox Hole.

The Fox Hole is a local Gentleman's Club in Ohio.

The Families of that small Warsaw, Ohio church, were greeted by protesters in bikini's.

They were not protesting God, in fact they were using scripture, and referencing the Bible to push their point.

They were protesting the invasive,  and intrusive activities that a group of church members were taking part in.

The members of this small town church in Ohio were waiting outside of the Fox Hole strip club harassing, photographing, and posting pictures online of the strippers and patrons of the strip club.

As one may imagine that kind of publicity was bad for business. Why go to a strip club if your grandma, mother, maybe your sister, or perhaps your boss are going to find out from their online church community, or even their website. Who knows?

It is no surprise that there was some retaliation. After all the Fox hole has cash flow and other financial concerns just like any other business. Perhaps the members of that Warsaw church were a little jealous, "collection plate envy",  if you will.

Not to mention that any sort of unprovoked harassment is just unwanted at any type of establishment in which you want folks to enjoy themselves and return.

Well needless to say the Fox Hole girls did not appreciate the harassing church members. Many of the girls were down right offended. Some of the girls are (like the members of that church) proclaimed Christians.

Just like the members of that church took action, so too did the Fox Hole Girls.

They took action.

They stand outside the church every Sunday in their bikini's and protest.

Don't Mess With The Fox Hole Girls!


On a serious level, this kind of display from church members or Christians, sets their very cause back.

If you are a christian or religious or whatever, attacking what and who you think is wrong is not going to convert people. You are not helping God. Help those who do that of which you think is wrong.

You need to meet folks where they are, in their current state, in their current situation. Playing the all-mighty righteous guru is not going to land you any new recruits. Just new problems and another reason for one to roll their eyes at the notion of Christ. Christianity's biggest obstacle, the biggest hurdle between people and God, are Christians.

Not to mention you are a sinner as well.

US Economic Growth... Well Kinda

The United States economy is at a fork in the road. Which way and where it will go? Nobody really knows, even if they don't tell you so.

How to Hedge a Failing US Economy

The finance blogs and finance bloggers of the world have been speaking of a dooms day looming in the not so distant future of the American economy. The really scary part is that they all have strong arguments.


There is a large supply of worry, and perhaps even a larger supply of reasons to be worried about.


In researching the current state of the American economy I had a few moments to think about what would be a good investment.


I asked myself; where should one put their hard earned money?




The Answer will shock you...









I think the most appropriate way to hedge ones portfolio at this point is to invest your time in a garden.


See the thing about this whole situation is that we as a country have messed with things like stimulus, bail outs, zero interest rates, new legislation, more regulations. and the like so much that there is little else to throw at the next unknown problem.


If things go bad again... It won't be because there is a shortage of money. No, It will be because there is no money of any standard or clearly determined value. Our economy will shift back over to the bartering system.


I am just not sure that are economic wheels can take another pot hole, recession, depression, or whatever.


We are already driving this thing with a spare tire (and on "E" thanks to BP).


The way i see it the US is still on track to a recovery, our economy is still growing, the illusion of money is still alive and well. However, there is just not a whole lot of great looking tricks to patch a tire if we catch another flat.


We can hold this thing together as long as everything runs smoothly, or if destiny blesses us with just a bit of luck we should all be just fine and dandy.


 I fear that any sort of bad luck in the near future could really F**k us.


But then again what do I know?


Let's get to the latest numbers that everyone is talking about...



GDP and Economic Growth

Where is The US Economy Going?

Over the last quarter the economy has grown at a rate of 1.6% which doesn't really sound all that bad to me. However original guidance predicted 2.4% which means that estimate fell by about 33%. On the brighter side analyst on wall street were expecting 1.3% so in that respect we are up 20%. I think that the fact that we are growing at all is either a miracle or a damn lie.


Over the last four quarters GDP has averaged 2.9%, The Experts on the matter say that unemployment will only get worst unless we have a GDP growth rate of 3%.


US Consumers



The US Consumer has actually been spending more on everything except for housing. Not to long ago I posted that the housing market was stabilizing but apparently I am a big fat liar.


Housing Numbers

Consumers are Spending - But Not on Housing

From the home sale numbers that have been released I estimate that at the very most in the month of July only 23,000 homes were bought and sold. This is less then an avg of 500 per state though trust me when I say that state home sale numbers differ tremendously. That does not say much for the previously posted story on the housing stability theory.

 In fact you have to go back half a century or so to find home sale numbers that low!

The home sale numbers have droped 33% year over year and they were not doing so well last year as you already know unless you have a world of warcraft account.


On top of that the Make Home Affordable Plan, Obama's mortgage assistance programs, has had fewer and fewer loan modification workouts come through HAMP, the modification program. The Obama modification plan, or more accurately HAMP has been a tremendous success by any comparative measure. But just the same, as of late, the HAMP performance has been a bit sluggish.


However the Obama Plan made an additional Hardest Hit Fund Payment to an additional five states that were hardest hit by the financial crisis.


I believe the foreclosure prevention assistance payout through the Hardest Hit Fund was 600 million dollars. Combining that with the original 1.5 billion dollars that stimulus total adds up to 2.1 billion dollars.

I think Obama is doing an amazing job overall on this side of things. Obama's housing and financial stability efforts have been tremendous.



The US Job Market



The private market is actually still producing new jobs. In July we had 71,000 new private sector work force additions. However the US economy as a whole shed a total of approximately 130,000 jobs.


These job losses were in large part due to the temporary census jobs that have come to an end. In July this number was around 145,000 jobs terminated. In June 225,000 jobs were lost. That is a total of 370,000 paychecks that are no longer going to be spent every other Friday... That is just no good.


But let us not get to hung up on that large and very scary number. The good news is that the private market is hiring and not firing. This is a blessing and a glimmer of hope for homeowners.

FSB RESPONDS TO THE ECONOMIC RENEWAL PROGRAMME

Last Tuesday, the Federation of Small Businesses (FSB) responded to the suggestion, by the Welsh Assembly Government press office, that they were fully supportive of the Economic Renewal Programme.

I reproduce the letter here with no further comment as I believe it is self-explanatory.


