A BUDGET FOR JOBS AND GROWTH? ONLY IF THE WELSH GOVERNMENT WANT IT TO BE

When I began my academic career in 1992 at Durham University Business School, I worked on a project that, on every Budget Day, would look specifically at the Chancellor’s financial proposals and their implications for the small firm sector.

In an age where tweeting was the noise made by a canary in a Warner Brothers cartoon and the fax machine was god, we spent time huddled around televisions trying to work out exactly what the implications were for the entrepreneurial community as the Chancellor spoke from the House of Commons.

Our analysis would then be written up by teams of academics and edited into one report. This would then be printed off overnight in the North East of England before being flown down to London first thing in the morning where TSB, the sponsor, would distribute to their clients at a morning press conference.

How different the response to the Chancellor’s budget has been this year, with both politicians and pundits racing each other to be the first out with a tweet on the results of the budget without even any careful and measured contemplation of the details.

In fact, barely had the Chancellor taken his seat that the Welsh Government had rushed out a statement stating that “This is a disappointing budget for Wales. It's not a budget for jobs and growth”.

Given that they had less than two hours to digest the detailed statements from the Treasury, one would have imagined that this behaviour was a hostage to fortune, especially given that, as in all budgets, the devil is always in the detail.

More relevantly, I have always considered that any new programme or initiative announced by the Chancellor is a chance for Welsh business to ensure, with the support of Welsh Government, that it takes full advantage of any new opportunities.

For example, the further reduction in corporation tax will mean that the UK will, by 2014, have the most competitive rate in the whole of the G7. Given this, the task for the Welsh Government is to link its own offering to this national indicator and ensure that the ‘brand’ for Wales attracts more businesses to this region rather than any other.

But it is not only in areas such as corporation tax in which Wales can sell itself. The interventionist approach by the UK government to various parts of the economic system could also reap real dividends for the Welsh economy if only we take full advantage of them. Let’s take finance for small firms.

The Government has provided up to £20 billion to support business under the National Loan Guarantee Scheme (NLGS). It has also announced £1.2 billion for the Business Finance Partnership (BFP) to develop new forms of non-bank finance. Surely, as one of the only regions with its own government owned bank in the form of Finance Wales, ministers could put forward a coherent strategy so that these funds, along with the money already held by Finance Wales, could create a far bigger source of funding for Welsh firms?

The UK Government also announced an ambition to more than double annual UK exports to £1 trillion by 2020, expanding not only the role of UK Export Finance but doubling the support to UKTI. Given that Wales has enormous potential through its manufacturing industry for international trading, but one of the lowest proportion of active exporters of any region, this presents a real opportunity for Cardiff Bay to work with Whitehall to get more Welsh firms to trade overseas.

But there is also support for specific Welsh industries. Take, for example, the 100 per cent per cent capital allowances for plant and machinery at the Deeside enterprise zone. This could, if supported by other programmes in training and skills development from the Welsh Government, make North East Wales the engine room of advanced manufacturing once more, certainly in comparison to other competing parts of the UK and after years of decline.

Indeed, there is now a massive opportunity for Broughton to bid for the £60 million UK Centre for Aerodynamics that will support innovation in aerospace technology but only if the Welsh Government works closely with the Wales Office to come up with the best plan possible to secure this within our borders.

The new corporation tax reliefs for industries such as the video game, animation and high-end television could potentially help the further development of these sectors in Wale, especially if serious attention is paid to ICT and the creative industries in the same way that the Minister for Business has recently courted the biosciences industry.

Indeed, that sector should be boosted by the introduction of a reduced 10 per cent rate of corporation tax for profits attributed to patents and similar types of intellectual property. Now all it needs is for the Welsh Government to announce a specific enterprise zone for this industry in Swansea that is centred on the Institute for Life Sciences.

Therefore, apart from political brinkmanship, can the Welsh Government really say that this was not a budget for jobs and growth? Certainly, it could be a self-fulfilling prophecy if it refused to take full advantage of the opportunities for boosting Welsh industry at a time when we need to punch above our weight as a nation to not only attract companies to invest here, but to grow and develop those businesses with real potential for job creation.

WALES AND EUROPEAN STRUCTURAL FUNDS

Last week, there was a political storm over the latest GDP figures to emerge from the European Union and which measure the relative prosperity of its regions.

As expected, West Wales and the Valleys – consisting of 15 local authorities – lost ground on nearly every other part of Europe despite being given £1.2bn of European funding for the period 2000-2006 under the Objective 1 programme.

