CHILCOT, GORDON BROWN AND UNANSWERED QUESTIONS

Last week, the Chilcot inquiry began into Britain’s role in the Second Iraq War which began in 2003.

Like many in the UK during the months leading up to the decision to go to war, I was not convinced by the flimsy arguments put forward by the British Government as a pretext to committing our troops to war in Iraq.

Indeed, I remember having quite heated debates with friends and colleagues who thought that Saddam Hussein should be removed whatever the cost.

Unfortunately, too many of our MPs were also ready to follow this line at the time, ignore the evidence before their eyes and support Tony Blair’s suggestion that Iraq had weapons of mass destruction ready for deployment within forty five minutes.

Why did Tony Blair cling to this line of argument for going to war with Iraq?

Well, it would seem that his own Solicitor General, the UK’s top law officer, had informed him that there were only two legitimate and legal reasons for going to war, namely "humanitarian intervention" and “military intervention on the basis of self-defence”, neither of which applied to the situation in Iraq.

Given that earlier United Nations resolutions on Iraq would also be difficult to enforce legally, he therefore needed an excuse for going to war and the threat of weapons of mass destruction, however flimsy at the time, provided this.

Thanks to the Chilcot enquiry, we now find out that a deal had been struck in 2002 with the Bush Presidency for ‘regime change’ and that there needed to be a case to make this happen.

This was exactly the charge made by the late Robin Cook when he made the honourable decision to resign from the Cabinet in protest at the decision by his own Government to make the case for war with Iraq.

The real scandal therefore is that the UK Government knew for several months that it was going to war with Iraq. Given this, why did it focus its entire efforts on making the case for war rather than preparing our troops for a war it knew was coming? As a result, our troops were left with inadequate equipment, such as body armour, to do a proper job in Iraq.

Only one week since the Chilcot enquiry began, we have already seen revelations from senior civil servants which, if they had been made public at the time, would most certainly have caused many MPs to pause before making the decision to go to war.

Whilst civil servants are there to advise their Ministers, it is the Government of the day which makes the final decision.

Therefore, the real focus of the Chilcot enquiry should be on how many members of the Cabinet in 2003, including the current Prime Minister, knew what was going on at the time, had knowledge of the real reasons for going to war in Iraq, and were aware of the delays in getting equipment procured to enable our Armed Forces to do their job properly?

Indeed, it would an incredible admission that Gordon Brown, the second most powerful man in the UK at the time, knew nothing about the real facts about the lack of evidence regarding the weapons of mass destruction.

Worse still, if he did accept the flimsy evidence as it stood, does this not question the judgement of the Prime Minister who is currently running the country?

One can only hope, regardless of the fact that we are only six months away from the general election, that the Chilcot inquiry fully examines the roles played by members of the current Government regarding he decision to go to War and that we find out why they supported this unnecessary and costly conflict.

ENTREPRENEURS AND THE WELSH LANGUAGE

While only one-fifth of the population of Wales are Welsh speakers, previous studies have indicated that they may have different economic characteristics from other language groups.

For example, research by various economists has shown that Welsh speakers have been found to have a lower unemployment rate, are less likely to be economically inactive and, most importantly, have an earnings advantage in Wales.

However, what about the impact of the Welsh language on entrepreneurial activity?

During the past 20 years, Wales has seen a proliferation in Welsh language businesses. For example, there are an increasing number of Welsh language bookshops independently owned by Welsh entrepreneurs.

In addition, the growing demand for Welsh literature has led to a number of Welsh publishing houses – such as Gwasg Gomer, y Lolfa, and Gwasg Gwynedd – and the development of a number of Welsh language magazine publications such as Golwg.

There has also been a particular revival in the production of children’s literature through the medium of Welsh during the past 30 years, driven mainly through a revival in Welsh language education.

While it would be expected that publishing would be a strong area for development, there are examples of a new type of professional Welsh language entrepreneur emerging in knowledge-based sectors such as media and television, mainly as a result of the commissioning activities of the Welsh language television channel S4C.

With much of this activity focused around Cardiff where both BBC Wales and S4C are located, the expansion of this sector follows a trend where much of the recent growth in Welsh language businesses has been outside the Welsh language heartland.

This development was driven by the increased demand for language skills which emerged as a direct result of the Welsh Language Acts which created unprecedented job opportunities for those who can speak the Welsh language.

This has led to a massive growth in translation facilities and an increase in the demand for the use of the Welsh language in large cities such as Cardiff and Swansea, which are traditionally non-Welsh-speaking areas.

The subsequent growth in Welsh-speaking professional classes, combined with a revival in terms of Welsh medium education in the same urban areas, has resulted in an increase in demand for educational services such as Welsh-speaking nannies and Welsh language nurseries in traditional non-Welsh speaking areas, thus creating more new businesses.

While such growth in new ventures is to be welcomed, it has been suggested that the expansion in the number of Welsh language entrepreneurs within non-Welsh speaking areas may actually be posing a real threat to the economic viability of the Welsh language heartlands as many are started by those who have moved away from those areas.

Indeed, the potential danger of a “brain drain” is exacerbated by the fact that these areas are already among the poorest in Europe and are those which can least afford to lose their entrepreneurial and talented young people to the more prosperous metropolitan regions.