SIR – It was extremely interesting yet quite alarming to read the Welsh Assembly Government’s response to the Federation of Small Businesses’ call for more detail on transport spending priorities (“Small businesses blast WAG over roads-upgrade funding”, August 16).

The first alarming point was their assertion that we called on WAG to double the transport budget, which was a rather pathetic attempt at throwing a red herring. The quote “we need to double the current level of investment in road infrastructure just to match the spending of our European competitors in France and Germany” is clearly an indication of the scale of the issue, not an actual proposal.

Of course, in the absence of any detail to quote on what they are actually going to do, it is far easier to pick up on something else and turn that into an issue. But I’m afraid that all it has done is made them look idiotic.

The second point, however, is far more alarming. To say that we were consulted on the Economic Renewal Programme and therefore have no right to criticise any of its recommendations is breathtakingly arrogant.

The whole process has hardly been the model of engagement espoused by the Welsh Assembly Government. For example, the consultation document did not ask for specific policy questions regarding the reorganisation of the Department of Economy and Transport, and the resulting document “answered” questions that were simply not asked in the consultation process.

The ERP as it stands now should be going out to consultation, yet there is no formal way to respond, and no period of consultation. Such major change, such as scrapping Flexible Support for Business (FS4B), International Business Wales and the Single Investment Fund, should go out to consultation.

And where was the consultation when choosing the business sectors to focus on? This work was undertaken by the Ministerial Advisory Group, which appeared to work in a silo away from stakeholders. Where was the engagement with the wider business community when choosing the sectors which will benefit from the ERP?

So, against the background of all this scrapping of business structures in Wales, that we should have the very audacity to ask where the money will be focused in future is something the Welsh Assembly Government might, one would think, be prepared for. But it appears not.

Instead it gropes around for immature deflection techniques to straightforward propositions. And that is quite alarming.

JANET JONES
Chair, FSB Wales

LOWER TAXES FOR WALES?

According to the Belfast Telegraph, the accountants PricewaterhouseCoopers (PwC) have just published a report that supports corporation tax varying powers to Northern Ireland.

Entitled “Making the most of devolution”, it calls for “Enterprise Zone status and tax-varying powers to make the region more attractive to overseas investors."

It builds on the report earlier this year by the Independent Review of Economic Policy (IREP), which also recommended differential rates of corporation tax in Northern Ireland, a move which is being considered by George Osborne.

What is relevant to Wales is the call, by PwC chief economist Dr Esmond Birnie, for Northern Ireland “to work with their Scottish and Welsh counterparts to exploit every advantage to make devolution real”.

This follows a similar call by Gerry Holtham and his recent review that:

“The Assembly Government should seek discussions with the UK Government and the other devolved administrations about the feasibility of devolving corporation tax. Any specific proposal will need evaluation to ensure its compatibility with European law, notably the question of whether any UK-wide agreement on limits to rate changes would be permissible.”

Given that the current state of indirect business support seems to be in a  complete mess, the question is whether WAG has started any discussion, with either the other devolved regions or the UK Government itself, about improving the environment for direct support to businesses in Wales via lower business taxes.

In my opinion, that discussion cannot start soon enough.

COMPETITION, WHAT COMPETITION?

Another comment on this blog, which if correct, makes me wonder what on earth is going on within the Welsh Assembly Government.

For clarity, this follows a comment where it was suggested that R and D grants would remain non-payable

"I'm afraid total confusion appears to reign within WAG as well as outside. I'm not sure where Anon got his information about R and D grants not being repayable but I've been told ALL grants will be repayable.

Given that the R and D grants eligibility criteria is that there is technical risk - and hence the product may never be launched - why would I saddle myself with a repayable grant when there is a possibility of no product sales with which to repay it.

Since non-repayable grants are available in the rest of the UK, moving the R and D element of my business to England is a compelling option. London First have been extremely helpful and, unlike WAG, understand my business. I also have far greater access to expertise in London and South East Universities than anything Wales can offer.

As a proud Welshman, this is not a decision I want to take, but at the moment I have no faith in the ability of the Welsh Assembly Government to get this right.

And just for the record, we have 1Mb broadband which is more than adequate for our needs (and stops my staff wasting time on YouTube)."

 Again, this is a really worrying development if, as is suggested, companies are perceiving the Economic Renewal Programme (ERP) in a negative light that may make them reconsider future investments.

Worst of all, this seems to suggest that the ERP has been developed with no sense of what the competition (i.e. the other UK regions) were offering?

Imagine if a company didn't consider competitors in a business plan. Any potential investor would show them  the door immediately.

Surely before drawing up the business plan for Wales PLC, there should have been a detailed analysis of what the other UK regions would also be offering.

Whilst business support in Wales, in the shape of FS4B is disappearing, there will still be active business support organisations in England in the form of the new Local Enterprise Partnerships (LEPs), despite the abolition of the Regional Development Agencies (RDAs).

At the moment, their actual function is currently out to consultation although unlike Wales, they will involve strong partnership between the public sector (in the form of councils) and the private sector (represented by organisations such as the Chambers of Commerce). There are even rumours that, contrary to Vince Cable's original plans, that some may even take responsibility for inward investment activity.

There will also be incentives provided to businesses via the new Regional Growth Fund. Although the final form of this new fund has yet to be fully determined as, similar to the LEPs structure, it is out to consultation with the business community in England, its two main aims are as follows:

- To encourage private sector enterprise by providing support for projects with significant potential for economic growth and create additional sustainable private sector employment; 

- To support in particular those areas and communities that are currently dependent on the public sector make the transition to sustainable private sector led growth and prosperity.

This is completely different to how most of the European Structural Funds have been used to date within Wales, with the private sector being largely excluded from direct involvement in any funded projects.

Given that many of us have, for years, called for greater business participation in developing projects that can help our poorest communities (especially during the last recession), this is a breath of fresh air i.e. an approach to regeneration that brings the public and the private sector together in partnership. Unfortunately, it will only apply to England.

Anyway, going back to the original comment and its implications.

The many comments that have been posted on this site on the implementation of the ERP by those working with businesses reflects those made by some leading figures over the lack of detail following its launch in July. Given this, it does make you wonder about the level of analysis and thought that went into the final version of the ERP.