Not surprisingly, the opposition parties went straight on the attack to accuse the Labour Party of failing to use what it once termed a “once-in-a-lifetime opportunity”.

In riposte, that anonymous individual known as the Welsh Government spokesperson responded by noting that GDP per head in West Wales and the Valleys has broadly kept pace with the UK as a whole since 2001.

Was he correct in dismissing such arguments?

Technically speaking, yes he was, as the rate of growth in West Wales and the Valleys is approximately the same as that for the rest of the UK for the period 2000-2009. But given that only London and Hampshire has shown any positive growth out of all the regions over that period, as compared to an overall growth of 23% across the European Union, it does beg the question of what the last UK Government was doing in terms of regional economic policy. That is a discussion for another day. Instead we should focus on the main reason behind European Structural Funding such as Objective 1 and the current round of Convergence funds.

Let’s be clear, Structural Funds are a mechanism for reducing the disparities between regions in Europe. Their role is not, per se, to close the gap between West Wales and the Valleys and the United Kingdom. In that respect, we should focus any analysis on the economic impact of the programmes on a European level, especially the performance relative to the other Objective 1 regions supported by the European Commission during the last decade.

So what do these statistics tell us?

Back in 2000, when we first received European funding, West Wales and the Valleys was the sixth most prosperous Objective 1 region in Europe with a GDP per head of 17,300 euros. However, by 2009, the region had fallen to 42nd out of 50 regions with a GDP per head of 15,700 euros.

And, given our emphasis on high quality tourism, I am sure it would surprise many to find that both the Canaries and the Algarve have a higher level of relative prosperity than West Wales and the Valleys.

Indeed, in relative terms, nearly every other Objective 1 region in Europe has performed better economically during this decade. Some have argued that the economic decline in West Wales and the Valleys is down to the world recession during 2008 and 2009, and the data suggests that the other Objective 1 areas in the UK, including South Yorkshire, Merseyside and Cornwall, were not as resilient as other poorer areas on the Continent.

Yet even if we only consider the growth in GDP per head for the period 2000-2007, we find that Wales’ poorest region had the worse growth rate – at 21.4% – of any disadvantaged area in Europe. In contrast, the Spanish region of Galicia grew at 63.6% over the same period.

So what went wrong?

Certainly the evidence, contrary to the statements from the Welsh Government, suggests that West Wales and the Valleys, relative to other areas in receipt of Objective 1 funding, has performed badly. Some have suggested that this relative failure is down to the fact that there were too many projects being funded through this programme and resources were spread too thinly across our poorest region.

As a result, the new £2bn Convergence programme, which replaced Objective 1 funding, has focused on fewer strategic projects. Yet others would argue that the failure to engage properly with the private sector, in conjunction with the dominance of public sector-driven projects, is a trend that has actually increased under the new round of European funding.

While the next few rounds of GDP statistics will tell their own story of the relative economic success of current Convergence funding, it is becoming clear that West Wales and the Valleys will now qualify for an unprecedented third round of financial support from the European Structural Funds programme.

Given the way that other regions of Europe in receipt of such support have grown economically while West Wales and the Valleys has floundered, I would suggest that Welsh policymakers should start looking at how other poorer parts of Europe have grown their economies, as it seems we still have much to learn in ensuring that our disadvantaged regions become competitive again.

MAKING THE CASE FOR ELECTRIFICATION OF RAILWAYS IN SOUTH WALES

Western Mail Column 10th March 2012

I am sure it will have been a massive disappointment that Cardiff was not chosen as the site for the UK Government’s £3 billion Green Investment Bank.

Given the worries by Westminster politicians over the independence vote in Scotland, the choice of Edinburgh as the site of the bank’s new headquarters was not much of a surprise, especially as the Scottish capital is already a major financial centre.

However, the real prize for South Wales from the UK Government is still out there, namely securing funding from the Department for Transport funding for the electrification of railways. Already, business cases have been prepared by the Welsh Government and submitted to the Department for Transport.

One focuses on the extension of the electrification of the Great Western main Line to Swansea, whilst the other on the entire valley line network, including lines to Ebbw Vale, Maesteg and the Vale of Glamorgan as well as the core valley lines north of Cardiff.

Both projects are equally important. The first in ensuring that the second city in Wales has a fast transport link to one of the World’s major cities, thus opening West Wales to potential investment, and the second in regenerating the South Wales Valleys and enabling efficient commuting to Cardiff.