Of course, given this situation, the question is how government should address this exodus by young Welsh speakers and whether there should be specific policies to encourage greater entrepreneurship within the Welsh language heartlands?

For example, following the demise of the Entrepreneurship Action Plan for Wales, business support programmes have been mainstreamed into a “one size fits all” approach. Given the need to encourage enterprise within the Welsh language heartlands, some have argued that there may be scope for strengthening support for potential and existing Welsh speaking entrepreneurs.

Others would contend that the Welsh language itself has little to do with the ability of most businesses in the Welsh speaking heartlands to succeed. What is more important is developing the right type of infrastructure – such as improved broadband, access to the right skills and transport links – that enable businesses in the rural Welsh-speaking parts of Wales to develop and grow.

Whatever the solution, it is clear that for the economic prosperity of Wales to develop, we must ensure that both Welsh speaking entrepreneurs and businesses which are based on the Welsh language are given the full support to flourish wherever they are based.

HART OF THE ECONOMY?

Should we be worried when a candidate for the job of First Minister shows a distinct lack of knowledge of the state of the economy?

Judge for yourself from the interview today with Edwina Hart in the Western Mail where she made the following statement in response to a question on the future of the Welsh economy:

“The key story of the Welsh economy, until the recession, was of its success. The UK economy grew at a faster rate than other industrialised nations; the Welsh economy grew faster than the UK economy and, within Wales, the economy of West Wales and the Valleys grew faster than Wales as a whole".

This sounds like great news until, of course, you examine the veracity of each of these statements in relation to the time period since Labour came to power in 1997.

The UK economy grew at a faster rate than other industrialised nations

INCORRECT - During the period 1997-2007, Ireland registered the greatest increase in real GDP per capita, followed by the Republic of Korea, Hong Kong, Sweden and Spain.

The Welsh economy grew faster than the UK economy

INCORRECT - During the period 1997-2007, GVA has grown in the UK by 68.7 per cent. In contrast, GVA in Wales has grown by 54.1 per cent – the lowest of any UK region apart from the West Midlands. England grew by 69.1 per cent.

Within Wales, the economy of West Wales and the Valleys grew faster than Wales as a whole

INCORRECT – During the period 1997-2006, GVA in West Wales and the Valleys grew by 42% as compared to 53% for East Wales. Whilst it would be correct to say that the gap has begun to close during the last few years between the two parts of Wales, that is not surprising given the additional billions poured into the region during the period combined with the decline of Wrexham and Flintshire, which grew by only 29% over the decade.

I am surprised no-one has picked up Mrs Hart on these 'exaggerations' regarding the state of the Welsh economy.

One can only hope, if she is successful next week, that she does not use the same statement as the basis for the real economic policies needed to bring Wales out of recession.

THE PLAID LED ASSEMBLY GOVERNMENT

It always brings a wry smile to my face when I hear that various Plaid Cymru backbenchers, whenever a WAG policy announcement has been made, have claimed that this or that brand new initiative is down to their interventions within cabinet.

Obviously the most recent example concerns ProAct, which the Deputy First Minister and his colleagues are forever claiming as their idea, even though it was developed within DCELLS, Jane Hutt's department.

However, after observing today's shenanigans in the Chamber, it is clear that when it comes to the referendum on devolution, it is Plaid Cymru that is leading the argument within the coalition government.

In an example of backpeddling that, if it was an Olympic event, would make Rhodri Morgan a gold medal winner, all that had to happen for him to go into full reverse on an earlier Labour Party policy decision was for a couple of Plaid backbenchers to stand up and say that, as Labour would not promise a referendum before the next General election, they just wouldn't stand for it and (hint hint) could vote to end the coalition.

Within a short space of time, we had statements rushed out by the Labour leadership to emphasise that they had been misunderstood and that it was all a great big mistake.

What a legacy of ten years in power by the First Minister!

The minute that Plaid Cymru feels uncomfortable about a Labour party policy on devolution, Wales' best known politician and his previously perfect sense of logical arguments ended up going round in circles like, to quote the man himself, a one legged duck.

Whilst Jonathan Morgan speculates whether it is Peter Hain or Rhodri Morgan who leads the Labour Party, today's fiasco has shown the Welsh Assembly Government is not led by Labour, but its partner in coalition.

I would imagine that Plaid Cymru will be ecstatic this evening at the tail literally wagging the dog although what the Labour leadership contestants will make of this fiasco, and their reaction to it after the result is announced next week, is the real political story from today.

CONSERVATIVES CLOSE GAP IN WALES?

Perhaps what many have failed to notice in general excitement of the YouGov/ITV Wales poll on a referendum for the Assembly are the voting preferences of those sampled for the next general election.

Unless I am totally mistaken, it looks like the Conservatives are running only a few percentage points behind the Labour Party in Wales. Compare this to the situation in 2005 when the voting intentions were 43% Labour verses 21% Conservative.

This reinforces the October poll results from YouGov and seems to suggest that the Conservatives will continue their resurgence in Wales and, given the concentration of Labour's votes in areas such as the South Wales Valleys, may spring a few surprises in some unexpected constituencies.

