US ECONOMIC GROWTH OUTSTRIPS UK PERFORMANCE

Wide awake at 2am in Los Angeles with jetlag!

Over here in California to meet with five universities, two consulates, seven potential investors and one of the most successful Welsh businessmen - all in three and a half days!

At least it has given me the opportunity to read about the development of the US economy during the last hour or so before trying to get back to sleep.

The contrast with the UK's recent growth is startling.

Whilst people are hailing the revised 0.3 per cent growth in the fourth quarter of 2009 for the UK economy, the US economy grew at an incredible 5.9 per cent in the fourth quarter of 2009.

This was largely driven by manufacturing with consumer spending less than originally thought. The fourth-quarter figure compares with 2.2 per cent growth in GDP in 2009’s third quarter. For the 12 months of 2009, GDP fell 2.4 per cent, the biggest full-year decline since the 10.9 per cent recorded in 1946.

Compare this to the UK's figures during 2009, which showed that the UK economy had declined by 5.0 per cent.

This places the claims of the UK Government as being 'best placed to emerge out of recession' into clear perspective.

It also demonstrates that the underlying weaknesses in the UK economy of unsustainable levels of public spending since 2001 has left us in the worst possible position for recovery, especially as the Government's deficit is predicted to hit Greece like levels of 12.6% of GDP later this year.

A FAIR DEAL FOR WELSH BUSINESS

There has been some recent discussion on the question of whether Welsh businesses are getting a fair deal on business rates.

To me, an issue as simple as business rates goes to the heart of the argument over the rationale for devolution and the ability for Wales to do things differently to England, Scotland or Northern Ireland.

In fact, despite having the powers to create a far more business friendly rate system that would be relevant to Wales, all that the One-Wales Government has done since 2007 is meekly mimicked the actions of Westminster when it comes to non-domestic rates for businesses

In the case of changes to rates to empty properties, the One-Wales Government replicated exactly the changes that took place in England.

When the Treasury announced that it would bring forward regulations to allow ratepayers in England to opt to pay the increase of five per cent in business rates for 2009-10 over the following two years, what did WAG do?

Exactly the same, of course.

Why didn't Wales adopt a different type of relief for empty properties such as continuing the reliefs for those properties in the poorest areas of Wales?

Why didn't WAG merely absorb part of the five per cent increase in business rates for the smallest businesses?

They didn’t because it has become clear that the One-Wales Government simply does not believe in cutting business rates for small firms in Wales as an economic lever.

Frankly, I find it difficult to understand why a devolved administration, when it comes to something as critically important as business rates, has merely adopted the old colonialist adage of "For Wales, see England".

Even the much lauded decrease in the multiplier and the recent 'increase' in business rate relief by WAG, which deals with the consequences of the 20 per cent increase in the valuation of property is an exact replica of the policy in England with one important exception.

English businesses get a far more generous level of rate relief than Welsh firms.

If we compare the current levels of business rate relief across England and Scotland and Wales, there are considerable differences in levels of business rate relief across the three nations.

For example, to qualify for 50 per cent business rate relief in England, your rateable value should be £6,000 or below. In Scotland, any business with a rateable value of £8000 or less pays no rates at all.

In Wales, you would only qualify for 50 per cent relief if your business had a rateable value of £2,400 (yes, £3,600 below the limit for England) and therefore a business with a rateable value of £6000 would only get 25 per cent relief.

Simply put, a small business in England with a rateable value of £6,000 would, after small business relief was applied, pay roughly £1221 in business rates in 2010-2011.

In Wales, that business would currently pay £1840, a bill that is 50 per cent higher than in England.

The same small business in Scotland would pay nothing.

Therefore, the simple fact of the matter is that small businesses in Wales pay more in business rates than their equivalents in Scotland or England.

That is not why many of us supported devolution for Wales. We backed an Assembly for Wales because we wanted policies that were different to England or Scotland that gave us a competitive advantage over other regions of the UK, not a disadvantage.

With regard to the provision of further rate relief to businesses, no further powers are needed. All that is required is for the Minister for Social Justice and Local Government to sign a new Non-Domestic Rating (Small Business Relief) Order which would improve the direct support to many small businesses across Wales.

Of course, it has been argued that Wales simply cannot afford this during a recession.

Yet, according to a report from the IWA, the spend in the current financial year is estimated at £107 per head in Wales with the RDA for the North East of England, One North East, second at £97. In Scotland, it is put at £76.

Even when we have such funding available, the bureaucratic nightmare than many businesses face trying to access this support means that WAG’s main business support programme had only spent 22 per cent of its budget six months into the current financial year.

As Dafydd Wigley said in an interview with the Western Mail back in 2007, “a significant reduction in the business rate might cost between £100m and £200m, depending on how it was applied, but it certainly can be afforded within that budget, and it would be better for that money to be re-circulating within the business sector, enabling it to take on more people, to set up new projects, and to have a new confidence and incentive for its work, than being gobbled up in the bottomless pit of bureaucracy, where so much of it ends up at present."

