Get the private sector to help in raising prosperity

Today, Rhodri Morgan has submitted the plans for the new round of £1.3 billion of European funding for the poorest parts of Wales to the European Commission for approval. However, the success of this programme will require a greater input from the Welsh business sector. So say the CBI in their response to the Assembly’s consultation document on the new Convergence funding which is replacing the current Objective 1 programme, stating that “the real effectiveness of these funds will come in the delivery, and in their ability to fully engage the private sector throughout the whole process”.

This does not seem to be happening with the current Objective 1 programme. Up to the end of 2006, over £1.34 billion of European grants had been shared out to 1,732 projects across the poorest parts of Wales and whilst the private sector has been recipients of funds from these projects, their actual role in the management of the whole Objective 1 process has been largely minimal.

To date, 37.7 per cent of the funding has gone to projects managed by Government organisations in Wales, followed by local authorities (21.6 per cent). Higher and further education bodies have received over £190 million of funds whilst charitable and voluntary bodies have received 13.0 per cent of the funding available for projects. Indeed, 60 per cent of the entire total programme (or £811 million) has been spent by only 20 organisations. In contrast, ninety two businesses have received £98.9 million during the period 2000-2006, which is equivalent to only 7.5 per cent of the overall Objective 1 budget.

Whilst policy makers will argue that it is the role of government to supply funding to businesses via intermediary organisations, this conveniently omits the fact that private sector involvement could increase the effectiveness and efficiency of many European projects, bringing in much needed expertise in key areas and, more importantly, ensuring the sustainability of many projects after the last penny of grant aid has been paid.

Some areas of Wales have been quite successful at working with private sector firms. For example, Neath Port Talbot has been the most successful in working alongside business to develop regeneration projects within the county. To date, it has developed nine business led projects with a total European grant value of £17 million. In contrast, Denbighshire, Merthyr, Torfaen and Blaenau Gwent have been largely unsuccessful in accessing private sector projects.

Perhaps more worryingly is the fact that a number of large regional projects, usually led by Government bodies, have failed to engage with the private sector in delivering key aspects of the programme. Out of 494 projects (worth over £700 million), only 43 were led and managed by the private sector in the period 2000-2006. Five regional partnerships – agrifood, community regeneration, entrepreneurship, forestry and tourism – have failed to develop any private sector-led projects.

However, certain parts of the programme have shown that working with the private sector can ensure that the relevant experience and expertise is utilised. For example, the highest participation rate by private sector firms was to be found in information age partnership, with 22 per cent of all project funds in this area. There were also twenty eight training projects managed by the private sector across the Objective 1 region.

If we are to make a success of this second round of European funding, then we must ensure that the private sector is plays a full part in the implementation of the new European programme by providing ideas and expertise across the range of different economic priorities. However, the signs so far are not too good.

For example, it is a great disappointment that the five expert workstreams established to advise on key deliverables for the new programme have been dominated by the public and voluntary sectors, with little representation from the business community.

The management processes for the new programme are now being put into place and I would beseech the Assembly Government to ensure that the wealth creating part of the economy plays a full and active role in the management of key projects across Wales and that ‘the usual suspects’ do not take the lion’s share of the funds again. If we are to begin the long climb back from our position at the bottom of the UK prosperity league table, then we need exciting new partnerships between the public, private and voluntary sectors to make the most of this ‘twice in a lifetime’ opportunity and ensure greater prosperity for our poorest communities.