MEETING YOUR HEROES

When you are lucky enough to get the position to meet your heroes, there is always an inevitable sense of disappointment.

Actors are boring and self-obsessed, sport stars are always smaller in real life, and politicians are, well, politicians.

Today, I was lucky to meet one of my real academic heroes and the man who created, single handedly, much of the entrepreneurship infrastructure that makes MIT the innovation hotspot that it has become today.

Even at the grand old age of 74, Professor Ed Roberts is a giant amongst academics and one of my personal heroes.

It was the work that Ed did in the 1960s and 1970s which laid the foundation for much of the knowledge we have today on technology-based companies and his research was the inspiration for my own Ph.D on technical entrepreneurship in the UK.

His talk today about the effect of MIT on the US economy was a tour de force and even in his 70s, he has the power to inspire and, most importantly, surprise us.

For example, his recent review of the entrepreneurial legacy of MIT demonstrated that foreign MIT alumni were 50 per cent more likely to be starting their own successful businesses than their US counterparts.

As he said today "About 30 percent of MIT’s foreign students form companies, of which at least half are located in the United States. Those estimated 2,340 current firms located in the United States but formed by MIT foreign-student alumni employ 101,500 people. In other words, talented foreign-born students attending MIT play an increasingly important role in creating U.S. companies, making MIT a magnet for worldwide talent that significantly benefits the U.S. economy".

That is exactly the sort of talent we need to attract to the UK and, more specifically, Wales. However, by pandering to the xenophobes in our society, the recent changes to visa regulations by this government means that it is going to be even more difficult to attract the brightest and the best to this country and the economic loss will be ours.

I managed to have a few words with Ed after his lecture and he was charming, funny and full of knowledge. It was a privilege to meet him twenty one years after I first read his articles and hopefully, we can get him over to the UK next year so he can get some of his important messages across to our policymakers.

WALES - SMALL BUT NOT CLEVER?

It is somewhat ironic that I am sitting here having lunch in the middle of the world class ecosystem that is MIT when my academic colleague Rob Huggins is preparing to give his inaugural lecture at UWIC, in which he argues that Wales seems to lack the ideas to address the lack of innovation within the economy, which is proving a barrier to growth when coupled with the lack of investment in knowledge.

As he states, "Evidence from leading regions around the world indicates that while universities can play an important development role, they are usually supported by a dense system of institutions, including publicly-funded research institutes and laboratories dedicated to applied research".

Of course, nowhere is there a better system to support R&D than that found here in Cambridge, Massachusetts and over the next two days, I will be attending the Regional Competitiveness Conference to discuss how we can partner with MIT to bring some of their best programmes to Wales

One of these programmes is the Deshpande Centre, which was established to help develop examining the commercial potential of novel-early stage research. The great news is that MIT would be willing for us to replicate Deshpande, and other such programmes, in Wales.

Our job now is to take full advantage of such an opportunity.

TAKING THE BEST OF WALES TO THE WORLD AND BRINGING THE BEST OF THE WORLD TO WALES

Today, the University of Wales started its agreement with the Massachusetts Institute of Technology (MIT), one of the World’s leading universities.

Founded in 1861, MIT has produced 75 Nobel Prize winners, seven of which are still working within the institution. With just over 10,000 students, it attracted £383 million of external research funding last year. More importantly, its success in commercialising research is unrivalled globally. For example, it has been estimated that the 25,800 currently active companies founded by MIT alumni employ about 3.3 million people and generate annual world sales of £1.5 trillion, producing the equivalent of the 11th-largest economy in the world.

Today, the University of Wales has become a partner in the Industrial Liaison Program (ILP), which helps leading global companies keep pace with industry changes, develop new products and processes, and adopt innovative management practices.

As part of this arrangement, Welsh companies that are members of the University of Wales’ Global Academy will be given access to world class academic expertise in key science, engineering and technology areas.

This is a real opportunity for Welsh businesses to gain direct access to some of the best academic minds in the World and I am thrilled at the prospect of having companies from Wales gain direct access to the ILP programme which helps businesses worldwide harness MIT's resources to address current challenges and anticipate future opportunities.

The aim of the University of Wales is to take the best of Wales to the world and to bring the best of the world to Wales. This programme is a perfect example of that philosophy and will enable Welsh entrepreneurs to work alongside MIT faculty to monitor emerging innovations in science and technology and explore their potential impacts. It will also give them the chance to explore new management practices and solve specific problems through consulting or research collaboration with the best in their field.

The ILP will also enable Welsh companies to access private workshops and conferences with MIT faculty which can be used to bring outside expert viewpoints into the company’s strategic planning efforts, explore the impacts of emerging and disruptive technologies on the company’s business and consider new approaches to the company’s management and organisation.

Entrepreneurs will be able to gain exclusive access to the “MIT Knowledge Base”, which enables companies to explore emerging technologies that may impact their industry, learn about relevant research at MIT, and identify faculty members working in their company’s area of interest.

This enables companies working with the University of Wales to join an exclusive group of organisations that can, through the ILP programme, gain access to the world class expertise at MIT. Currently, 200 of the world's leading blue chip organisations from across the globe turn to the ILP for professionally coordinated access to MIT experts, research facilities, and information resources that will help them bring innovation to market. The programme offers streamlined access to MIT’s intellectual capital, and enables companies to stay abreast of new technology developments, anticipate changes in the marketplace and sustain growth and profitability.