Not many would disagree with such remarks.

I certainly don’t and it may be time for one of the National Assembly’s Committees to examine, in detail, whether providing help to Welsh businesses through grant funding and a bloated business support programme is more effective than cutting the amount government takes from the business community through reducing business rates.

So the next time a politician reminds you of the fact that small businesses are the backbone of the Welsh economy, ask them what they think of the fact that the Welsh Assembly Government ensures that small firms in Wales are paying higher rates than their equivalents in England or Scotland?

THE TRUTH, YOU CAN'T HANDLE THE TRUTH

As I was going to post on this issue this morning (having read the Welsh version in the Western Mail yesterday), I noticed that the excellent Druid of Anglesey blog has had the same idea.

So Hat Tip to the Druid, regardless.

The piece below by Ron Jones, the founder of Tinopolis, is refreshing, insightful, inspiring and cuts to the heart of much that is wrong with Wales.

Whilst I don't agree with everything Ron says, I have never before read a piece by any businessperson in Wales that hits the nail on the head regarding the role of WAG in supporting the economy.

If the Deputy First Minister had any sense, he would have a private meeting with Ron Jones, without his coterie of civil servants who follow him around like pilot fish, and go through each one of the points raised in this excellent article.

However, I very much doubt that is very going to happen.

Whilst Ieuan Wyn Jones asks for the truth about the economy, I am afraid the real problem is, like the memorable scene in the film "A Few Good Men" is that he can't handle the truth.

" The Welsh Assembly Government has decided that we need an Economic Renewal Programme.

The first objective of which is to “To better understand the structure of the Welsh economy, its key characteristics and drivers and gain consensus on the vision for the future economy of Wales”.

This is followed by the usual clichés of “renewed approach to economic development”, “meet the needs of new and existing businesses”, “stronger and more sustainable economy”, and “increase the prosperity and long-term well-being of the people”.
Cliches generally have a grain of truth but when we read that our government has yet to understand the structure of our economy we should be worried. I sense that we are on the brink of one of those dispiriting “something must be done” moments in Welsh history.

After the billions of pounds spent and the efforts of the many hundreds of WDA and now WAG staff over so many years is this as far as we’ve got? Our politicians announce that the answer to our economic problems is another strategy. Probably nobody outside WAG could even guess at the number of strategies, re-launches and fresh beginnings Wales has suffered over the last decades.

To avoid facing up to the failure of all previous strategies our government has declared this to be year zero. We should now pretend that changes in the world economy occasion a re-focussing of our efforts, building on the excellent work and success of the past.

Our economic past is not history, we are living in it. The business model for Wales has been broken for years and we need to acknowledge that before we can move on. Wales has not had an easy ride. It had imposed on it an economic model ill-fitted to the modern world. We were once a land of entrepreneurs. We had farmers, merchants and manufacturers who served their markets and sustained the economy. We weren’t rich but we survived. Governments in London weren’t about to waste money on the Welsh and they didn’t.

Since those days Wales has suffered nationalisation, privatisation, government to whom Wales was a nuisance, unworldly trade unions and our, the people’s, unwillingness to face reality.

All have conspired to create not a post-industrial society but a society at ease with living off a public purse to which it makes an insufficient contribution.

Just consider a few of the things we have allowed to happen.

Nationalisation removed our corporate base and moved control to London with a profound impact on the business infrastructure. Successive governments over 50 years supported failing or doomed industries. Nicholas Edwards saw Wales as Greater Cardiff. Our WDA ended up pursuing any company prepared to move operations to Wales whilst ignoring indigenous business. Our well-funded universities have made virtually no contribution to our economy. A bloated public sector hoovers up young talent with better salaries and less risk.

The great levers of the economy are outside Wales, but we were entitled to hope that devolution would at least bring an understanding of our economy, empathy for what our country needs.

Instead, post-devolution we have created the foundation of an economic nightmare. The public sector stole Objective 1. We lost the wasteful hundreds of the WDA only for them to reappear within WAG, now hidden in a new fog of bureaucracy and hidden from public view.

The petty regulation beloved of Tory and Labour governments in London has been accepted and gold-plated. Crucially, our people are poorer now than any in the UK and falling further behind.
Faced with this, searching for a new strategy is an insult to the people of Wales.

Something should be done is an empty phrase but perhaps WAG should at long last stop analysing and consulting.

We are at the stage where anything is better than that".

ENTER THE DRAGBROWN

have just been sent this video.

Interesting how the Far East views our PM.

COMMUNITIES FIRST, BUSINESS SUPPORT PROGRAMME NEXT?

The National Assembly's Public Accounts Committee has condemned a "chronic and long lasting failure" by the £214 million Communities First initiative and that it is failing to deliver value for money for our most deprived communities.