More relevantly, it begs the question whether this revolution in business support was actually requested by businesses or, as many are now beginning to suspect, was dreamt up by a small cabal within the hallowed halls of Cathays Park and Cardiff Bay.

Perhaps it is time to find out the truth - watch this space.

MAKING THE ECONOMIC CASE FOR POWYS

As Wales’ largest county, Powys has had some notable industrial successes throughout its history. It was the birthplace of Robert Owen, the creator of the co-operative movement and the location of the first mail order business in the world – Pryce Jones of Newtown.

It is also where Laura Ashley, arguably one of Wales’ most famous entrepreneurs, chose to start her textile business in the 1960s which took Welsh fashion designs around the globe.

Given this business heritage, it is disappointing that, in terms of economic policy during the last decade, Powys has become very much the forgotten county of Wales.

For example, when Wales applied for European funding back in the late 1990s, Powys was omitted from the list of counties that was put together to make up the artificial region now known as West Wales and the Valleys.

As a result, not only did Powys then lose out on a share of the £1.2 billion of European funding made available to West Wales and the Valleys, but it also lost out on any assisted area status for the vast majority of the county with the notable exceptions of Machynlleth and Ystradgynlais.

This status is critical for companies wishing to expand their operations or for those inward investors looking to relocate as it means that a higher level of grant support can be given to a company setting up or expanding in an assisted area. As a result, maximum grant support of up to 50 per cent has been available within West Wales and the Valleys since 2000 whilst none has been forthcoming for any business wishing to relocate or expand within the majority of the county, including the main conurbations of Newtown and Welshpool.

The question, of course, is whether this failure to include Powys within the West Wales and the Valleys region has affected the Powys economy at all?

If we examine the economic data for the county, it does suggest that there has been a slowdown as compared to the rest of Wales.

For example, official data from the Office for National Statistics shows that Powys has now suffered a fall in economic prosperity (GVA/head) from 75.0 per cent of the UK average in 1999 to 66.1 per cent in 2007. This decline of 8.9 per cent compares with an overall fall in the prosperity per head of West Wales and the Valleys of only 1.9 per cent.

By the time the first round of Convergence funds via the Objective 1 programme was drawing to a close in 2007, the GVA/head in Powys in 2007 was £12,771 per head. In four of the counties receiving funding it was higher, namely Swansea, Gwynedd, Bridgend and Neath Port Talbot.

Indeed, whilst the economic prosperity of West Wales and the Valleys had grown by 41 per cent during the period 1999-2007, that of Powys had increased by only 29 per cent.

Given this, you have to ask the question why the Welsh Assembly Government (WAG) did not make a case for Powys to be included in the second round of European Structural Funding for the period 2007-2013, which has resulted in an additional £2 billion of funding for the West Wales and the Valleys region?

Why didn’t anyone within WAG stand up for Powys during this time, especially given the fact that it had been overtaken in economic prosperity by other counties which still qualified for funding? Would it have been too difficult to make a strong case for inclusion and therefore access to vital funding for economic development?

Assuming that Powys would have had its fair share of the two European funding programmes, this exclusion has meant that the county has lost out on around £200 million of additional financial support for the economy during the period 2000-2013.

One can only imagine what such investment would have done for its prosperity during this time.

If the Welsh economy continues to decline relative to the rest of Europe, then current estimates suggest that the fifteen counties that make up West Wales and the Valleys may well qualify for an unprecedented third time.

If that does happen, then there is certainly a case to be made for Powys to be included in this next round of European funding and therefore gain access to funding opportunities that could turn around the economic decline suffered by the county during the last decade.

A LETTER TO THE MINISTER

Another business advisor has contacted me over the ERP and changes to the economy. He has sent the following email to Ieuan Wyn Jones and he has kindly allowed me to reproduce it here.

"Dear Minister


I have been involved in corporate finance in Wales for 13 years; the last two in my own limited company consultancy business. My experience has shown that targeted grant support (both ‘free’ and repayable) for the right businesses has been invaluable in allowing them to start/expand/locate to Wales and to create real, sustainable, well paid and highly skilled jobs. Both my clients (previous and current) and I have been shocked by the approach taken by the Welsh Assembly Government. My clients’ view is that Wales is now ‘closed for business’ – surely not the intention you hoped to portray, but genuine feedback nonetheless.

I have been lucky to work with some excellent businesses in my working career. Even in the last two years, projects for which I have helped to secure grant support will create and safeguard well in excess of 500 jobs in the next three years alone. I can tell you that the average basic salary across all of these jobs is just shy of £30k and will ultimately ‘cost’ the Welsh Assembly £5.5m (although almost £1.5m of this is subject to repayment). Importantly, this support has leveraged over £8.5m of commercial funding – most of which has been dependent upon grant support. Those jobs are also highly skilled (IT, manufacturing, environmental) with my clients committing considerable sums to further training and development. Several of the these clients have also created strong links with Academia with some even influencing the curriculum to tailor graduates’ skills. I can confirm that none of this would have been achieved without grant support.

I would be the first to agree that there were fundamental issues with the grant regime prior to the Single Investment Fund. However, the change of emphasis towards quality jobs, training, skills etc. within SIF was a great step forward. For financial constraint cases, none of my clients had issues with elements of the grant being repayable (why should they?) and this could have continued. The fundamental issue has actually been the WAG support infrastructure rather than grants themselves. Critical decisions should have been taken when the WDA was subsumed into WAG and, again, with the launch of SIF. However, for whatever reason this did not happen. It now appears that all businesses are to suffer for the failing of WAG to make difficult decisions at the time.

I was currently engaged by a number of companies with mobile projects and they were of a high quality with the proposed jobs having excellent skill levels and high salaries. These companies were only considering Wales as an option because of the potential grant support available. Given the absolute lack of information and guidance emanating from WAG since the announcement was made, all have chosen to pursue alternate options. This is a very poor state of affairs and reflects badly on Wales as a whole – reinforcing the stereotype of Wales being an inward looking and backward country. This hurts me considerably as I take great pride in this country and the potential that it has.