Today was the first day of MIT 2009 Research and Development conference which all ILP members are invited to on an exclusive basis. Along with 200 other attendees, I listened to lectures by MIT's leading professors on subjects as diverse as energy, materials and transportation, and met with faculty members leading the field in technology transfer, commercialisation and entrepreneurship.

To say that this was a mind-blowing experience would be an understatement and I hope that we can build on some of the discussions we had today to benefit the Welsh economy.

And just to give an example of the calibre of people who are here at the event, I had a chat over coffee with the President of Honda research centre in Silicon Valley who expressed an interest in seeing how Welsh companies could potentially help with his research agenda and given that one of the companies working with us is developing a hybrid engine, there are real possibilities emerging for Welsh firms.

I also discussed the possibility of having teams from MIT come over to assess projects for innovative welsh start-ups and I will be following up on this later this week with the ILP team

That was just day 1 - can't wait until tomorrow....

BACK IN THE USA

This week, I am back in the USA or, more specifically, in Massachusetts visiting a number of universities.

Whilst I will be visiting a range of academic institutions over the next couple of days, my primary aim is the launch of a new relationship between the University of Wales and MIT - one of the top universities in the world.

I will blog more on this later this week but, as I have mentioned previously, there are many lessons to be learnt from the MIT experience.

Indeed, the model is so successful that the Singapore Government is replicating it.

As this article describes, Singapore is looking to copy the success of MIT with its own new institution - the Singapore University of Technology and Design - which will be headed up by former MIT Professor Thomas Magnanti, who headed the MIT School of Engineering - the best in the World.

SU opens its doors in August 2011 and its strategy is based on looking at how the world's great entrepreneurial universities - Stanford, which gave birth to Silicon Valley, and MIT do it. It aims to replicate the 'vigorous entrepreneurial ecosystem' to nurture and support students and faculty who want to launch new businesses.

Singapore is putting in place various measures to encourage a research and innovation culture with SU aiming to become one of the world's foremost universities within the next 20 years, producing 'technologically grounded leaders' who will have an impact on society in different ways.

If only we had the same vision here in Wales. Still, the new relationship with MIT could be the first step....

WAG FAILS ON RECESSION

Yesterday, the all party finance committee came out with what is possibly the strongest criticism yet of the Welsh Assembly Government’s handling of the recession.

Its report noted that rather than focusing on the downturn and dealing with Wales’ growing unemployment problem, Labour and Plaid Cymru had focused instead on delivering the ‘One Wales’ agreement.

As this blog has said time and time again, and despite the spin generated by economic summits, the Welsh Assembly Government simply has not changed its overall approach during the deepest recession since the Second World War.

Nowhere is that more obvious than in WAG's annual spending plans, where the committee noted that:

• funding for health and social services account for 40.3% of the budget next year, while the share for the economy and transport fell from 8.1% to 7.6%.


• there were questions over the savings made by reducing health boards from 22 to seven given the no redundancy pledge, and the allegation by NHS finance directors that up to £1 billion of NHS spending was being used inappropriately


• an apparent ‘lack of coherence’ between ministerial portfolios;


• there were difficulties in measuring £600m of efficiency savings;


• trouble in tracing the effectiveness of cross-cutting policies such as child poverty.


• the Government had not made any significant change to its baseline budget in response to the recession


• there were concerns about funding for schools, colleges and higher education facing 5% cuts.

However, the publishing of the report was marred by the behaviour of the Plaid Cymru AM, Chris Franks, who tried to protect his own leader by allegedly getting one of Plaid’s press officers to draw up amendments to deflect any criticism of the economic development portfolio.

Of course, this is the same AM who, back in August, suggested that Wales was doing better than the rest of the UK economy thanks to his party's effort in 'driving' the Welsh Assembly Government but has been strangely quiet since as unemployment figures have gone from bad to worse over the last few months.

By hiding behind ProAct - as the three candidates for the Labour leadership did last night on Dragon's Eye - both of the parties which make up the OneWales Government seem to have taken their eye off the ball regarding some simple fundamentals to help the economy - such as access to finance for small firms, reducing business rates and utilising European funding - that could have made a real difference to businesses during the recession.

WALES SEES HIGHEST INCREASE IN UNEMPLOYMENT IN THE UK

It has become such a familiar story that even BBC Wales can't be bothered to report on today's unemployment figures showing that Wales continues to perform worse than the rest of the UK.

WHO WINS UNDER PROACT? NOT CONWY....

As this blog has pointed out time and time again, the ProAct scheme is a policy that could support businesses through a recession, but only as part of a wider package of measures. It certainly isn't the panacea to the deep-seated economic problems faced by our country.

Despite the fact that small firms have been hit hardest during this recession, 68 per cent of ProAct funding has gone to large firms and I find it strange that £1.1 million of public support should be offered to a multinational company such as Corus, especially when there are thousands of small businesses that require help during the economic downturn.

Of course, there are those who disagree with this, such as Gareth Jones, the Assembly Member for Aberconwy, who recently was moved to write a letter to the Daily Post criticising my stance on this issue.