This is hardly news to those of us who have been commenting on the deteriorating state of this programme for a number of years.

As I said back in July 2007,

"the programme has been accused of adopting a top down approach that has largely focused on the administration of the programme and becoming yet another bureaucratic jungle for individuals and communities to navigate through. Such organisational and operational problems have culminated in the scandalous position of £6 million of Communities First funds allocated to our poorest communities being returned unspent to the Assembly Government last year (2006)".

One can only forlornly hope that WAG takes this report seriously and addresses the main concerns of Assembly Members so that the funding to help our poorest communities goes to the right people and the right projects.

However, given the state of the Welsh economy, the more pertinent question is when are we going to have a formal inquiry into the Government's main business support programme which had only spent 22 per cent of its budget six months into the current financial year?

There are certainly questions over value for money as Wales spends more per head on economic development than any other part of the UK and yet remains rooted to the bottom of the regional prosperity league table.

According to a report from the IWA, the spend in the current financial year is estimated at £107 per head in Wales with the RDA for the North East of England, One North East, second at £97. In Scotland, it is put at £76.

Bottom of the spend league table is the South East England Development Agency at just £20.

Clearly, the time has come for the Public Accounts Committee to turn its laser focus onto the business support system in Wales.

There are some serious questions to ask as to the lack of leadership within the department, why we are spending more than any other part of the UK on supporting businesses through an increasingly bureaucratic programme that is seemingly having little effect on the Welsh economy, and why process has taken over from outputs.

A BULLYING CULTURE

Given the furore over the allegations of bullying at No 10 Downing Street, I found an article I had written for the Western Mail in 2004.

Having read it again, it seems very little has changed in six years.

"The issue of bullying has been sadly prevalent in the news. Therefore, it was with interest that I read a report published by the Chartered Institute of Personnel and Development (CIPD) on bullying in the workplace.

Surveying over 1,000 employers, the study showed that most of those businesses questioned admitted that they simply did not do enough to tackle this growing problem.

Workplace bullying is generally defined as vindictive, cruel, malicious or humiliating behaviour towards an individual or even a group of employees.

This can occur between workers but can also be the abuse of authority by management, reflecting an autocratic style that is based on the simple premise that it is easier to tell people what to do rather than allowing them any personal initiative.

Perhaps the biggest problem is that many organisations do not have any formal policies and procedures to deal with bullying and it is often ignored, especially given the stereotype view as to what constitutes bullying.

However, bullying can take many different forms.

A recent research study found, whilst male bullies indulge in loud verbal bullying, female bullies tend to favour a strictly psychological approach to inflicting pain on others such as gossip and persistent criticism.

The CIPD study found that 12% of bullies are subordinates, and indulge in subtle practices such as not passing on phone messages from the head of the organisation to their manager or withholding information from their manager until they are in a meeting.

It should be of little surprise that the trade union Amicus is now looking to make workplace victimisation unlawful.

Personally, I would be against any further legislation on business, especially if organisations are made aware that the consequences of a bullying culture are that employees are demotivated, productivity decreases and the "bottom line" is affected.

More worrying for the organisation, good employees will leave whilst those involved in bullying remain and the cycle begins all over again.

Perhaps the worst aspect is that the bullying managers are often motivated by issues such as lack of self-confidence, envy towards other people's abilities, success and popularity, or they may take a completely irrational dislike to an aspect of someone's personality or their way of doing things. This can take away valuable management time from making the organisation more efficient and effective and may affect the reputation of the organisation, especially if legal action is taken.

Workforce bullying is only one aspect of the "dog eat dog" mentality that is becoming prevalent in an increasingly competitive world, with senior managers believing that piling on the work will create more productive employees and businesses.

Given this, it is interesting that the Chartered Management Institute recently reported that UK managers are having problems in coping with massive personal workloads.

Many state they have to work an extra 14 hours more than they are paid for, resulting in effectively a seven-day week. In such organisations - where staff are constantly overloaded, where there is a blame culture, and where aggressive behaviour is tolerated or promoted - there is inevitably an increase in bullying.

Research suggests that overloaded and bullied employees tend to work for organisations that are declining or shrinking, where the management style is bureaucratic and reactive. In contrast, those employees who feel purposeful, energised and recognised, are those that work for growing, dynamic companies where the management style is empowering and successful.

Indeed, it is not surprising to find that many of the fastest growing firms in Wales have excellent human resource management policies and see the development of a strong and motivated team as integral to their success.

Also, Admiral Insurance owes much of its success to the people-oriented policies developed by its chief executive Henry Engelhardt, and the company regularly features in the lists of the best UK companies to work for.

In contrast, a survey by the Health & Safety Executive estimated 13.4m working days a year are lost to stress, anxiety and depression, at a cost of £3.8bn to UK industry annually.

So, look after your employees and they will look after you."