Unfortunately, it is highly unlikely that anything I say will have any influence but it is important to me that I try. I would urge you to reconsider the swinging cuts you propose and to urgently make a decision on the treatment of mobile projects."


I am most disturbed by the statement about the lack of information and guidance from WAG which is clearly causing confusion amongst businesses and their advisers. It is not an isolated incident as I have heard similar complaints from others within Wales who work with businesses both large and small.

More concerning is the growing perception that Wales is 'closed for business'.

To a large extent, the blame for this must be laid firmly at the door of WAG as it has focused its communications strategy for ERP on the message "an end to the grants culture" rather than anything positive for business.

If you were a company, would such a headline make you think about relocating here to Wales? I very much doubt it.

FURTHER COMMENT ON THE ECONOMIC RENEWAL PROGRAMME

This comment was left yesterday by Bob Shepherd on one of the blog entries from last week.

I reproduce it here for those who may have missed it as it demonstrates the strong feelings out there in the business support community over these changes to economic development in Wales.

Unlike some of the commentators who have posted on this blog lately, individuals such as Bob are those who are working every day to try and bring business into Wales.

Yes, these changes directly affects businesses such as Bob's but it is clear that, at least in the short term, the ERP will also affect the potential of the rest of the Welsh economy to grow itself out of recession.

"I am a consultant who has dealt with grants, finance and mentoring, both for and despite the WAG activities. I have friends and colleagues who move in my world, some of whom are (still) working for WAG in some context or other. I am not a big fan of the WAG business support efforts in recent years but what has happened lately is beyond belief. My own blog has followed a similar line.

One could argue some of the points made in the ERP would be a good idea if we were starting off right now. But to guillotine grants and much of what was in train without something in place to follow on is laughably inept, unprofessional, needlessly destructive and frankly typical of the WAG dabbling in an area they really don't know too much about.

I understand the staff don't know what is going on. The clients don't know if their grant application made the cut, so to speak. There are good propositions out there which were being prepared at no small cost which are now scrapped or on hold at best. There are consultants who relied on the complexities of the grant system for a business themselves who are wondering what to do. There are businesses shying away from coming to Wales, not only because they can't get a grant but because of the chaotic business environment now apparent. I could go on but you all know what I am talking about.

The last I heard is that WAG are expecting some decisions to be made by the New Year!

I am joining a small campaign that is growing which is to personally email ieuan.wynjones@wales.gov.uk and ask him why this situation has been allowed to develop, to let him know about clients I have that will probably go elsewhere to a more professional environment" .

Thanks for commenting Bob. 

Further comments from other business professionals are welcome as you will be assured that, given the frequency of visits from WAG to this website, someone in Cardiff Bay will be reading them.

THE FSB, WAG AND THE ERP

It was good to finally see the Federation of Small Businesses (FSB) in Wales finally baring its teeth over WAG’s plans to change the economy in this morning’s Western Mail and suggesting, as this blog has for the last few weeks, that small firms are suffering as a result of this policy.

The response from WAG was predictably one of denial, and reflecting its current strategy that if its spokespersons keep stating that the Economic Renewal Programme (ERP) will be helping small firms in Wales often enough, the rest of us may start to believe it.

However, it is interesting what the WAG spokesperson has noted in the article, namely that "The FSB were consulted extensively during the formation of this policy”.

In other words, the FSB agrees with the ERP and shouldn't now be complaining about its implementation.

Of course, the FSB, like all other organisations across Wales, was consulted over what should be in the Economic Renewal programme. However, as far as I am aware, no further consultation took place regarding the actual contents of the ERP published back in July, which was a closely guarded secret until the launch ‘party’ at Panasonic.

If that isn’t the case, then it would seem that WAG is now essentially stating that the FSB – the main business representative body in Wales – actually supports

• limiting soft loans to a “picking winners” sectoral approach
• getting rid of business support for thousands of small firms
• spending hundreds of millions of pounds of taxpayers’ money on ultra fast broadband that the vast majority of its members neither wants nor needs

Of course, there is one way to clear this up.

To date, small businesses up and down the land have had no opportunity to respond properly to the new published strategy from WAG. Given this, perhaps the best thing to do is for the FSB to put the ERP to the test and fully consult their 10,000 Welsh members on whether the strategy will benefit small firms in Wales.

Then we can find out whether the FSB membership does agree with WAG over the future direction of the Welsh economy or whether they believe that the small firm sector in Wales has been sold up the river by a government that simply does not understand the entrepreneurs of this nation.

EVIDENCE-BASED ECONOMIC POLICY?

What has become clear, in the absence of any real consultation by politicians and policymakers about the implications of the new Economic Renewal Programme, is that many small businesses simply do not have a clue about the fact that WAG is abolishing all grants for businesses.

The only exceptions to this decision are those firms within the six key sectors of ICT, energy and environment, advanced materials and manufacturing, financial and professional services, creative industries and life sciences which will be moved into a new repayable grant system.

WAG certainly seems to be in an inordinate rush to disadvantage small business in Wales. According to a senior businessman I spoke to last week, all grants from the Welsh Assembly Government have been stopped immediately although the new repayable grant system for six key sectors will not be operational until the end of the year.

As a result, it seems that no government support will be available to the small firm community in Wales for the next six months. This will mean that at a time when banks remain reluctant to lend and we are trying to emerge out of the deepest recession for 90 years, there will be no financial support from WAG for the majority of small businesses.

This is a position that can only be classed as economic madness when the existing grants could easily have been phased out over the remainder of this financial year while the new system was being put into place.

In principle, I have no objections to a system of repayable grants if it is managed properly and made available to all Welsh businesses – we certainly should not limit financial support to a small number of sectors, especially given the previous track record of politicians in “picking winners.”

Indeed, as Wales emerges out of recession with 130,000 people currently unemployed and a further half a million classed as economically inactive, we must support every viable business opportunity to create employment, and that means investing in all parts of our business community.

However, is there anything wrong with the current grant system that should lead to its abolition?

To date, no real rationale has been given beyond the fact that WAG should carefully consider “its interventions at the level of individual companies.” 

Apart from disparaging comments about a “grant dependency culture” in Wales, has any evidence been provided to show that the current grant system does not produce results for the Welsh economy?