I have a lot of time for Gareth, which is why I am perplexed that he suggested in his letter that I was wrong to criticise "the ProAct scheme for investing a million pounds in Corus because....it wasn't one of many small firms in serious financial difficulties and implying that this investment was of no help to small businesses".

Given this, it gives me little pleasure to reveal that the latest figures from the Welsh Assembly Government show that not one penny has been paid out under the ProAct scheme to help businesses in the Conwy local authority area, where the official unemployment rate has risen from 5.3 per cent to 8.1 per cent between September 2008 and 2009.

Therefore, whilst ProAct has actually been of no help at all to the small businesses in his own constituency, the local AM seems content to support the gift of over a million pounds to a large company that has itself admitted that it did not even qualify for the funding.

THE DANGER FACING WELSH UNIVERSITIES

Last week, an article appeared in the Times which highlighted the dangers faced by Scottish Universities following Lord Mandelson's proposed shake-up of the higher education sector in England.

The warning came from Lord Sutherland, former principal of Edinburgh University, who believes that there are significant funding implications for Scottish Universities if universities in England are able to charge higher fees whilst improving the experience offered to students and making a more explicit contribution to Britain’s economy.

Of course, higher education is devolved in both Scotland and Wales and what applies to the Scottish Higher Education system probably applies even more so the sector in Wales.

Therefore, rather than rewriting the whole piece to reflect the Welsh viewpoint, I have merely substituted "Wales" for "Scotland" in the Times article. It does not make easy reading for politicians and policymakers in Wales.

"Welsh universities could fall behind their English counterparts as a result of a new Westminster blueprint for improving higher education in England.

The warning came yesterday as Lord Mandelson, the Business Secretary, announced a 10-year strategy which suggested that universities in England may be able to charge higher fees — but only if they improve the experience offered to students and make a more explicit contribution to Britain’s economy.

Lord Mandelson said that students should be entitled to full details on the quality of teaching and academic support. At the same time, vice chancellors should be given a new responsibility for filling skills gaps in the economy, particularly in science and technology. The twin emphasis on student entitlement and business needs, will define the role of universities for the next decade, he added.

The plan had the potential to boost the funding of English universities, particularly the most prestigious, thus enabling them to attract a higher calibre of academics. But it could adversely affect Welsh universities by drawing more funds towards their English counterparts, and making access to them more attractive to students. There were three proposals which could affect Wales— a potential rise in the cap in tuition fees, a concentration of funding in top-flight universities, and a drive to improve access to universities.

Lord Mandelson has made plain that public spending on higher education faces “constraints” in the coming years, leaving business and students to make a higher contribution, supplemented by universities seeking philanthropic support and more earnings from overseas students.

Later this month he will launch a review that is expected to lead to the lifting of the cap on variable tuition fees, which have risen in line with inflation since they were capped at £3,000 in 2004. Many English vice chancellors want the upper limit to rise to between £5,000 and £7,000 a year. According to one former Vice Chancellor, “This will significantly affect Wales as it will raise the level of funding available in the south. It means their institutions will be able to headhunt quality staff, offering very well-resourced laboratories compared to here.”

The blueprint also states that taxpayer funding of higher education research will be concentrated on fewer universities which can demonstrate world class capability. It means that institutions less associated with research but which excel in a handful of disciplines will lose out unless they collaborate with established research centres. It could also leave Welsh universities behind. “The implication is that the best universities in England, which are the top of the class in the world, will have more concentrated resources available to them – and that will put extra pressure on other universities”.

The third proposal which could improve the higher education sector in England beyond that in Wales was the move to increase participation among those from disadvantaged backgrounds who would not normally attend university. This would serve to attract the most capable students, regardless of their background as “talent is not postcoded ”.

A worrying time for universities across Wales unless a radical approach is taken soon.

Indeed, it would suggest that regardless of the high quality of research in Welsh institutions, the majority of UK research funding (which is not devolved) would be focused in a few English institutions.

Given that Wales only attracts around 3 per cent of the £2.8 billion made available by UK research councils every year, it means that around £50 million is 'unBarnetised' and goes to other universities within the UK system. This is mainly because there are too many high quality UK proposals and simply not enough funding to go around.

As a result, the funding gravitates to established research groups within the more prestigious Russell Group universities, thus widening the gap between them and the rest of the university sector.

Given this, I would suggest that Welsh policymakers need to seriously consider whether Wales' share of the funding should be ringfenced under Barnett to ensure that we do not become third class citizens in the battle to secure more funding for higher education.

If we do not, then the gap between Welsh universities and the rest of the UK will continue to grow.

WE WILL REMEMBER THEM

Every year, I go and pay silent tribute to a grandfather I never met because, like millions of others, he died serving his country during the Second World War.

I am sure all of our thoughts on this special day of remembrance will go out to the families of all our serving troops who are risking their lives to help others.

DOES SIZE MATTER?

Last week, the Western Mail reported on "Size Analysis of Welsh Business, 2006", a government report that provides data on the structure of enterprises active in Wales, including employment, turnover and the sectors in which businesses operated.

Drawing on its own unique Welsh data set, it indicated that 41% of business sector employment was accounted for by large firms i.e. enterprises with 250 or more employees.
Not surprisingly, the CBI commented that this proved that large businesses were “vital for Wales’ economic survival.