Indeed, given the billions of pounds spent on trying to regenerate the poorest parts of Wales in the last decade, it is likely to be a transport project that brings workers to jobs, rather than the other way round, which is likely to have the biggest impact on the future prosperity of some of our poorest communities.

In fact, one can only applaud the current Welsh Government for finally supporting the development of a city region of 1.4 million people around Cardiff. But if it is to succeed as a modern European city, then it has to have a modern transport infrastructure to support any future development.

Given the changes that have occurred in Cardiff since devolution, it is incredible to think that there has been no major project in the capital city of Wales since 1995, when the last section of the section of road from Culverhouse Cross to Cardiff Bay was opened.

In addition, the development of a strong financial services sector in the city based on a new enterprise zone, which is the aim of both Cardiff Council and the Welsh Government, could see tens of thousands of extra jobs created in this sector alone by 2020. Yet, without a coherent strategic approach to transport, the revitalisation of Cardiff and much of South Wales is likely to be undermined.

And it is no longer acceptable that our capital city remains at the European average in terms of connectivity by road and rail when it is trying to position itself as a competitive international centre. 

In fact, Mark Barry, in his excellent paper for the Cardiff Business Partnership - A Metro for Wales’ Capital City Region, hit the nail squarely on the head by stating that whilst a good transport infrastructure does not guarantee economic success, it is also true that economic success can only occur where there is a good transport infrastructure.

So, ensuring the success of the electrification of the Valley Line Network and the main line to Swansea is critical, as any negative decision will mean that it will probably be decades until a similar case can be made successfully, ensuring that Wales will continue to bump along the bottom of the UK’s prosperity league table.

I have been reliably informed that the business case prepared for both projects by Welsh Government officials has been thorough and professional and should stand up against other projects from other parts of the UK that are also looking for funding.

However, things are never that simple, especially when there is strong lobbying for rail schemes in and around Manchester and the Midland Mainline Electrification. And whilst some may think that Wales ‘deserves’ the funding, others will be making the same case for their regions.

Given this, it is vital that we adopt a strong “Team Wales” approach to this, which not only involves politicians from all parties in the National Assembly, but also businesses in the region and local authorities. But most importantly, the Welsh Government needs to put aside any political differences it may have and work closely with the Wales Office to ensure there is a strong voice for both transport projects within the corridors of Whitehall.

The stakes are far too high for petty political point scoring and if this opportunity is missed because of an inability to work together for the benefit of our economy, then it will be Wales that will be the poorer for it.

INNOVATION IN WALES - 3D EDUCATIONAL TECHNOLOGY

Last week, I was delighted to be among the 200 invitees to No 10 Downing Street for a celebration of Wales, hosted by the Prime Minister.

Attended by representatives from all political parties as well as celebrities from Gavin and Steacy and our rugby captain Sam Warburton, it was a wonderfully eclectic evening for all present.

However, what was most pleasing to me about the event was the presence of a large number of Wales Fast Growth 50 firms, the companies creating wealth and employment across the economy, including a number from North Wales.

One of those present was Anas Mawla, founder of Gaia Technologies of Bangor. A highly innovative business, it assists schools to make the most effective use of information technology in order to improve learning experiences and provide a more stimulating environment for young people in the classroom.

The story of Gaia is one that many young entrepreneurial graduates today should aspire to. Anas Mawla and his brother Ayad graduated from Bangor University’s Electronics Department where they studied Computer System engineering. Together with Katerina Patochea, herself a graduate of the Bangor University Marine Biology Dept, they borrowed £800 from Katarina’s credit cards and started the business while still enrolled as students.

Today, Gaia employs over 80 highly skilled and talented individuals and is forecasting that its annual turnover growth will reach £24m in the next two years. I recently visited Anas at his offices in Parc Menai and was struck by the commitment of the company to the local region. In fact, the key motivation for establishing a computing business in North Wales was their desire to contribute to where they live by employing and develop skilled IT graduates, as well as using the company to leverage in additional resources and interest to the region.

Such dedication demonstrates that great businesses can be grown anywhere regardless of location and the company is committed to further developments in the Gwynedd area through building on a service that realistically budgeted, innovative and friendly. What was most exciting about the company was the way that they have developed 3D technology for the educational market, with the funding of this innovation coming from Gaia’s own surpluses.

All cinemagoers will know about the 3-D revolution started by James Cameron in his groundbreaking film Avatar. However, the real application of 3-D technology is not in the movies but in education, especially as some subjects are far easier to teach if you can visualise them. As someone who thought he had seen it all, putting on a pair of 3D glasses at Gaia’s headquarters in Bangor was an incredible experience.