ABOUT TIME

A report in the Western Telegraph last week reported that the Minister for Economy and Transport had discussions with Chevron to try and avoid job losses at the refinery in Pembrokeshire.

It follows high level dialogue with Bosch which, although too late to stop the closure of the plant and the loss of 900 jobs, may yet see other possibilities emerge for the plant at Miskin.

That is great news and I hope that this now sets a pattern of more regular dialogue between WAG and key employers in Wales.

However, some of us have been crying out for such high level talks to take place for quite some time:

For example, back in October 2006, I wrote the following piece:

"Many of the manufacturing companies which are major employers within Wales are based within the more deprived areas, and I very much hope that Assembly officials are in constant discussion with every single major manufacturer in Wales over their future plans, especially in the way that policymakers may be able to help them in upskilling or upgrading their plants to ensure that they do not move their operations to low-wage economies. Most of these businesses have been in receipt of grant aid from the Assembly Government and one would naturally expect a continuous dialogue between the account managers of the grant programmes and senior managers of the manufacturing businesses.
Communication is key to ensuring that everything that can be done, is done prior to a decision to downgrade or even close a manu- facturing plant. Shutting the stable door after the horse has bolted will not help anyone, least of all the skilled employees losing jobs. No matter how effective 'Team Wales' is at moving in after the plants have closed, the loss of a major manufacturing plant will have significant knock-on effects, not only for employees of the firm, but also for the small firms which inevitably supply these larger businesses with components and services.
I only hope that our civil servants are acutely aware of these inevitable and largely irreversible changes to the structure of the manufacturing sector and are working hard to ensure that we have seen the last of any major closures which could, with advance warning and good communications between government and business, have been avoided."

It just makes me wonder whether WAG actually had any high level talks with the parent companies of the businesses that have closed in Wales over the last two years?

More importantly, how many jobs could have been saved by earlier discussions with the chief executives of the parent companies which are now gone for good?

NORTHERN IRELAND LEADS THE WAY AGAIN

Following their decision to delay the revaluation business premises, Northern Ireland has again shown the way to Wales on how to use devolution to reduce business rates and support the economy.

Whilst empty properties are liable to 100% liability in England and Wales for all commercial properties, including factories, the Northern Ireland Government has decided to keep the rating of empty commercial properties will remain frozen at 50%.

The question, of course, is why WAG continues to simply copy England on the issue of business rates rather than develop their own policies on the matter.

So much for devolution.

NO HAIN, NO GAIN?

Having just come back to Pwllheli to spend a few days with my family, I picked up the Daily Post tonight to see the picture of the Secretary of State on the business pages with the promise that he would essentially be the saviour of the Anglesey economy.

Every point I was going to make on this story has been made on the Druid's latest blog, so I won't repeat the best bits of this excellent posting.

However, the people of Anglesey should be warned that Peter Hain has previous form on promising jobs in areas faced with redundancies and eventually delivering nothing.

Back in March 2003, just before the second Assembly elections, KTH of Llanidloes was under threat of closure with 240 jobs in the balance.

Who promised to come to the rescue by persuading Ford - KTH's main customer at the time - to take on more orders?

None other than the Secretary of State at the time, Peter Hain.

Fast forward to the 12th May 2003 and one of the representatives of the group fighting to save the factory makes the following statement.

"We feel very frustrated because we don't know what to do or who else to turn to...we've been to Westminster and Cardiff and the town council is still waiting to hear from Welsh Secretary Peter Hain about his approach to Ford to try and get business to keep the plant open."

Naturally, they didn't hear anything from the Welsh Office and four months later, the KTH factory closes for good with the loss of 240 jobs.

With the election due to be called in early April, there is little possibility that anything can be done to support the project before the end of the current financial year, especially given the pace that WAG officials are operating at with regard to approving both convergence and grant funding.

Therefore no decision will be taken on the wind turbine factory this side of the general election but I am sure that Mr Hain knows that already, although that hasn't stopped him, yet again, promising the earth to another area hit hard by redundancies.

Plus ca change.....

TUMBLEWEED

I am amazed that there has been total silence from Plaid Cymru and its supporters on the matter of the appointment of a new vice chancellor at Bangor University.

As this blog pointed out on Monday, you would have normally expected comment after comment on the decision by the university that the next holder of this post will be a non-Welsh speaker, despite the fact that it should be an essential criteria given the unique position of the University.

Yet apart from a bland statement from Cymdeithas y Iaith, there has not been one public utterance from the Party of Wales and its supporters on this issue.

As one commentator noticed, is this because the party is embarrassed about the issue, given that the President of Bangor University is none other than Lord Elis Thomas; that the local Assembly Member is Alun Ffred Jones - the Minister responsible for the language - and that the Honorary President of Plaid Cymru, Dafydd Wigley, is Chairman of the Bangor Business School?