It went on to say that while large firms accounted for 0.8% of total businesses, they contribute a staggering 55% of Wales’ national turnover and that, as a result, we should “readjust our understanding of what factors deliver the most wealth and employment for Wales and support them to innovate and grow here in Wales.”

So there we go, 20 years of an academic career down the drain!

Why on earth have I bothered to focus on supporting the development of small firms in Wales when, all along, I should have been expounding the importance of large firms to the economy?

However, doesn’t this data seem to contradict other information about the business sector in Wales? For example, the Western Mail’s Top 300 supplement of the biggest firms in Wales shows that only 135 of the companies listed would qualify as a large firm under the current standard definition.

So have the government number-crunchers got it wrong? Well, yes and no.

If anyone bothers to read the statistical report in detail, they will discover an interesting disclaimer hidden away in the notes. This states that “in all cases, the size band of the enterprise is based on the number of UK employees… so an enterprise employing 10,000 UK staff but only a handful in Wales is categorised as a large, and not a micro, enterprise”.

Basically, that means a company employing 300 employees in Manchester and having a base in Llandudno employing 30 people would be classed as a large firm, even though it would be employing the same number of people in Wales as a small independent store next door.

Indeed, what it shows is that there are about 800 large firms with an employment presence in Wales but only around 150-200 large firms which are completely based in Wales, which roughly reflects the Top 300 estimates.

Is this surprising?

Of course it isn’t, as many of the shops and stores we find in the high streets up and down Wales are branches of large companies which are based across the border, such as Burger King, Boots, Waterstone’s, Jessops, Body Shop, WH Smith and Moss Bros.

With the honourable exceptions of the Principality and a couple of smaller building societies, most of the large banks and building societies also do not have headquarters in Wales.

Indeed, more than 50% of the 405,000 jobs within large firms in Wales can be accounted for by retail and finance companies and, according to the report, every large company has, on average, around 10 branches across Wales employing about 30 people.

That is not to disparage the contribution of large UK firms with branches in Wales to the Welsh economy and any job is critical in the current economic downturn.

However, even by stretching the imagination, I fail to see how we can encourage a branch of NatWest in Barry or Debenhams in Bangor “to innovate and grow here in Wales”, as claimed by the CBI.

While many Welsh companies have kept the faith with their employees during the worst recession since the Second World War, it is the branch plants of many non-Welsh firms which have closed their operations and abandoned thousands of workers.

More importantly, will it be large firms that are going to lead the Welsh economy out of recession during the next few years?

The evidence seems to suggest otherwise. For example, if we examine the US economy in the period 1980 to 1986, while 34 million jobs were lost, 45 million jobs were created with 32 million of these being generated from the birth of new businesses.

Indeed, during the recessionary period of 1980-82, small firms provided almost all of the new jobs in the US economy. Closer to home, the growth of the UK economy since the last recession of the early 1990s has been supported by an increase of more than 25% in the number of small businesses.

There is no denying that large firms in the UK are significant employers across all regions, including Wales. However, if we just accept this particular set of statistics on face value, then I believe we are in danger of forgetting the importance of new and small firms to support the recovery of the economy.

Last week the Wales Fast Growth 50 project demonstrated what the indigenous business population of Wales is capable of achieving, with our fastest growing firms generating more than half a billion pounds in turnover in 2008 and creating more than 4,000 jobs.

If we are to develop a successful economy, it is clear we need to encourage the likes of Corus, Admiral, Airbus and Ford to continue to develop their operations here in Wales.

However, it would be foolish in the extreme to use these statistics as the basis for ignoring the potential of thousands of Welsh companies that, with the right support, could grow and make a major contribution to wealth creation and jobs within this nation.

WELSH DEVOLUTION AND THE CONSERVATIVE PARTY

Clearly, the main political story is the decision by David Cameron not to veto further powers for the National Assembly for Wales if two thirds of members vote for them and the Conservative Party is in power in Westminster when such a decision is made.

He also made it clear that Conservative party members would be free to campaign for or against further powers as they see fit.

Naturally, as a pro-devolutionist within the Conservative Party, I am glad that this issue has been cleared up once and for all and that we can now focus on developing policies towards the next Assembly election.

However, if you read some of the recent political commentary, you would have thought that it was only the Conservative Party that has any difference of opinion on key issues. Of course, that simply isn't the case and you only have only look at the differing policies being put forward by the three candidates for the labour leadership.

For Plaid Cymru, even the most die-hard nationalist would find difficulties in arguing that the economic viewpoint of Dafydd Wigley reflects that of Leanne Wood, and I won't even go into the diverging opinions of Kirtsy Williams and Lempit Opik!

But that's politics for you. You take a particular stance on a subject within your party and debate your opinions with your fellow members in the hope that you can persuade them of your arguments.

As Thomas Jefferson said, “I never considered a difference of opinion in politics, in religion, in philosophy, as cause for withdrawing from a friend” and certainly I feel that my pro-devolution views should not make me withdraw from debate on the subject in the Conservative Party.

