In the Western Mail today, its director for Wales, David Rosser suggests that not only will WAG continue to with grant aid for inward investors, but that there is nothing wrong in supporting large firms over small companies in Wales.
As he notes,
"The inward investment market has its own rules which we cannot rewrite here in Wales. If we wish to participate in this market we have to play by these rules, and that means financial inducements to attract footloose investment. We can certainly decide that if we are moving away from grant aid then this should also apply to inward investors, but we must accept Wales’ intrinsic attractions are not yet sufficient to bring in these companies without inducement. We may get there, but we are not there yet.
And if we opt out of grant aid for inward investors then we had better understand that we will see a steady stream of disinvestment by companies that were attracted here under the old rules. The CBI is certainly not advocating an economic policy based solely on inward investment but to rule ourselves out would leave some parts of Wales highly vulnerable.
Offering grants to foreign companies, but not to indigenous businesses, sounds unfair but it is logical and defensible. And for SMEs they offer a customer base. At the CBI Wales council meeting last Friday the position was summed up nicely by one of my small company members this way: “I can’t build my business only selling to other SMEs, I need big companies so I can grow by gaining larger contracts”.
I have enormous respect for David and his role at the CBI, which has grown more influential under his tenure. However, in making such a statement today, he has demonstrated that the CBI can no longer call itself the voice of Welsh business.
It is not a matter of big or small companies, indigenous or inward investors. The CBI should be representing all of them equally and yet these comments suggest, as many have suspected, that indigenous Welsh companies are of little interest to a CBI whose council is predominantly made up of large employers.
Overall, the CBI seems to be happy with WAG's approach which places "less emphasis on directly helping individual companies" but clearly only if that company is not an inward investor wanting taxpayers money to relocate or expand in Wales.
But what is fascinating is that this statement, which seems to be defending WAG, destroys the message that has emanated from WAG over the last few months.
Let me remind you of a few:
"The business grant culture of the Welsh economy over the past 30 years is over, the assembly government has said". BBC Wales, 5th July 2010
"First Minister Carwyn Jones criticises foreign firms who locate in Wales to benefit from Government grants" Wales Online, July 15th
“Plaid Cymru has long argued that small businesses are the lifeblood of the Welsh economy and that town centres are the heart of our communities. Now that Wales is coming out of the economic crisis, Plaid leader and Economy Minister, Ieuan Wyn Jones has launched the Economic Renewal Programme which will see significant investment in infrastructure and a move away from the traditional grant culture for big business to a culture of investment . This will benefit all areas and all types and sizes of business."
Nerys Evans AM, Plaid Cymru Director of Policy, 16th July 2010.
Given this, you would have thought we were in for a major radical overhaul of business grants in Wales and those nasty big companies, such as Bosch, would no longer be getting access to Welsh taxpayers funding. Yet, it would seem that the only thing that hasn't changed in the Economic Renewal Programme is the continuous subservience of WAG to large foreign companies.
If we examine a recent request for statistics on Welsh government grants, we find that four companies have been offered over £50 million of grants since 2008. These were Airbus UK Ltd (£14.8 million), Ford Motor Co Ltd (£13.4 million), Toyoda Gosei (£13 million) and Doncasters Precision Castings (£11 million).
The real irony about Toyoda Gosei was that the offer, yet to be taken up, was made on November 24th 2009, a full month after Ieuan Wyn Jones first indicated that the "grant culture was over"
If Wales is to succeed, then it needs to support both large and small companies and what the CBI and others have failed to appreciate is that a £500,000 grant to 100 small growing Welsh firms can be as effective as a £50 million grant to a four large inward investors.
Indeed, an independent report from the London School of Economics and commissioned by WAG showed that grants were far more effective within smaller firms, which begs the question why WAG will continue to offer grants only to bigger companies?
Clearly, it is not the business grant culture that needs to change in Wales but the mentality of senior civil servants and organisations such as the CBI which are clearly biased against supporting entrepreneurs and developing the small firm sector in Wales. Unless that changes, then our economy will continue to be the poorest in the UK.
