Making convergence funding work for Wales

Last week, I read a fascinating article in the Economist magazine by Europe’s Regional Policy Commissioner Danuta Hubner.

In it, she discusses some of the key priorities for European competitiveness spending during the next seven years. Interestingly, she notes that the shift in policy across Europe should be from one of “opening roads to opening minds”, which reflects the Assembly Government’s current view on how the next round of European structural funds should be spent within our poorest areas.

However, one of the revelations of the article is the emphasis that European funding should encourage greater entrepreneurship and, more importantly, act as a catalyst to create opportunities for attracting the private sector to the poorest areas.

I sincerely hope that the Assembly Government takes heed of this, as its record with the last round of £1.3 billion leaves much to be desired in terms of the involvement of the private sector. A number of organisations have suggested that the lack of success of the current Objective 1 programme in raising prosperity levels within West Wales and the Valleys is because the majority of projects have been managed by public sector organisations, many of which have little if any experience of wealth creation as part of their activities.

According to programme statistics, nearly two thirds of the funding allocated under the Objective 1 programme has gone to projects managed by Assembly Government organisations and local authorities, with higher and further education bodies receiving over £190 million of funds, predominantly for training and educational courses. In contrast, just ninety two businesses have received £98.9 million during the period 2000-2006.

If the type of private sector project is examined in more detail at a local county level, business organisations have received 10.6 per cent of the grants awarded, and there is massive variation across the different parts of Wales. Neath Port Talbot has been the most successful in working alongside business to develop regeneration projects within the county, developing nine business led projects with a total European grant value of over £17 million.

Anglesey has also been successful in harnessing business support for 26.6 per cent of all local partnership projects to help transform the county. In contrast, Denbighshire, Merthyr, Torfaen and Blaenau Gwent have been largely unsuccessful in accessing private sector projects.

In terms of the larger regional projects covering all of West Wales and the Valleys, only forty three out of nearly five hundred projects were private sector led during the period 2000-2006. Five key areas– agrifood, community regeneration, entrepreneurship, forestry and tourism – have failed to develop any private sector-led projects and it is surprising to note that there were only two business-led projects in the areas of business support and infrastructure.

The highest participation rate by private sector firms was to be found in information age partnership, with twenty two 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.

The largely strategic and public-sector dominated approach that has been undertaken in Wales during the current Objective 1 programme is emphasised by the fact that sixty per per cent of all Objective 1 funding in Wales has been spent by only twenty organisations, with a third of the total funds (or £426 million) distributed by the Assembly Government or its quangos.

Therefore, this data clearly shows that the private sector has played a relatively minor role in the management of Objective 1 projects. As the CBI Wales noted in their response to the Assembly’s consultation document on the new European funding programme for Wales, this situation needs to be changed as 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.

However, signs that the private sector will influence the spending of the funds are not encouraging. For example, only a fifth of the twenty five strong Monitoring Committee responsible for the spending of the £1.4 billion of European funding coming to Wales can be said to be working in the private sector, which does not bode well for the future.

The success of the next round of European funding – the last chance we will have of making an impact on raising the prosperity of Wales with such large amounts of money – will only come if the private sector is fully engaged in supporting the development of projects under this programme.

Like many others, I would therefore implore the new Assembly Government to do its utmost to ensure that our entrepreneurs are encouraged to take part in developing projects for this programme.

If it does not, and the public sector continues to domiante the agenda without little input from business, then Wales will, to the dismay of us all, remain firmly anchored to the bottom of the UK’s prosperity table.