Wales poorer than Poland

Earlier this week, many would have been horrified to read that some parts of Wales are officially worse off economically than areas within the former Soviet Bloc such as rural Poland.

A report from the Organisation for Economic Co-operation and Development (OECD) showed that Wales remained one of the poorest nations in Europe and that, despite billions of pounds of European funding, the wealth gap between Wales and the rest of the UK had actually widened.

Drawing on the latest GVA data - which track the prosperity levels of the various nations and regions of the UK and which this blog has reported on previously – the OECD reported that the GVA per head for London in 2007 was 152 per cent of the UK average as compared to Wales at 75 per cent, the worst performance of any UK region. A decade earlier, London was 138 per cent of average prosperity of the UK in 1997 whilst Wales was 80 per cent.

Ironically for those who lambast the previous government’s regional policies, the average annual GVA growth rates for all regions apart from London was higher between 1989 and 1997 than over the last decade.

Therefore, the analysis of Gross Value Added (GVA) rates between 1997 and 2007 reveals that the gap between London and other parts of the UK has actually widened under the current Labour administration, with Wales among the hardest hit.

During the period 1997-2007, the London economy grew in overall terms by 91 per cent as compared to a growth of only 54 per cent for Wales. The UK economy grew by 69 per cent. This suggests that if the Wales’ growth had kept pace with the UK average over the last decade, an extra £4.2 billion would have been generated in the Welsh economy.

What on earth has gone wrong?

After all, devolution was supposed to give Wales the powers to determine its own policies for economic development that would be separate from Whitehall? More importantly, the creation of a new devolved body coincided with the financial bonanza of billions of pounds of European funding being made available to boost the Welsh economy.

Rather than admitting that there remain deep rooted structural problems within the Welsh economy and, more importantly, developing strategies to address them, it is becoming clear that successive Assembly Governments have been in a constant state of denial about the declining state of the Welsh economy for years.

One visible example is the fact that our once powerful manufacturing industry has lost tens of thousands of jobs and yet politicians are happy to take a ‘not me guv’ attitude and simply blame globalisation for our ills. The fact that they could have encouraged greater productivity, higher levels of research and development, more skills and training and higher levels of investment in process technologies for the industry, seems to have completely passed them by.

Rather than working with and listening to the private sector, the Assembly Government seems content to continue with the current status quo which has resulted in the disastrous economic performance of our economy during the last decade.

The most visible example of this inability to make the most of business expertise and experience is in the management of the European Structural Funds, where there has been minimal involvement by the private sector in the development and delivery of regeneration programmes such as those provided through £2 billion of European funding.

In fact, during the last major funding programme (known as Objective 1), statistics show that only 13 per cent of the £1.3 billion programme earmarked for the poorest parts of Wales went to private sector projects between 2000 and 2006. In contrast, over half of the available funding went to public sector backed projects.

Whilst promises have been made to ensure greater interaction with the private sector, this has not materialised with the £2 billion programme of funding for the period 2007-2013. To date, only 19 per cent of the expressions of interest for money under the current Convergence funding scheme have come from the private sector i.e. 34 expressions of interest in new projects have been received from the private sector as compared to 30 from the public sector, 66 from the Assembly Government and 46 from the voluntary sector.

More worryingly, many are now concerned that the majority of European funds, rather than adding anything additional, are being largely used to subsidise existing Assembly Government programmes and that private sector organisations, who could and should be leading innovative new projects that could make a difference to the Welsh economy, are being turned off by the massive bureaucracy and increasing delays in making decisions on any applications.

Given this sorry state of affairs where the businesses – the wealth creators in our economy - are essentially being crowded out by public sector bodies such as the Assembly Government, it is no wonder that the gap in prosperity between Wales and many other parts of Europe is growing.

Certainly, that needs to change, and change quickly, if we are to start closing the prosperity gap with the rest of the UK over the next few years.

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