Tuesday, March 8, 2011


The Challenge

Rather than working with, and listening to, the private sector, the Assembly Government seems content to continue with the status quo that has resulted in the disastrous performance of the economy of Wales during the last decade.  

The private sector has much to offer the Welsh Assembly Government, from providing advice on matters relating to economic development, to supporting the supply of vital public services. To date, the last three Assembly Governments have largely spurned such advice, thus isolating one of the most important parts of Welsh life from making a full contribution, especially in the development of the economy.

The Evidence

There is growing evidence that the private sector can make a real contribution to ensuring that the Welsh budget is fully realised for the nation. According to the CBI and other business representative groups, there is enormous potential for Public-Private Partnerships (PPP) in improving services by delivering efficiency savings. 

These can provide value for money for taxpayers, increase government transparency and financial accountability and encourage long-term collaboration through genuine partnering. Most importantly, at a time when the funding from the Treasury to Wales is reducing, enormous savings could be made for investment in front-line services. 

In addition, there could be the leveraging of significant private sector investment for new projects and the opportunity to access private sector technical, management, and financial resources and expertise. Public sector managers could then focus on delivering their key services, rather than managing projects which take them away from their core business. Since the National Assembly for Wales was created, there has been a moratorium by WAG on private sector involvement in areas such as the NHS. However, this has not stopped other parts of the public sector from working with businesses. For example, the Welsh Local Government Association has agreed that private companies should have greater involvement in delivering council services, which could result in projects such as new schools being built through money provided from private funding.

The Way Forward

The Welsh Assembly Government must ensure that the private sector is fully involved in delivering the strategies of the Welsh Assembly Government. Opportunities should be created for Welsh businesses to work more closely with the public sector and ensure that the private sector can play a major role in improving public services and, more importantly, create wealth and employment in the economy as a result of such involvement, particularly by fully utilising the expertise and experience of the private sector within economic development programmes such as European Structural funds.

Case Study

The Private Sector and European Structural Funds in Wales

The most visible example of the inability of WAG to make the most of business expertise and experience within the private sector has been in the management of the European Structural Funds, where there has been minimal involvement by the private sector in the development and delivery of regeneration programmes such as those provided through £2 billion of European funding. 

During the last major funding programme  - known as Objective 1 - statistics show that only 13 per cent of the £1.3 billion programme earmarked for the poorest parts of Wales went to private sector projects between 2000 and 2006. In contrast, over half of the available funding went to public sector backed projects. Whilst promises have been made to ensure greater interaction with the private sector, this has not materialised with the £2 billion programme of funding for the period 2007-2013. At February 2010, WEFO had approved 69 projects led by the Welsh Assembly Government; 21 local authority projects, (EU funds almost £162m), 19 third sector (EU funds, £60m), seven private sector (EU funds over £8m) and 13 HE sector projects (EU funds £130m).  Whilst the number of third sector projects is healthy, the total grant value is low in comparison to those led by other sectors. This has led to concerns that the majority of European funds, rather than contributing anything additional, are being largely used to subsidise existing Assembly Government programmes. As a result, those private sector organisations that should be developing and leading innovative new projects that could make a difference to the Welsh economy are being turned off by the massive bureaucracy and increasing delays in making decisions on any applications.