Why hasn't Dafydd Iwan, who lives ten miles down the road from the University and is the President of Plaid Cymru with responsibility for 'grassroots members', penned a passionate protest song about the "evil" university and the way it wants to impose a non-Welsh speaker on the college built by the pennies of the quarrymen of Dyffryn Ogwen?

Where are the clever and pithy comments from Welsh Ramblings or Syniadau, who are never slow to criticise the policies of other Welsh political parties on the language?

I am sure that some will revert to type by saying that they won't be "lectured by a Tory on the Welsh language" but isn't it surprising that a former Conservative Assembly candidate is the only person to have raised this issue publicly when it is an open goal for representatives of the 'Party of Wales'.

Indeed, whether my party has an opinion or not on the matter, mine has been made absolutely clear as a Welsh speaker who was born and brought up in Gwynedd and who spent four years working at Bangor University.

I will also get the usual bland responses about the 'responsibilities of Plaid being in Government' and that 'universities are independent institutions' but, for example, this has not stopped Plaid activists from insisting that all businesses in Wales, even those in predominantly English speaking areas, conform to a bilingual policy.

Indeed, this is one of the few posts in Wales where it can be argued that Welsh is an essential part of the role of a chief executive within a predominantly Welsh area and where Welsh is a key part of the activities of the University.

If not, then why was the current Vice-Chancellor appointed with such a condition attached to his post?

Worst of all, the Welsh media has confirmed its role as the trumpet of the establishment by ignoring this story completely with the honourable exception of Golwg.

I am sure that Plaid's leaders will all be laughing about this over wine and canapes at the next BBC reception at the National Eisteddfod but by deciding to stay silent and conveniently ignore this issue, they may have damaged Welsh language provision in higher education in Wales for a generation.

MORE JOB CUTS IN THE UNIVERSITY SECTOR?

The last few entries have focused on the university sector in Wales and for this I make no apology.

Whilst the Welsh media has picked up on the odd story, it would seem that there is a quiet revolution going on within the sector, with hundreds of jobs under threat over the next few months.

We have already seen 100 jobs under threat in Bangor and a further 100 at IBERS in Aberystwyth.

Now, the news reaches me that three former colleagues at the University of Glamorgan Business School have been given a 90 day consultation with regard to their current positions.

This can only mean that more than 100 employees at the University have been offered redundancy to trigger such a consultation.

The fact that all three are professors within the Business School seems to be a worrying trend in that seems to be a targeting of senior staff for redundancy in an effort to save money.

If that is the case, then it could hit the university's reputation badly, especially if the business school, after an impressive growth in research reputation, reverts to becoming a teaching department once more as it was in the days when Glamorgan was the Polytechnic of Wales.

Worst of all, the university's standing within the Good University Guide has dropped from 55th in 2008 to 94th in 2010, and getting rid of high quality staff will not help this improve in the short term.

Does this cost cutting exercise suggest that some universities in Wales are already preparing for the worse following an announcement by the Welsh Assembly Government to commission an independent review of education funding?

If so, then the Welsh Assembly Government should come clean as to the extent to which the massive cuts to higher education highlighted in England by Lord Mandelson will be passed onto Wales.

Indeed, it can be expected that these job cuts may be the first of many lost in the sector over the next few months with a real knock on effect for the reputation of Wales as a 'learning country'.

THE IMPORTANCE OF BEING WELSH?

With powers for the Welsh language about to be passed over to the National Assembly for Wales, it is ironic that Bangor University has announced that its new Vice Chancellor would not, unlike previous incumbents, be required to speak Welsh.

This follows an earlier proposal to close five departments that have some of the highest levels of Welsh language content within the University.

Whilst those who have an antipathy towards the Welsh language will say that the best person for the post should be appointed regardless of linguistic ability, this ignores the importance of Bangor University as the ‘cradle of the language’, especially through its excellence in teaching and research in Welsh.

It also conveniently forgets the fact that Bangor is located in one of the few counties (see diagram) where Welsh is spoken by the majority of the population and is the working everyday language of many local organisations.

Bangor has a high proportion of local Welsh speaking students attending its courses - a figure that will no doubt go up when tuition fees increase – and an estimated 40 per cent of all students in Wales studying through the medium of Welsh do so at Bangor.

The institution is therefore in a unique position and one that would normally be taken into account when appointing a new chief executive and it would have been expected that the University should have made Welsh language proficiency a desirable, if not essential, condition of the job.

One can only wonder whether the University has reached this decision because of concerns that it cannot become a world class institution when it has such a strong commitment to the Welsh language?

If that is the case, then they have clearly not examined the recent success of the National University of Ireland in Galway, which is based in the Irish speaking Gaeltacht region.

Unlike Bangor, NUI Galway actually has a legislative responsibility to employ members of staff who are competent enough to teach in the Irish language as long as those people are fully qualified in every other way.

Secondly, it is committed to developing an exemplary bilingual campus through providing the physical and social environment that will suit that objective.