Given the impact that the withdrawal of financial support will have on the ability of the small firm community to grow, has there been any detailed conclusion of the impact of business grant schemes in Wales?

Perhaps there has been no detailed analysis because evaluations of similar support programmes show that grants do actually make a real difference at the level of the individual firm and have considerable knock- on effects for local economies.

For example, a recent study commissioned from academics by the UK Government suggested that business grant programmes are delivering benefits to the English economy through net additional employment as well as higher value-added benefits such as regeneration, skill enhancement and the development of supplier networks.

There also seems to be a misinterpretation by many politicians of the level of grant awarded to small firms across Wales. In almost all instances, the entrepreneur will have to come up with the majority of the funding for any project to be developed, with the grant being used to plug any finance gap for that business.

Such a “co-investment” model seems to pass with little criticism when applied to a public sector project, such as the £15 million of public funding recently awarded to Bangor University to create a new arts centre.

Yet, there seems to be a real difficulty among the current set of governing politicians and policymakers within WAG to invest public money in supporting the real wealth creators within the economy, the small firm sector. 

The stock answer by many opposed to grants to small businesses is that “the businesses would have done it anyway” although the evidence from the UK Government study referred to earlier suggests otherwise.

In one example, the grant added to the total investment and therefore boosted the future stream of revenues, while in another, the grant enabled the owner to increase his growth objectives for the business. In another case, the additionality from the grant scheme enabled companies to modernise their facilities far earlier than planned or purchase new capital equipment vital to the services that they could provide, especially for firms operating in more traditional sectors of manufacturing.

Of course, there is nothing wrong with the principle of repayable grants but they will only work if the rest of the UK also adopts such a scheme. 

If not, then small businesses in other regions will be given an unfair competitive advantage relative to Welsh small firms. In addition, any large business will think twice before choosing Wales over another UK region that not only has grants available to investors, but is as good, if not better, when it comes to other advantages such as infrastructure or skills.

As the poorest region in the UK, surely we should be maximising our support for Welsh businesses, not reducing it?

SOCIAL INNOVATION

With the advent of the "Big Society" in the UK, the Economist makes timely reminder of the obstacles that faces those "social entrepreneurs' who try and bring innovation to their communities and try solve some of society’s most intractable problems.

Of course, this is nothing new.

As I wrote over two years ago, there should be a greater partnership between government and social entrepreneurs to find creative and sustainable solutions to society’s problems, especially within some of the poorest regions of Europe such as West Wales and the Valleys.

Indeed, the same problems seem to exist wherever you are in the World.

As the Economist points out, the biggest obstacle in both America and Britain is likely to be the inertia of the bureaucratic, rule-bound public sector. It also notes that success may depend on the emergence of a subgroup of social entrepreneur that (are called) “civic entrepreneurs”, who can navigate the treacherous waters of bureaucracy.

Given the difficulties within social enterprise programme such as Communities First, the question is not whether we have such civic entrepreneurs in Wales, but whether any are ready to put their heads about the parapet and make a difference within their local communities?

More relevantly, will WAG become less anally retentive about their micro-managerial approach to any type of community that receives public money?

WHAT DO YOU THINK?

One of the great management thinkers of our time is Tom Peters, who broke into the consciousness of the business world through his writings with Robert Waterman in the groundbreaking book "In Search of Excellence".

His subsequent writings have been very much on the same theme of trying to see the different side of management practices and his 2003 book "Re-imagine" still has the power to make one think differently about the business world. If you want a peek inside the book, you can access Chapter 2 here.

One of Tom's real strengths is to be able to make the complex sound simple and his blog is a joy in deconstructing the most complex issues.

I particularly enjoyed this week's entry and I thought that it had real echoes for not only individuals but for organisations and even government (including our own here in Wales!).

As Tom says:

"I started blogging in June of 2004, and the best part of it, frankly, is the wonderful comments that come from India at 1 a.m. or come from anywhere. And one morning when I logged on, I had gotten a lovely comment from a guy by the name of Dave Wheeler. And it went like this: “What are the four most important words in an organization?”
And the four words were: What. Do. You. Think.
And I thought about it and I thought, “My God. This is just bloody amazing.” What does What Do You Think mean? What Do You Think, when you say it to me, means: You are a person of value who has an opinion that I want to hear. And so, I’ve started taking it to its ultimate extreme and saying, “Okay, I want you to keep a little scorecard. Keep it in your pocket, wherever else. How many times” —and I do, everybody’s watching this— “how many times in the course of a day do you say—not five words, not three words, not 10 words—What Do You Think?”
You know, we hear this about empowerment and that about empowerment and this program and that program and this training course and that training course. I would argue, in the world of engaging people, nothing is better than the four words: What Do You Think? Try it. Count it. Measure yourself. See what happens."

So, what do you think?

FAST GROWTH 50 WINNER EXPANDS ITS OPERATIONS

Finally, some good news for the Welsh economy.

According to a report from the BBC, more than 100 jobs could be created after the expansion of Unit Engineers and Constructors Ltd with significant positive knock-on effect on suppliers and sub-contractors in Wales.

More importantly, the company expects its overseas trading activity to significantly increase to make it one of the  leading exporters in Wales.

For those of you who follow this site, Unit was the fastest growing firm in Wales in 2009. 

Led by the irrepressible Bill Ledwood (pictured), the company has grown by 978 per cent in the period 2006-2008, and currently employs 167 people.

Read the interview with Bill following last year's Fast Growth 50 awards here.

Its latest development sees it expanding its base through the purchase of the Midlands-based firm Birwelco Ltd and Unit forecasts an annual turnover of more than £50 million for its acquisition by 2013.

Congratulations to Bill and his team and given the fantastic response to this year's competition, we will hopefully see more good news from fast growing Welsh businesses over the next few months.

INTERNATIONALISING SMEs HELP TO GROW THE ECONOMY

A study from the European Commission has shown the benefits of internationalisation by small companies for the development of local economies.

The report "Internationalisation of European SMEs” maps the level of internationalisation of small firms in Europe and identifies the main barriers and advantages of the internationalisation process.