In history, you could walk down a street in plague-infested London in 1665, find yourself in the World War 1 trenches or see ancient Rome in all its glory. In science and engineering, there were 3-D depictions of various creatures, the inner workings of a sports car and even the doomed nuclear reactor in Fukushima, Japan. It is an amazing learning experience that allows students to enhance their understanding of difficult subjects by learning through observation and investigation rather than by instruction. It also helps teachers simplify complex issues making them easier to understand and speeding up the learning process.

Simply put, it is a fantastic technology within a highly innovative business that is currently the World leader in the generation of 3D interactive images for the education sector and, most importantly, is based in Bangor not Silicon Valley!

 We should be exceptionally proud of a company such as Gaia that is not only a world-beater, but is committed to the local economy and I am sure we will all be following their developments with interest as they take the best of North Wales out to the World over the next few years.

THE LEADERS WE DESERVE?

The marvellous and hard-fought win by Wales at the home of English rugby to capture the Triple Crown a week ago is not only the culmination of the development of a squad of talented young players, it is the living embodiment of successful leadership and what it can achieve.

Clearly, the extensive coaching ability and in-depth knowledge of Warren Gatland and his backroom staff has been critically important. However, I think that everyone in the rugby World and beyond acknowledges the simple fact that without the on-field leadership of Sam Warburton, this team would only be a collection of talented individuals.

Sam, even at the tender age of 23, has shown himself to be a leader who has brought together a group of rugby players, many of them from regional sides that are playing well below their potential and has, by example, helped to mould them into a team of champions. Unfortunately, outside the rugby pitch, this culture of individual leadership is an alien concept across most of Wales.

For those of you who have been reading my column for the last eight years, you will know my views on this subject. It remains my strongly held belief that many of the problems we currently face can be placed firmly on the doorstep of those who maintain their status at the top of Welsh civic society not through leadership qualities such as trust and respect but by old fashioned methods such as promotion, perks, patronage and protection.

Such individuals are not leaders in their own right but are only powerful because of their job or position. As a result, they remain rigid enforcers of the status quo that benefits them and their acolytes rather than being agents for change.

They remain staunch followers of the religion of who you know, rather than what you know, which is the last thing a new democracy such as Wales needs, especially as it has had serious consequences for the development of this nation for such a long time. Worse of all, these transactional leaders breed the next generation of acolytes who blindly follow their masters in the belief that to get ahead, they have to copy similar attributes. And so the vicious spiral of decline continues with dire consequences for the organisations they lead.

Are these really the people we need or deserve? Of course not and it is not only on the rugby pitch that we require strong and enlightened leadership. In business, politics, education and civic life, we need individuals with a vision that inspires others and releases their abilities to help Wales move onwards and upwards.

Unlike those who have been running the ‘old’ Wales, we need leaders who will empower people in order to create and maintain a new vision, think strategically and work with others to initiate changes. We need leaders who, rather than throwing their employees on the scrapheap when the going gets tough, care deeply about the people who work for them and refuse to impose their solutions or suppress potential.

Sadly, such leaders are very few and far between in Wales today. In fact, those "troublesome priests" or angry young men and women who dare to think differently are ostracised, ridiculed and, in many cases, sidelined by those who fear that anyone with anything new to say will challenge their position. And the irony of a new Wales is that the ‘establishment’, with very few exceptions, has embedded itself even more within Welsh public life since devolution.

Unfortunately, the results are clear for everyone to see not only in terms of our economy, but also the effect on our declining health service, our cherished educational system and the governance of many other parts of public life. Indeed, the worry for many of us who care passionately about Wales is that the scandal at Awema is not an isolated incident but merely the tip of a very large iceberg.

Therefore, whilst the Silk Commission follows other august bodies such as the Richard Commission in considering the future of further powers for Wales, its conclusions will be largely pointless unless there is a revolution in the way Welsh organisations are managed and governed. Indeed, in a week where we celebrate, yet again, our patron saint and our special national qualities, there seems to be no drive or impetus by our current leaders across Welsh civic society to take us to the next level.

Certainly, if Wales is to punch above its weight, as our fantastic rugby team did last Saturday, then we need a call to arms for a national culture where ability and vision, rather than patronage and fear, are the key attributes for choosing our leaders in Welsh life. If this happens, then the sky is the limit for what we can achieve as a nation.