Finally, it offers taught courses through the Irish language in the Arts, Science and Commerce Faculties, and much of its administration is undertaken through the Irish language.

Has that strong commitment to the Irish language affected Galway’s reputation globally?

Quite the contrary, and Galway is acknowledged internationally as a world leading centre for research in internet technology, biomedical science, environmental change and social policy.

It also generates more patents and spinoffs than any other Irish university and attracts over 1,500 international students annually.

As a result, NUI Galway was voted the Sunday Times Irish University of the Year for 2009-10.

So, it is clear that excellence and a strong commitment to the local language can go hand in hand for a university that is located within a region with a strong linguistic heritage.

As a former professor at Bangor, I am, like many others, disappointed that its current aim seems to be one of becoming yet another carbon copy of an average English university.

However, wouldn’t it be transformational if the university instead created a vision for a 21st century Welsh academic institution that, like Galway, is rooted within the culture of its local community but has global ambitions, especially at a time when the Welsh language is at its strongest for decades?

And it could launch this vision by appointing a leader who appreciates not only the importance of world class research and teaching, but can interact directly with the Welsh language and culture which should be the foundations of a university such as Bangor.

INFLATION - THE ENEMY OF RECOVERY

There are various reports out today which suggest that inflation could rise further than expected when figures are released later this week.

Although the Bank of England has already acknowledged that inflation was likely to have risen above 3 per cent in January, it was then expected to fall below the 2 per cent target set by the Treasury.

However, others are not so optimistic.

For example, Investec predicts a 4.2 per cent inflation rate for January, more than double the 2 per cent target, due to the rise in VAT to 17.5%, higher petrol prices and the impact of the snow on food prices.

Citigroup has also predicted that inflation would be close to 4 per cent even at the end of the year, compared with the Bank’s forecast of close to 1 per cent.

Whilst the IMF has suggested that governments should allow for higher inflation in the future, this is the last thing any economy needs as it tries to recover from a recession, especially one in which the current Government has created unprecedented levels of public debt.

Whilst higher prices could lead to yet another blow to consumer confidence, there is another problem for any incoming government if inflation continues to remain high throughout the year.

At a time of economic austerity when there are expected to be massive cutbacks in public sector expenditure, a higher rate of inflation will lead to higher pay demands from public sector workers whose pay settlements, unlike those in the private sector, are normally linked directly to the rate of inflation. It will also lead to pressure to increase pensions, social security and other areas of expenditure which directly affect the general public.

Therefore, the next Government will not only have the issue of reducing the current deficit, but may well have to deal with increasing pressures on further expenditure due to the inability of the Bank of England to keep inflation under control.

SAVING IBERS AT ABERYSTWYTH

One of the key factors in creating long term economic growth and competitiveness is the development of a strong innovation system that creates new products, processes and services.

Given this, it is surprising to find that there remains uncertainty over the Institute of Biological, Environmental and Rural Sciences (IBERS), based at Aberystwyth University.

According to reports, the Institute faces a £2.4 million deficit and is facing the loss of up to 100 jobs.

This news has come less than four months it was awarded the Queen’s Anniversary Prize for Higher and Further Education and a commitment, by the University, to use IBERS to address “the important issues in land-based science” and an acknowledgement that it represented best practice in the “seamless connection between scientific research and innovation”.

Universities in Wales are under immense short term financial pressure and are looking to address potential future deficits in their budgets. However, it is inconceivable that the Welsh nation would allow one of its key research centres to be decimated at a time when the food industry is becoming a key issue around the World.

For example, one only has to read the UK Government report on implementing the "Food 2030" strategy to show how IBERS has a future in helping to support the critical future role of the UK's food production and distribution system.

To close IBERS down now would not only be an embarrassment to the Welsh higher education sector but would jeopardise any opportunity to establish a critical mass of research expertise in an area that will be growing in international importance and significance over the next decade. It is therefore imperative that WAG examines how it can support IBERS to continue.

Indeed, if public funds can be used to underwrite projects such as the Millennium Centre or the National Botanic Gardens, then there is no reason why we cannot support a vital national research centre that has the potential to make a real difference to the future economy of Wales.

TOO LITTLE TOO LATE

Following certain rumours circulating around Cardiff Bay that Carwyn Jones and Ieuan Wyn Jones had made a 'secret' visit to the HQ of the German manufacturer over the weekend, WAG has finally come clean and admitted that the two did go over and try to broker a deal with Bosch on Monday.

Unfortunately, as this blog pointed out nearly three weeks ago, such a move was long overdue, especially as WAG should have been in consultation with the senior management of Bosch long before the decision to close the plant, rather than relying on middle ranking civil servants dealing with middle ranking branch managers.

According to the Deputy First Minister, WAG has "met regularly with Bosch, including this week in Germany, and have been working closely with them over the last few months to look at all the options available to keep the plant running and develop new product lines".