It found that:

• internationally-active SMEs report an employment growth of 7 per cent whereas the figure stood at 1 per cent for those without any international activities.
• there is also a strong relationship between internationalisation and innovation. 26 per cent of internationally active SMEs introduced products or services that were new for their sector in their country as compared to 8 per cent for other small businesses
• the sectors of activity with the highest share of exporting SMEs are mining (58 per cent), manufacturing (56 per cent), wholesale trade (54 per cent), research (54 per cent), sales of motor vehicles (53 per cent), renting (39 per cent) and transport and communication (39 per cent).
• only 16 per cent of SMEs are aware of public support programmes for internationalisation and only a small number of SMEs use public support.

The EU has also produced a document which proposes policy recommendations based on the situation, barriers and drivers for internationalisation as well as a good practice brochure that presents a collection of national and regional policies that tackle some of the main problems faced by SMEs in internationalisation.

One of the schemes that is recognised as good practice is the "First flight" programme run by Enterprise Ireland, which is aimed at helping companies who are new to exporting by assisting the company’s management team to develop an action plan for internationalisation. The critical aspect of the programme is that through mentoring and business support, it provides high value information that can be directly tailored for use by participating SMEs and is viewed as the first step to a long-term internationalisation and exporting strategy.

Such support schemes make a real difference to the success of small companies and it is easy to forget, in the discussion about the inward investment role of International Business Wales (IBW), that another key role undertaken by the organisation was in helping Welsh companies develop international strategies to help grow their business.

With the abolition of both IBW and FS4B (the business support arm of WAG), there will now be little support available for those businesses wishing to take the first step in developing their export potential. Focusing on six sectors, as WAG has done, is contrary to the call, by academic researchers in the field, for a more balanced policy support which takes into account the diversity of SMEs that operate, or are capable of operating, in foreign markets.

Given the recent dismal performance of Welsh companies when it comes to international trading activities, we need more, not less, businesses to export their goods and services around the World, especially given the potential impact on employment growth within the Welsh economy.

LEARNING FROM FINLAND?

There has been some comment from on the last post regarding the Finnish Government's latest approach to broadband.

Simply put, Finland has become the first country in the world to make broadband a legal right for all its citizens, entitling them to a one megabit per second broadband connection now, with a 100-Mbit/s connection to become a right by the end of 2015.

As a result, all Finns, including those living in sparsely-populated areas, will be connected to the internet with fast fibre-optic or cable networks by this target date. Therefore, the objective of the project is to ensure that nearly all (more than 99 per cent of the population) permanent places of residence and places of business and public administration are no further than two kilometres from a 100 Mbit/s fibre-optic or cable network.

In principle that sounds very similar to Wales but in practice, it is very different.

Unlike the proposals from WAG, telecommunication operators themselves are expected to construct fast connections in densely-populated areas, where there is demand, on market terms. Support will only be given to projects that are not commercially viable i.e. in raising population coverage from 95 per cent to 99 per cent in rural areas.

More relevantly, telecommunication operators will have to dip into their own pockets and cover at least 34 per cent of the costs. The rest of the costs will be funded by the State (66 million euros for the period 2009–2015), municipalities and the European Union’s Rural Development Fund (24.6 million euros).

Therefore, the difference is that

• telecommunications companies are being pushed by the Finnish government to cover the vast majority of the broadband extension within the country (which is why the project is probably costing less than half of the that to be spent by WAG)
• telecommunications companies are expected to put in their own cash of tens of millions of euros into the Finnish project, unlike the procurement exercise in Wales where WAG will pay for the whole project
• financial support for broadband from government and European funds will only be provided in those areas where there is no commercial viability
• other budgets critical to the economy, such as business support which are vital for getting the country out of recession, have not been "raided" to pay for this additional broadband funding

That seems to be a very different proposition to that put forward by WAG officials, as I have discussed in the previous posting.

Given this, I wonder if any WAG officials have been in touch with their Finnish counterparts to examine whether the key criteria for the Broadband 2015 project could be adopted for Wales?

It certainly seems to be better value for money, could cost far less than expected and could ensure that telecomms companies, which will benefit financially from the infrastructure investment, also pay their fair share of the project.

It may also mean that less funding would need to be diverted away from supporting small businesses in Wales.

There are clearly different models and technologies for delivering broadband to much of the country (e.g. read this article on Rory Stewart MP and his idea for broadband into rural Cumbria), not all of which necessarily involve government.

The question is whether WAG has thoroughly examined all the options before plumping for the easiest i.e. pay a large telecomm hundreds of millions of pounds to provide fibre across wales.

I would suspect they haven't.

WAG SUPPORT FOR BROADBAND

One of the key decisions of the Economic Renewal Programme (ERP) is the abolition of funding and support for the majority of small businesses in Wales. Instead, the savings made will go towards the £240 million required by the Welsh Assembly Government (WAG) to invest in a “next generation” broadband infrastructure for Wales by 2016.

Investment into critical new technologies can make a real difference to the productivity of businesses and there is certainly a case for extending the current broadband provision away from the main industrial urban and localities to the more deprived communities and those rural areas which still depend on dial up modems to access the internet.

However, the major weakness within the ERP is that the Welsh Assembly Government simply fails to make a coherent case as to why this is a better form of investment than supporting firms directly, and why government should fund this instead of the private sector.

Let’s start with the rationale that the investment in broadband will give a better return on public funds in terms of the number of jobs created.

One of the most critical reports on the role of broadband in economic development is “The UK’s Digital Road to Recovery” from the London School of Economics.  If we extrapolate from the employment generation data presented in the report, then it is estimated that a £240 million investment in next generation broadband would create or retain around 11,000 jobs in Wales for one year i.e. a cost of roughly £22,000 per job.

For those in government, the question is whether such an investment in economic development, which is what this programme is essentially about, represents real value for money. No case is made at all as to whether spending on next generation broadband will provide a better return as compared to other types of support that could be available to develop the economy, such as inward investment, start-up support or help for growth businesses.

For example, if business really wants better broadband, then simply making the £240 million available as a special repayable grant to all businesses in Wales that wish to invest in next generation broadband may be a far more effective method of spending public money.

The second issue is why should government subsidise such services at a time when telecommunications companies are increasing their investment in new technologies?

