THERE is always some debate on how you measure economic prosperity within a nation. While some politicians would prefer to measure more esoteric notions such as wellbeing, the majority of economists (and the UK Government) use Gross Value Added (or GVA) as the key measurement of wealth in the nation. This simply measures the difference between the output of goods and services and the cost of raw materials and other inputs.
In Wales, I am sure policymakers dread the annual figures that come out every second Friday of December, as they indicate whether all their efforts have actually made an economic difference to Wales, and whether, relative to the rest of the UK, we have grown in prosperity.
Unfortunately, Santa did not bring an early Christmas present this year, with our relative prosperity actually dropping to its worst level for many years which was a surprise to many, including myself. Indeed, I am sure that many politicians will be disappointed at the fact that we seem not only to be standing still, but are moving backwards relative to other regions which do not have devolved powers.
The data showed that in 2005, GVA per head in Wales was 78.1 per cent of the UK average, the lowest amongst all the UK regions. This is despite assertions from politicians during the last seven years that the GVA data does not reflect the reality of the economic picture in Wales. Even highly respected Assembly members, such as Finance Minister Sue Essex, dismissed the figures in 2003 as being "out of date" and said the picture for Wales was, in fact, much brighter. Unfortunately, the situation seems to have become relatively worse since 2003, despite a record number of jobs in the Welsh economy.
What is more worrying is the fact that, unlike most other regions of the UK, Wales has had a couple of billion pounds of European (and matched funding from the private sector and the Assembly) spent specifically on trying to raise the level of wealth in Wales since 2000. Given the recent data, this seems a very poor return on the investment made, despite the spin and hype regarding the "success" of Objective One. Indeed, whilst the Welsh economy has grown by an average of 4.4% since we qualified for Objective One money, the average annual growth rate in the preceding years (1989-2000) was 5.1%.
Even more worrying is the evidence which suggests that the poorer regions of Wales are growing at a slower rate than the rest of Wales, despite the extra spending on Objective One projects. Certainly, the most dramatic decline has been seen in Bridgend and Neath Port Talbot, which has seen its average prosperity fall from 86% of the UK average in 1995 (which was then above the Welsh average of 84%) to 67% in 2005.
Also, the statistics show that the two poorest areas in the UK are Anglesey and the Gwent Valleys, both at different ends of the country with very different problems, but still in need of drastic support in the future.
After eight years of devolved powers, something isn't working in terms of making a real difference to prosperity in Wales. In the same number of years that the Assembly has been in existence, the Republic of Ireland managed to change itself from the basket case of Europe to one of the fastest growing modern economies.
Whilst we clearly do not have the same fiscal arrangements as our Celtic cousins, Wales does possess the entrepreneurial talents that should be engaged to enable a new economic direction for this nation.
Last week's figures finally prove that the government-dominated approach to creating economic wealth simply does not work and that a stronger partnership must be created with the private sector in Wales to provide the right experience and guidance to our politicians and civil servants.
At the very least, the First Minister should urgently convene a summit of our leading businesspeople and entrepreneurs - such as Sir Terry Matthews, Sir Christopher Evans and Henry Engelhardt - to get their views on what is needed to kick start the Welsh economy. Certainly, their experience and expertise of wealth creation should give clear guidance on the measures required to turn around our fortunes and ensure that Wales can become the innovative entrepreneurial nation we all want it to be
In Wales, I am sure policymakers dread the annual figures that come out every second Friday of December, as they indicate whether all their efforts have actually made an economic difference to Wales, and whether, relative to the rest of the UK, we have grown in prosperity.
Unfortunately, Santa did not bring an early Christmas present this year, with our relative prosperity actually dropping to its worst level for many years which was a surprise to many, including myself. Indeed, I am sure that many politicians will be disappointed at the fact that we seem not only to be standing still, but are moving backwards relative to other regions which do not have devolved powers.
The data showed that in 2005, GVA per head in Wales was 78.1 per cent of the UK average, the lowest amongst all the UK regions. This is despite assertions from politicians during the last seven years that the GVA data does not reflect the reality of the economic picture in Wales. Even highly respected Assembly members, such as Finance Minister Sue Essex, dismissed the figures in 2003 as being "out of date" and said the picture for Wales was, in fact, much brighter. Unfortunately, the situation seems to have become relatively worse since 2003, despite a record number of jobs in the Welsh economy.
What is more worrying is the fact that, unlike most other regions of the UK, Wales has had a couple of billion pounds of European (and matched funding from the private sector and the Assembly) spent specifically on trying to raise the level of wealth in Wales since 2000. Given the recent data, this seems a very poor return on the investment made, despite the spin and hype regarding the "success" of Objective One. Indeed, whilst the Welsh economy has grown by an average of 4.4% since we qualified for Objective One money, the average annual growth rate in the preceding years (1989-2000) was 5.1%.
Even more worrying is the evidence which suggests that the poorer regions of Wales are growing at a slower rate than the rest of Wales, despite the extra spending on Objective One projects. Certainly, the most dramatic decline has been seen in Bridgend and Neath Port Talbot, which has seen its average prosperity fall from 86% of the UK average in 1995 (which was then above the Welsh average of 84%) to 67% in 2005.
Also, the statistics show that the two poorest areas in the UK are Anglesey and the Gwent Valleys, both at different ends of the country with very different problems, but still in need of drastic support in the future.
After eight years of devolved powers, something isn't working in terms of making a real difference to prosperity in Wales. In the same number of years that the Assembly has been in existence, the Republic of Ireland managed to change itself from the basket case of Europe to one of the fastest growing modern economies.
Whilst we clearly do not have the same fiscal arrangements as our Celtic cousins, Wales does possess the entrepreneurial talents that should be engaged to enable a new economic direction for this nation.
Last week's figures finally prove that the government-dominated approach to creating economic wealth simply does not work and that a stronger partnership must be created with the private sector in Wales to provide the right experience and guidance to our politicians and civil servants.
At the very least, the First Minister should urgently convene a summit of our leading businesspeople and entrepreneurs - such as Sir Terry Matthews, Sir Christopher Evans and Henry Engelhardt - to get their views on what is needed to kick start the Welsh economy. Certainly, their experience and expertise of wealth creation should give clear guidance on the measures required to turn around our fortunes and ensure that Wales can become the innovative entrepreneurial nation we all want it to be
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