However, documents revealed yesterday showed that WAG had held just two meetings with Bosch between October 2009 and January 2010.

Too little, and far too late....

MAKE CHILDCARE TAX DEDUCTIBLE

Reports out today show that parents some parents are facing more than £22,000 a year for nursery places with childcare swallowing up a significant proportion of the income of families, many of which have already been hit hard by the recession.

According to the DayCare Trust

• The cost of a nursery place for a child aged over two in England increased by 5.1% last year - almost twice the rate of inflation
• childminders' fees rose by 6.4% for under-twos and 9.2% for older children;
• and a full-time nursery place for a child under two costs an average £176 per week - or £9,152 a year - as compared to average gross weekly earnings of £489, although some nurseries in London are charging £425 a week, or £22,100 a year.

Whilst the DayCare Trust wants to increase the contribution by government, it is clear that this issue is most pertinent for those families where both parents are working.

Therefore, why not examine whether, and how, childcare can become tax deductible?

It would certainly help families where both parents are working and by limiting tax relief to the basic rate of tax, it would avoid any accusations that it was there to benefit the better off.

That could include an appreciation of the informal home childcare offered by tens of thousands of grandparents up and down the country.

More importantly, it would finally enable the millions of self-employed - who have been left out of the current employers' childcare vouchers scheme - to get support from the government.

It is not a new idea - see this article from 2002 - but it is something that politicians, to date, have been reluctant to discuss during the recession, despite the fact that it would be a very popular measure with millions of parents up and down the land.

We urgently need a reform of the tax system in the country which currently penalises those who work. This policy, if examined and costed properly, could even be a more practical and focused alternative to the married person's tax allowance.

So what are we waiting for?

This could be the radical tax policy that could show the real difference between the two main parties in the run-up to the general election.

GDP TO BE REVISED DOWNWARDS?

Having been in New York last week, I have now spent the last 24 hours in wonderful Copenhagen at an international project meeting, so my blogging has suffered yet again!

Catching up on the news in bed, it would seem that whilst the focus in Wales has been on the timing of a referendum on further powers (I have already given my opinion on this two years ago), there have been some disturbing statistics released on the state of the UK economy.

First of all, retailers saw the lowest sales growth in 15 years during January 2010, with UK retail sales values falling 0.7% on a like-for-like basis from January 2009, when sales had risen 1.1%.

In addition, Britain’s trade deficit increased to £7.3 billion in December 2009 - up from £6.8 billion in November - contrary to most economists, who had forecast that the deficit would fall to about £6.6 billion. Although the relative weakness of sterling did result in exports increasing by 4.5 per cent to £20.9 billion, imports rose by 5.2 per cent to £28.2 billion.

Given the fact that the economy only grew by 0.1% in quarter 4 of 2009, these worst than expected figures could result in a downward revision of GDP for the fourth quarter of 2009, meaning the country would still be in recession.

Even if we remain out of recession, the retail figures suggest that if things do not improve quickly, and there is little sign of this happening within the manufacturing sector due to the muted demand from the eurozone, then the chances are that the UK economy will slip back into negative growth during this first quarter of 2010.

The implications of that happening at a time when the Bank of England has stopped its quantitative easing measures are unthinkable, especially when government still remains reluctant to reduce public expenditure in the short term, thus threatening the credit rating, and credibility, of the UK economy.

Greece today, Portugal and Spain next week?

And the UK? The worst case scenario doesn't even bear thinking about.

THE CONCEPT OF LEADERSHIP IN WALES

In 2005, I wrote an article about the development of leadership within Welsh civic society and argued, that in developing the future of Wales, we needed leaders of real quality and calibre who could begin to make a real difference to our nation.

Unfortunately, many of the arguments within that article remain as pertinent today as they did five years ago. In particular, there is the question of how Wales develops a new style of leadership across organisations that can transform the nation, especially given that the post-recession era will bring enormous challenges to a small country such as ours.

Having spent the last week in New York, it is clear that strong and innovative leadership is an integral part of the American way of life from the White House to the White Sox. Indeed, you only have to browse the bookshops of Manhattan and see the thousands of books written by management gurus, sporting stars and successful businesspeople to know that this issue is taken very seriously in the USA. Even President Obama, prior to his election, penned a bestseller setting out his leadership qualities to the nation.

Many would say that, outside the rugby pitch, such a culture of leadership is an alien concept within Wales. Certainly, there remains the perception that an ethos exists where many of those who have gained positions of authority within Welsh civic society maintain their status as leaders through the old fashioned methods promotion, perks, protection and patronage. Worst still, there are also those who use psychological currencies such as anger and threats to create a climate of fear that ‘encourages’ loyalty.

This “transactional” style, where strength is not a result of true leadership abilities but comes from the power transferred to those individuals, is not the most effective and desired style of leadership needed within a modern society. Such individuals are not powerful people in their own right but are only powerful because of their job or position, with this power acquired and maintained by a combination of fear and patronage rather than trust and respect.

