Getting the facts on grants

As an academic studying economic development in Wales, one my regular highlights was analysing the papers of the Assembly’s Economic Development Committee.

This was because you could access vital government information that couldn’t be obtained elsewhere, including assessments of WAG’s different support programmes, quarterly economic analyses, reports from Ministers on the state of the economy and a wealth of other material.

In particular, I was always fascinated to see the regular report from the Minister on the number and distribution of Regional Selective Assistance and Assembly Investment Grant offers made every year as this gave a clear indication of how WAG’s main policy instrument was being sued to support the Welsh economy.

Unfortunately, since the establishment of the third Assembly, Ministers no longer turn up to regularly inform members on what happening within their portfolios and, more importantly, to be held accountable for their actions.

Worst of all, very little information seems to be provided, certainly within the new Enterprise and Learning Committee, on the state of the economy. Indeed, the last time any information was given on WAG’s main grant giving programme was May 2006.

Fortunately, you can still get access to the information if you ask nicely and last week, figures were released by the Welsh Assembly Government which analysed the grants awarded to business for 2002-2009.

During this period, the main form of support given by the Welsh Assembly Government since its creation a decade ago has been Regional Selective Assistance (RSA). This was a discretionary grant that was available to manufacturing and service sector firms within certain parts of Wales and had to be spent on capital expenditure (such as property, plant or machinery) and/or the creation and safeguarding of jobs.

Most importantly of all, the companies had to demonstrate that such grant assistance was necessary to enable the project to proceed.

As always, the statistics regarding RSA grants cast real illumination on the approach being undertaken by Welsh politicians and policymakers in supporting businesses.

During the period 2002-2009, £552 million of regional selective assistance (RSA) grants were awarded to 889 companies in Wales. This funding created over 38,000 jobs and safeguarded another 15,398 employees at a cost per job of around £10,000. Of this total amount of grant support, two thirds of the value of grant awarded went to manufacturing companies, which is not surprising given the higher than average dependency on this sector by the Welsh economy.

The statistics also demonstrate the focus, during this period, on inward investment projects as a key part of the strategy for the economic regeneration of Wales, with 56 per cent (or £311 million) going to support non-Welsh based companies. The average grant per job was lower for Welsh firms (£8,160) as compared to overseas owned companies (£11,502) coming into the country.

Controversially, the data shows that £291 million was awarded to 200 large firms across Wales as compared to £220 million to SMEs (small to medium-sized enterprises). This will disappoint many Welsh entrepreneurs who have had to listen to the usual rhetoric from politicians that small firms are the backbone of the economy.

Of course, the case could be made that larger firms are more efficient at using the grant, although an independent report from the London School of Economics and commissioned by WAG showed that actually RSA was far more effective within smaller firms, which begs the question why these grants have been focused on supporting bigger companies?

Finally, there is an analysis of the degree of RSA expenditure by geographical region which, not surprisingly, shows that certain parts of Wales have done better than others. For example, whilst North Wales makes up approximately 21 per cent of the Welsh business population, the region only received 14 per cent of the total amount of RSA grants awarded. This means that North Wales firms have essentially lost out on around £35 million of support during the last eight years.

It is also worth noting that companies in the Central and Gwent Valleys in South Wales have received 30 per cent of the total amount of RSA grant aid despite the area collectively having less than 13 per cent of the Welsh business population.

Despite over £168 million of grant aid being awarded to firms in these two valley regions, the local economy has, according to the latest statistics, only been growing at 75 per cent of the Welsh rate. Certainly, this begs some serious questions as to whether business grants do actually make any significant economic difference to local economies, especially within more deprived areas of Wales.

Given the importance of such data, perhaps the third Assembly Government will, as its predecessors did, be willing to make such information regularly available to Assembly members to ensure that, at the very least, they can be fully informed as to the way that the economic development function of this country is operating and, more importantly, the effect it is having on our communities.

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