For example, BT has already announced in May that it will increase its plans for fibre-based fast broadband from 40 per cent to two-thirds of all UK homes, and this without any incentive from the UK Government.

In addition, other telecommunications businesses are coming up with innovations to extend their market share. Only last week, Virgin Media announced that it will trial ultrafast broadband over existing electricity poles in Caerphilly. If successful, this 'non-traditional' approach could significantly accelerate delivery of next generation broadband to millions of extra homes across the UK.

If the private sector is already expanding its broadband infrastructure, then why should the taxpayer subsidise such services? There is, of course, a clear argument to support those areas that are deemed “uneconomical” for further investment by telecomm companies. But surely, the whole point of investing in broadband to rural areas is to ensure that they do regenerate and create businesses that will utilise the technology in the future and pay companies such as BT for the privilege of doing so.

Given this, why on earth should government pay out what is essentially a grant to the telecomms providers to enable them to gain business from those new customers that they will gain as a result of the infrastructure investment by the taxpayer?

The analogy most used by politicians about broadband is that it is equivalent to building the motorways of the future.

Yet, the difference between roadbuilding and broadband and is that, unlike the former, the government is handing over these new information motorways, paid for by the public purse, to a group of  private sector firms that will then be charging “tolls” for businesses to use them.

Is that a fair and effective use of public money?

If the principle of the new ERP is to move away from the old style of grants, then why should WAG pay large telecoms companies to essentially extend their broadband networks across Wales and thus increase their profits.

Surely, the only logical way is to treat them the same as every other business in receipt of WAG funding and get them to repay the grant from the increased business they will gain once the networks are in place.

As I wrote last week, to abandon small business support as we come out of a recession and spend £240 million on broadband provision is either the biggest mistake in economic development history or an inspired vision for the Welsh economy.

Yet there seems to be little evidence for the latter conclusion in terms of the impact on job creation and the “value for money” in paying large private companies vast amounts of public money for broadband networks that they are expanding in any case.

Of course, this is not the first time that WAG has invested in such infrastructure having already spent £30 million on a fast broadband service called Fibrespeed in North Wales.

At the very least, one would have expected WAG to have undertaken a thorough evaluation to demonstrate the success of the take-up of this scheme, which is provided for businesses across the A55 in North Wales, before committing hundreds of millions of pounds of Assembly and European funding to expanding this programme across the rest of Wales.

Surely, in the absence of any other meaningful evidence for changing the whole direction of Welsh economic policy, it is the least that the Minister and his policy team can do to show those tens of thousands of small businesses that will no longer be backed by the Welsh Assembly Government that there is some method in this perceived madness.

CREATING AN ENTREPRENEURIAL WALES

Whilst looking for an article last week, I came across this 2001 piece from the BBC which reported on my IWA pamphlet "Creating an entrepreneurial Wales" which I wrote during my tenure as Professor of Enterprise at the University of Wales Bangor (as it was then).

As it states:

"The Welsh Assembly has been urged to focus on supporting business entrepreneurs to meet their growth targets and help lift the economy.

In a report for the Institute of Welsh Affairs, Creating an Entrepreneurial Wales, the administration is advised to aid growing small and medium enterprises (SMEs), which make up a significant percentage of the business base in Wales.

Current assembly policy - particularly European Objective One strategy for regenerating deprived areas of Wales - "ignores the (entrepreneurial) sector completely", the IWA report concludes.

Its author Professor Dylan Jones-Evans, from the University of Wales, Bangor, said the assembly's targets under the National Economic Development Strategy would be "substantially" boosted by even moderate growth in the SME sector.

Prof Jones-Evans said the Welsh Development Agency and other business organisations should pinpoint SMEs which had the capacity to grow.

The professor forecast that a modest 10% growth by Wales's entrepreneurial businesses would create an extra 27,000 jobs by 2005/6 and a turnover of £1.8bn.

Current assembly policy focuses on supporting all types of small business, with many destined not to grow.

Aid for new firms - an area where four out of 10 are destined to fail - can also be misplaced, said Prof Jones-Evans, who is Professor of Enterprise and Regional Development.

Wales has 15,500 SMEs which are defined as employing between 5-250 workers. They employ a total of 270,000 people and have an annual turnover of £19bn.

Prof Jones-Evans admitted little could be done about fluctuations of interest rates, corporation tax or the strength of the pound.

The professor emphasised the pivotal role of the WDA and organisations such as Finance Wales, and ELWa (Education and Learning Wales).

He added: "They can take immediate action to develop the relevant policies and structures to identify, support and grow those indigenous businesses within Wales, which can make a real difference to the prosperity of our nation."

Substitute the "Economic Renewal Programme" for "European Objective One strategy" and you can see that nothing much has changed during the last decade.

Granted, I admit that I wasn't convinced that we should pour all of our public resources into start-ups in those days but I didn't need to be.

Wales didn't have a problem, like it does now, in starting businesses, only in growing them. Certainly, we didn't have statistics such as the 19.4 per cent decline in the number of new business births between 2004 and 2008 - the worst performance of any region of the UK. More importantly, it already had the Entrepreneurship Action Plan in place which focused specifically on encouraging new ventures.

My call was for an equal balance to ensure that those companies that did start and showed potential for growth after a number of years were given every encouragement to become the business stars of the future.

Unfortunately, the new ERP seems to have abandoned both the vast majority of start-ups and growth companies in Wales, and one has to seriously wonder where the jobs will come from over the next few years.

SCRAPPING SMALL BUSINESS SUPPORT

The new approach of the Welsh Assembly Government to the economy should have become obvious last year when, during the Welsh Labour leadership campaign, Carwyn Jones announced that his primary economic policy was to “use the larger companies in Wales as a basis for attracting more business and more investment”.

Whilst this statement was made prior to any consultation regarding the Economic Renewal Programme, this may begin to explain the zeal with which the Department of Economy and Transport seems to have interpreted the First Minister’s focus on large businesses as a sign to abandon general support for small businesses in Wales.

Last week, this column discussed the abolition of financial support to the general small business population in Wales, a change of policy that the Welsh Assembly Government (WAG) has singularly failed to communicate properly to the business community in Wales.

