Monday, July 11, 2011


Earlier this week, it was reported that the Welsh Government was not interested in a sterile debate over the relative size of the public and private sector.

Yet, ignoring the simple facts behind this balance risks continuing the economic decline that has been experienced in Wales over the last decade, especially as statistics suggest that understanding and dealing with the differences could help politicians understand some of the real issues behind the Welsh economy.

Let’s examine, for example, what has happened to employment within the private and public sectors during the term of the last Assembly Government? An examination of the official statistics show that there was a fall of 4 per cent in private sector employment in Wales during the period 2007-2010, a reduction of 34,000, with the biggest decreases to be found in Blaenau Gwent (-19%) and Torfaen (-14%), both local authorities within the poorest areas of Wales that are in receipt of billions of pounds of European money.

Such a failure to create much needed jobs within the most deprived areas of Wales is certainly not a “sterile debate” and needs far more detailed examination and understanding by the Welsh Government as to how it has managed to spend so much money with so little tangible results. In fact, such a review may finally conclude that past attempts to generate jobs within the Valleys simply have not worked and that creating a transport infrastructure that brings workers into urban hotspots such as Cardiff, Swansea and Newport may be the only viable solution to an age-old problem.

If we examine the public sector over the same period, then we see a very different picture as employment actually went up during the period 2007-2010 by 11,000 (or 3 per cent). Indeed, nearly a third of all those employed in Wales are currently to be found in the public sector, far higher than most other regions of the UK. Apart from the administrative centre of Cardiff, the counties with the highest proportion of public sector workers are Ceredigion (36%) and the Isle of Anglesey (36%), which suggests that a range of rural policies need to be examined to rebalance the economy in these areas.

However, what politicians should be most concerned about is that during the last Assembly Government which promised so much with its revamping of the support given to business, the public sector has continued to grow whilst the private sector has declined.

But this is not merely a matter of blaming the last Labour-Plaid coalition, as it is not an isolated trend. Indeed, if we look at the statistics available for the period 2001-2010, then we see that the private sector in Wales has been declining in relative importance, at least in terms of employment, since the First Assembly Government. In fact, during the last decade, the actual number of those employed in the public sector in Wales has increased by 67,000. In contrast, the number employed in the private sector has declined by 12,400.

Of course, the convenient answer given by the Welsh Government is that the private sector in Wales is too small but, as the statistics above show, there has been little success by successive governments in Wales in addressing this issue, despite having billions of pounds of European funding available to support the business community.

Indeed, if public sector jobs are protected in Wales as has been suggested some within Government, then in order to achieve the balance of private to public sector employment last seen in 2001 (i.e. ensuring that our private sector is not "too small"), an additional 170,000 private sector jobs would need to be created over the term of the next Assembly.

These are the simple facts and it is certainly not as a case of private sector good, public sector bad as we need efficient and effective public services in education, health and government. However, politicians must stop ignoring the current situation and pretending that there are no real structural problems in the Welsh economy.

More importantly, they must begin to understand the scale of these problems that are before us, and realising that if we are finally start to get Wales off the bottom of the UK regional economic league table, then jobs need to be created in the productive sector of the economy, the one that creates wealth and prosperity.

To paraphrase President Bill Clinton, “it’s the private sector, stupid” and ensuring that that they do everything they can to help the business community create the jobs that are desperately needed in Wales is the only challenge that should be concentrating the minds of our leaders over the next five years.