Far from it, and whilst I will continue to argue for more powers from Wales, I understand that some of my friends within the party may have a different viewpoint. My role, as a member of a democratic political movement, is to work alongside other like-minded people to persuade them of the benefits of devolution. If they do not agree, then to quote another US politician, "you can't please all of the people all, of the time".

I am a pragmatist above everything else and I made my stance on further devolution absolutely clear in the response to Lord Roberts in May of last year. It may not be to everyone's taste but if anyone has any doubts regarding where I stand on this issue, the letter to Wyn is reproduced below.

Lord Wyn Roberts
House of Lords,
London,
SW1A 0PW

Annwyl Wyn,

I am writing to you with regard to the review of Welsh devolution that you have been tasked to undertake on behalf of the Conservative Party.

It is my opinion that there has been a steady acceptance that not only is devolution here to stay in Wales but, more tellingly, that Wales was short-changed by the Labour Party relative to Scotland in the Government of Wales Act, 1998. Certainly, the new law-making powers introduced by Labour this year have actually made the situation even more confusing and have led to conflict, not clarification, between Wales and Westminster.

This review is critical as I expect that it will be a Conservative Government in Westminster that will make the final decision on a referendum for further powers in 2011. Whilst it is tempting for the bulk of the Conservative Party to reject the importance of this issue, it is critical that the decision arrived at regarding Welsh devolution reflects the realities of the new political situation in Wales.

As my nain would have said, “Yn iawn neu ddim o gwbwl”, and I believe that is the real issue facing us today – we should have a proper devolution settlement for Wales or none at all.

The fact that the Labour Party has mismanaged Wales during the last nine years, even with the current powers that the Assembly Government has at its disposal, is no excuse for assuming that we could not do better. Indeed, the Conservatives, as they have done at a local authority level, could develop a more efficient public service that could benefit the whole of the nation and create an entrepreneurial and innovative economy that would raise Wales from the bottom of the UK’s prosperity league table.

Contrary to the nationalist viewpoint, I do not believe that a Welsh Parliament is a step towards independence but a move towards equality within a Union of Parliaments within the United Kingdom, a Union that would be strengthened by having a Welsh ’Senedd’ with full law-making powers. The vast majority of the population of Wales perceive themselves as both Welsh AND British and there has been an increasing pride in Wales being able to make its own decisions over a number of key areas.

There is also the assumption by the majority of our party that Labour will always be in power in Wales within the Assembly and that our party are reluctant to grant more powers as a result of this. This is a false assumption and I believe that the hegemony of the Labour Party is over. Its position as the major political force has been broken forever in Wales, as yesterday’s council election results have shown.

We should have no fear of having further powers in a parliament in which Conservatives will play a full role. Indeed, creating a Welsh parliament will weaken and not strengthen the nationalists’ position in Wales, as few will ever have the appetite for independence, especially an independence which has Wales as a region in Europe but not in the United Kingdom. Our British ties, especially in the more populated areas in the North east and South East of Wales, will see to that.

From an economic point of view, I believe that the assumption that full powers for the Assembly along the lines of the Scottish Parliament, would not help Wales, as indicated by several business organisations during the original devolution debate, is no longer valid.

The real question, which must be addressed by detailed research, is how further powers would make Wales a more attractive business environment for both inward investors and indigenous businesses. Indeed, there could be a viewpoint that a more radical Assembly Government, with increased devolved powers, could use legislative powers to boost investment and profitability. This would certainly be an improvement on the current settlement where economic development policy in Wales is straitjacketed by having only one real instrument – grants to business – as the means of making any real difference to the economy.

To date, there has been little examination by policy-makers of the impact of such new legislative powers on the Welsh economy, and it is about time that a cost-benefit analysis is undertaken of the effect of additional powers, taking into account the benefit for Welsh businesses. Most importantly, such an exercise should look to learn from other small countries that have managed to buck the trend that big is best and created competitive dynamic economies.

In my opinion, we have waited too long to examine the effect of greater legislative powers on economic and enterprise development, and I was extremely disappointed that this was not discussed in any real depth during the enquiry by the Richard Commission into further powers for the Assembly. I believe the time has now come to have an honest debate to thoroughly re-examine the whole issue of the additional powers that can create competitive advantage for Welsh businesses, as opposed to grants that do little to support long term investment.

Many would argue, including many of my colleagues within the Conservative Party, that Wales is not mature enough at this stage in the devolution process to consider further powers. However, this is no excuse for not having a wider and deeper debate specifically on the effect of further powers on the competitiveness of the Welsh economy, especially as the political bandwagon towards further decentralisation from Westminster is rolling ever more quickly down the hill. To this extent, this consultation is merely one stage in the process of examining further devolution and is, I would hope not, just an event, to quote a recent Welsh politician.

With regard to the debate on devolution, I sometimes think that politicians are their own worst enemies, and arguing for more powers just because we have less than the other devolved parts of the UK is just not good enough and will attract little support from the business community. Instead, we should be arguing the case for greater powers because they make a difference to Wales and not because of any devolutional shortcomings relative to Scotland, Northern Ireland, or even Guernsey.

However, there needs to be a ‘quid pro quo’ in any new devolution settlement. If Wales, as a nation, wishes for further powers from Westminster, then the Conservative Party must reduce the current political representation at the House of Commons to reflect this, possibly halving the number of Welsh MPs, and increasing the number of AMs necessary to deal with primary legislation.

