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Whatever happened to the devolution dividend?

May 9th 2019

The dawn of devolution came with high hopes for the economic fortunes of Wales. Helen Cunningham looks the past 20 years and asks if a devolution dividend has been delivered.

A reflection on devolution and the economy really depends on what we are trying to determine. If we look at it through statistical lens of either GVA or GDP, it’s a familiar story; Wales has stubbornly hovered around the bottom of the table in relation to its UK counterparts over the past 20 years. Productivity indicators tell a similar tale. On levels of economic inactivity though, Wales has witnessed something of a turnaround and is doing better than the rest of the UK in terms of employment rates. So, a “mixed picture” then?

A distinct dimension

Any assessment depends on whether you believe there is a distinct Welsh economy. Many of the levers that drive the economy sit in Westminster and as the last decade illustrated only too well, there’s no buffer at Offa’s Dyke to halt austerity in Wales. Initiatives like Enterprise Zones and City Deals are clearly English imports, and understandably so. Even the Welsh Government’s increased borrowing powers are greatly contingent on spending what it borrows on the M4.

Critiques of the Welsh Government’s economic approach have veered between madly ambitious and madly unambitious. Largely, government thinking for much of the last 20 years has been characterised by orthodox economics; big investment projects, attracting mobile investment and picking winning sectors, some of which have over promised and under delivered, badly. The Technium programme and the Circuit of Wales may be infamous examples of when things went wrong but unfortunately, there are others. Clear, credible aims, sound economic governance and a healthy dose of realism were conspicuous by their absence in many cases, and “lessons learned” has become a familiar yet somewhat hollow phrase.

The Welsh Government’s 2006 scrapping of the Welsh Development Agency took many of its functions in house. Arguably what warranted attention wasn’t so much the scrapping itself but the retention of skills, expertise and relationships. On that front, something of a vacuum followed, manifest in a lack of strategy operationally, although not literally. It is striking that despite the relative continuity of the political make-up of successive governments over the last two decades of devolution, we’ve seen a multitude of economic strategy documents. Some with promise, like the 2004 Wales Spatial Plan, withered on the vine, illustrative of an opportunity for long-term planning that other nations would envy, that wasn’t capitalised on.

Decade two: a maturing approach

The second decade of devolution has been overshadowed by severe economic downturn and austerity. It has sometimes felt like focus has been geared more to mitigation and damage limitation of forces beyond the control of devolved institutions. However, as devolution matured, we have seen developments that have responded to need in a challenging climate, like the creation of the Development Bank for Wales in response to the identified funding gap for Welsh businesses.

The latest economic strategy document Prosperity for All also shows some sign of a shift away from the orthodox approach, with room being made for new ideas, doing things differently and promoting fairness. It is evident in the commitment not just to an increased quantity of work but more focus on the quality and proximity of rewarding work, drawing on the Wales TUC’s Better Jobs Closer to Home campaign. Recognition of foundational sectors in the strategy also demonstrates more explicitly than ever before the links being made between people’s daily lives and the economy. Tapping into and maximising existing levers and opportunities, such as procurement, is welcome and in line with our own work on building economic resilience through lasting solutions that will stand the test of time. While the strategy is still clearly wedded to much of what we’ve seen in previous strategies and doesn’t represent a comprehensive shift, it does offer some grounds for optimism. Although, the real test will be in its delivery.

A tall order

In retrospect, expecting a “devolution dividend” was always a tall order. Learning from mistakes, openness to new ideas, taking a long-term approach and tackling some of the structural challenges that are unique to Wales and its diverse geography may help start to deliver that dividend.

At the Bevan Foundation, we’ve consistently argued for an economic approach that delivers for people and looks beyond just the cities. We were pleased that we helped secure the Heads of the Valleys programme and that our recommendations for growth hubs were reflected in the Valleys Taskforce work, as well as putting the Living Wage on the agenda. We’ve called out the government when we’ve thought they’ve got it wrong and will continue to do so. But we can’t do that without your support to spread the word, provide much needed funds and be part of the debate. To help us do the same and more in the next chapter of devolution, sign up here.

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