As a result, they remain enforcers of the status quo within organisations rather than being agents for change. By establishing this style of management from the top of the organisation, they also create the next generation of transactional leaders as their attributes are copied by other senior people who are looking to replace the current leader.

This culture is the last thing Wales needs at a time when every nation will be looking to take advantage of a growing World economy.

In contrast to the comfort zone that we seem to have been stuck in for the last twenty years, the new Wales needs to be a place of rapid change both in terms of its economy and society.

To achieve this, we increasingly need leaders - in business, politics and civic life - with a vision that encourages and inspires others and releases the creativity within them to move Wales forward.

Unlike those who were running the ‘old’ Wales, these ‘transformational’ leaders will not use their power to maintain the status quo. Instead, they are innovative, enthusiastic, and empower others in order to create and maintain a new vision.

Such entrepreneurial leaders are of enormous value to organisations and society as a whole as they have the ability to anticipate events, envision the future, maintain flexibility, think strategically and work with others to initiate changes that will create a viable future for the organisation. They also care deeply about the people who work for them, refusing to impose their solutions or suppress potential, which results in organisations become more efficient, effective and able to fully fulfil their potential.

These individuals are the ‘holy grail’ of organisational change but are, sadly, very few and far between in Wales today. One can only hope that Welsh organisations have the courage to appoint these champions of change and innovation, thus ensuring that there is a shift away from the old transactional style that dominated Welsh life for so long to a more to transformational leadership approach.

If it does, then it may be the sign we need to show that we are finally beginning to enter a new culture across Wales where ability and vision, rather than patronage and fear, are the key to achieving success not only for individuals and organisations, but for society as a whole.

START-UPS AND GROWTH - A VIEW FROM THE ASSEMBLY

Having just come back this morning from a very successful trip to New York (more about that next week), it was good to read that the Learning and Enterprise Committee remains as independent as its predecessors such as the Economic Development Committee in providing guidance to the Welsh Assembly Government.

Certainly, their comments on the state of the manufacturing industry in Wales should be a real wake-up call to the Economy and Transport Department, especially given the recent reports that less than a quarter of the business support budget had been spent in the first six months of the current financial year.

Whilst I agree with much of the conclusions, I was taken by the comment in the report which stated

""A focus on quality rather than quantity with encouragement for firms with high growth potential as opposed to high numbers of start-ups".

I would support the former wholeheartedly - after all, I created and have been involved in the Fast Growth 50 project for the last eleven years - and the evidence from that is unequivocal about developing a policy of backing winners, but only after they have gone through the pain of starting up.

After all, if I could identify a successful growth company when it is first started, I wouldn't be doing this but instead would be sitting in a villa in the Bahamas with the Nobel Prize for Economics on my mantelpiece!

However, I simply don't understand where on earth they got the evidence dismissing a policy of creating a high number of start-ups as all the academic research in this area shows otherwise.

Perhaps members of the committee haven't read the Global Entrepreneurship Monitor reports which has been examining the relationship between entrepreneurial activity and economic growth for over a decade.

Indeed, it is not a matter of choosing one policy over the other and both approaches complement each other - creating more start-ups leads to more growth companies.

It is the old football adage of more shots on goal, more goals.

Simples really....

USE IT OR LOSE IT - WAG FAILS TO SPEND BUSINESS SUPPORT BUDGET

Having spoken to many companies about the level of business support that they are receiving from WAG, the biggest complaint is the amount of bureaucracy that seems to be stifling the entire system.

Simply put, if WAG is putting in resources to support Welsh businesses, then surely those resources should get out to those businesses as quickly as possible?

Unfortunately, that doesn't seem to be the case.

When the Minister for Economy and Transport was asked what proportion of WAG's Business Support Programme had been expended by 31st October 2009, the answer came back as:

"At the 31 October 2009, the expenditure on the Flexible Support for Business Programmes represented 22% of the overall annual budget for 2009-2010."

Yes, that's right - after six months of the financial year, less than a quarter of the business support budget had been spent and this during the worst recession since the 1920s.

You would have thought spending would be AHEAD of target given that WAG and the Minister have both emphasised the lack of funding available to small firms as the key problem in the economy.

And its gets worse as there is allegedly tens of millions of pounds that remains underspent within the economic development budget with two months to go of the current financial year, and this at a time when businesses are crying out for support.

If that is the case, then it is clear that something is seriously wrong with the entire business support structure within Wales. Given this underspend, there is a strong argument for the Audit Office to examine why there is so much inefficiency within DET when it comes to ensuring that government support reaches our business community quickly.

Otherwise, as this blog and others have argued, WAG should get rid of the majority of business support, focus on those areas of market failure only(start-ups, innovation) and use the rest of the money saved to reduce business rates for the small firm sector.