In addition, I would expect the next Conservative Government to undertake a thorough review of the Barnett formula and to look at alternative methods of funding UK regions. There is a price to be paid for greater powers and if the Welsh nation decides that this is the way forward, then greater economic self-dependency has to be part of this change.

At the same time, we must, as Welsh Conservatives, acknowledge the fact that two thirds of Wales, as well as pockets of poverty in Cardiff and Newport, are amongst the poorest parts of Europe and will need to argue strongly for fiscal support from any incoming Conservative Government to enable any regeneration to take place.

As I mentioned earlier, given the position of some of the bodies representing business during the initial devolution campaign, such a debate will clearly polarise opinion on the legislative influence of government on business, but the data shows that Wales still needs to improve its economic performance relative to the UK and the Assembly clearly has a major role to play in this.

The increasing self confidence that has come from the first stage of devolution has prompted a growing number of businesses, especially those in new knowledge-based sectors, to adopt a more positive attitude towards devolution. It has also encouraged larger businesses, especially within banking and finance, to create Welsh headquarters for their divisions which were previously managed from Manchester, Birmingham and Bristol.

With this change in attitudes by an increasing number of the wealth creators in our economy, I can only be hopeful that there are enlightened individuals within our party - be they academics, businesspeople and even politicians - that will consider the possibility of adopting a different and more positive approach to further devolution that can make a real difference to Welsh businesses and ensure a prosperous future for our economy.

Yn ddiffuant,



Professor Dylan Jones-Evans

AND THE FASTEST GROWING FIRM IN WALES IS...

....Unit Engineers and Constructors Ltd of Pembroke Dock.

Since starting in 2004, this Pembrokeshire-based company has grown to a turnover of over £17 million in 2008 and its workforce to 167 people.

In 2008, the total turnover of all the firms on this year's Fast Growth 50 list was £565 million as compared to £273 million in 2006. Therefore, the companies have collectively generated £292 million of additional sales in two years at an average growth rate of 107 per cent.

As in the previous ten years of the list, Fast Growth 50 firms have created employment at a time when the economy was at the edge of recession. In the period 2006-2008, the fifty companies will have created around 1900 new jobs, doubling their workforce.

If we take this in context of the entire Welsh economy, government statistics show that number of people employed in the private sector in Wales increased by around 12,000 people in the period 2006-2008.

Therefore, this year's Fast Growth 50 has been responsible for around 15 per cent of all new private sector jobs in Wales during this two year period, a remarkable achievement that shows the importance of supporting indigenous businesses during a recession.

The Fast Growth 50 dinner, attended by nearly 400 guests last Friday, was a resounding success and the speech by Bill Ledwood (above) of Unit describing how he had grown the company from a position of extreme adversity and with little support was a tale of entrepreneurship that every politician and policymaker should listen to.

As one company wrote to me afterwards,

"I just wanted to say thank you to everyone involved for a great Friday night at the FG50 awards on Friday. I was a guest of one of the finalists, having not been to the FG50 since 2005 and hope very much that our organisation will be part of awards themselves in 2 or 3 years time. Thanks again for a really well organised evening in which I met many interesting and inspiring business people. For me the FG50 is a unique and valuable concept that gives small business like mine a real incentive to become profitable and consistent, whilst showcasing success alongside the large players."

Full details of the Wales Fast Growth 50 winners for 2009 can be found at http://www.fastgrowth50.com/.

PETER AND RHODRI'S RED HERRING

A lot of attention has been given by the Western Mail to the joint press event held yesterday by Peter Hain and Rhodri Morgan.

According to their interpretation of the proposal by the Conservatives to cut down on the number of Welsh MPS, there would be a knock-on effect for the Assembly unless new legislation was introduced to change the way its members are elected.

The logic is that as the Government of Wales Act requires that the constituencies from which the 40 directly-elected AMs are chosen are identical to the ones used to send MPs to Westminster, both of them argued that this could result in an Assembly with just 30 constituency AMs and only 15 AMs from the top-up list.

I assume this calculation has been made because the 2006 Government of Wales act states that "the total number of seats for the Assembly electoral regions must be one half of the total number of the Assembly constituencies".

The Secretary of State for Wales then went on to state that "With the Richard Commission saying that the workload required 80 members, to turn the argument the other way around and actually reduce the number of Assembly members would be very, very serious..."

So taking that logic to its conclusion, then we would need roughly 53 parliamentary constituencies in Wales to enable the Richard Commission vision of having 80 members of the Assembly sitting in Cardiff Bay!

This would require a new Act of Parliament to enable this unlikely scenario to happen.

However, one would assume that any incoming Conservative Government, in changing the number of MPs across the UK, would also make legislative provision for changes to the Government of Wales Act to enable the regional list calculation to change accordingly i.e. this would allow for the reduction in the number of MPs whilst maintaining the current number of AMs, as has happened in Scotland.

Of course, if the reductions in MPs were to be made and the link maintained between Westminster and Cardiff Bay constituencies, this could mean that there would be 30 first past the post AMs elected and a further 30 from the regional lists.

I wonder what that would do to Labour's election prospects in any future Assembly election?