It’s been almost five months since the UK voted to leave the EU. As the initial shock of the referendum result dies down, the latest edition of Exchange looks at the impact that Brexit could have on Wales. Our contributors Read more »
Last week’s Autumn statement was bad news for Wales. Not because the £227 million cash windfall isn’t welcome – it is – nor because the news about fast broadband for Newport and tax breaks at Wales’s enterprise zones aren’t valuable – they are too. It’s bad news because the Office for Budget Responsibility has made clear that the UK faces several more years of low growth and high unemployment. OBR estimates that the economy will have shrunk in 2012 by 0.1 per cent whilst in 2013 the decline stops and there’ll be modest growth of 1.2% and then things get going in 2014 with 2.0% growth. Not only is this not exactly a stunning recovery from the recession, but OBR have consistently been over-optimistic about when the economy starts to recover. In 2010, they forecast annual growth this year of 2.6%, and just a year ago, in November 2011, still expected 0.7%. Like tomorrow, it looks as if recovery never comes.
This dismal economic outlook is tough for ordinary people in Wales, from the workers at Tata Steel who are waiting for manufacturing to get going again, to the workers in retailers up and down Wales desperate to sell some big ticket items, to unemployed people desperate for work. For unemployed people in particular, there doesn’t seem to be much respite – unemployment is forecast to stay at around 8% until 2015, but even in 2016 and 2017 it only falls to 7.6% and then 7.1%.
The autumn statement’s also a challenge for the political parties in Wales, and especially for Welsh Labour. The Welsh Government has bold ambitions to kick-start the eocnomy, get people into work, cut poverty and raise educational attainment. These were big asks that had barely been achieved when the economy was growing, let alone now. The First Minister has promised ‘delivery’ and has a whole raft of measures to demonstrate outputs and outcomes – although as many have noted – no targets. However the bleak economic outlook threatens to drive a coach and horses through Welsh labour’s plans.
Its ambitions to tackle poverty, for example, are brave and the Welsh Government makes much of its commitment to retaining the targets of eradicating child poverty by 2020, as well as tackling poverty more widely. Yet every analysis of the economy and of tax and benefit changes up to 2015/16 shows that poverty is likely to increase in the next few years. It doesn’t look as if unemployment is likely to fall below much below current levels either. And add to this Wales’s weak economy and employment structure and the likelihood of achieving its target on poverty is zero. Far from poverty shrinking in the next 5 years, it will surely grow both in terms of numbers and the percentage in poverty. It’s likely to fall down on its ambitions for getting people into work too.
On a number of other key policy areas, there is a strong likelihood that Welsh Government will fail to achieve its aims, not because of its own performance but because it is simply impossible to buck the UK economic trend. Perhaps avoiding the worst is about the best that can be hoped for, although hardly a headline grabber. But come election time, endlessly pointing the finger down the M4 claiming “it wasn’t us, it was them” doesn’t have a lot of voter appeal.
There’s an adage a friend tells me is widely used in the NHS. It goes “Only do what only you can do.” If this was applied to Welsh Government activity in the next few years, it might result in a very different set of priorities. Education, health and care, environment and infrastructure would rise to the top. Other areas, where the Welsh Government is basically whistling into the wind, would slide to the bottom. It would be a brave government that, given its rhetoric and values, ditched its commitment to poverty, equality and employment. But that’s the clear implication of last week’s autumn statement. So while I don’t expect to hear a screech of brakes on these issues, it may well be that there’s some gentle back-peddling in months to come.
Victoria Winckler is Director of the Bevan Foundation