By focusing its new repayable grant system on six key sectors predominantly within high technology industries, WAG has turned its back on the majority of small businesses in Wales.

If we are to create jobs as we come out of the recession, then surely we must focus on every opportunity that arises from the economy?

Wales is the poorest region in the UK, has the highest unemployment rate of any of the four home nations and has lost over 45,000 private sector jobs during the worst economic downturn for a generation. Is now the time to abandon financial support for the one part of the economy - the small business sector - that will create the majority of jobs as we come out of recession?

However, it is not only funding that WAG has stopped for the majority of small firms. It has also decided to close down its business support activities that were previously administered through its FS4B programme. This will mean that there will be little, if any, support for small businesses across Wales to grow and develop after March 2011.

What exactly is the rationale for abandoning business support to small firms in Wales?

Could it be that there is no case for the existence of such services to help businesses grow and develop?

Failure in the supply of information and advice is a recognised market failure problem for small firms not only in Wales, but across all developed nations. Even in the USA - the bastion of free market economics - there is a dedicated agency - the Small Business Administration - whose role is to provide support for entrepreneurs across America.

Could it be that business support in Wales simply wasn’t working?

There is certainly backing for that proposition, given the recent critique by the head of Welsh Assembly Government’s corporate governance division. As was widely reported earlier this month, this damning report stated that the DET did “not have in place a fully effective framework of control", that there were management weaknesses identified which had exposed the department to "significant risk" and that only a limited assurance could be provided on its overall arrangements for risk management, control and governance.

As a result, the auditors concluded that there was a major risk of "loss, fraud, impropriety, poor value for money, a failure to achieve objectives" and there were "significant concerns" about the way the department was being managed.

Yet, does such abject failure by senior management within DET actually justify the abandonment of WAG’s entire small business policy? Is this wholesale change being used as an excuse to do what a number of senior civil servants in DET have privately wanted for years, namely to abandon any interventions to support the small business community in Wales and hide their own shortcomings in managing such a policy?

Yes, there are challenges in delivering business support during this period of economic austerity but that does not mean you get rid of the policy entirely. Instead, there should have been an increased focus on improving the quality and appropriateness of support with limited resources, keeping in touch with the changes in the small business community and managing the network of Welsh private sector expertise.

Whilst small business support should have become simple to administer and deliver, all DET did during the last three years was create a bureaucratic nightmare that has ground the whole system to a juddering halt. What was therefore needed was a complete rethink of business support, not its abandonment due to failings within WAG.

As we come out of recession and firms begin to consider further investment opportunities, the demand for business support is likely to increase substantially in Wales.

Whilst the private sector – such as accountants and lawyers - may well take up the slack in some of the more prosperous areas, it would be expected that there will emerge a gap in support within rural areas and those areas which are currently in receipt of European Convergence Funds.

If an increased number of firms do not get support, then it will give them less chance to maximise their potential for job creation and reduce their competitiveness, thus compounding the low levels of economic activity within these more deprived communities. Indeed, WAG has indicated that its £30 million growth programme to support businesses in the poorest areas of Wales will come to an end in March 2011 and the funding reallocated to the six identified priority sectors of the economy.

To go against conventional wisdom and abandon support to small businesses in the most deprived region in the UK and instead spend the £240 million saved on superfast broadband could be an inspired vision.

On the other hand, it could be the single biggest economic mistake ever made by an elected administration in recent times.

The jury is clearly out and we will wait to see the result.

However, one thing is certain, namely that if this strategy fails to generate the jobs so desperately needed by the Welsh economy over the next few years, then WAG will have no-one else to blame but itself.

S4C

Over the last few weeks, we have seen S4C stumble from one crisis to another that has ended up, not surprisingly, with the resignation of its chief executive, Iona Jones.

Whilst politicians, even within the slumber of the summer recess, are scrambling over each other to provide solutions for S4C’s current predicament, Ms Jones’ resignation raises far more questions than answers over the future of the television channel not only within a digital age, but at a time of austerity when it is nearly totally dependent on UK Government funding for its existence.

At least one clear decision has been made which should bring some short-term stability to S4C, namely the appointment of Arwel Ellis Owen as interim chief executive.

As an experienced and politically savvy media insider who has run his own successful business for a number of years, many are confident that Arwel will be able to steady the ship and more importantly, bolster the morale of staff at this critical time in the history of S4C.

However, it is clear that S4C will need more than interim solutions to enable it to re-emerge as an organisation that is able to provide programme content in the Welsh language that is of high quality and of relevance to the population of Wales.

The crux of the immediate problem will be that of funding.

As S4C is funded directly by Westminster and not the Welsh Assembly Government, the channel will have to wait until October’s Comprehensive Spending Review to find out whether its budget has been substantially cut, although there are rumours that it could face cuts of up to six per cent per annum over the next few years.

If that turns out to be the case, then how should government at both a UK and Welsh level deal with such a reduction in budget?

One Assembly politician has gone so far as to suggest that the best solution for S4C in the long term would be for it to be directly funded by the BBC licence fee, rather than government grant.

Whether that means the population of Wales alone would pay a “premium” of around £10 per month per household for S4C through their licence fee or whether the BBC could and should give part of its funding directly to Welsh language broadcasting is a politically explosive issue, especially within the period leading up to the next Assembly elections.

Others have argued that savings could be made by moving S4C from Cardiff and relocating it to an area such as North West Wales where it could have a major economic impact. Certainly, there seems to be no compelling reason why it should be based in our capital city, especially as other broadcasting organisations such as the BBC are busy outsourcing their activities to regions other than London.

However, if there is an “elephant in the room” over the future direction of S4C, it is whether the Welsh Assembly Government should gain direct control over funding for the channel from Westminster.

As I argued in this column last year, if the Assembly is to have powers over the Welsh language, then it must also have responsibility for the one organisation that has possibly done more than any other to preserve the language over the last twenty five years.

As political parties develop their policies for the next Assembly elections in May 2011, will any have the courage to bring responsibility for the future of S4C under the auspices of our democratically elected National Assembly for Wales?

The answer to that question may well determine the future of Welsh language broadcasting, and the Welsh language itself, for a generation.