Brexit, Blaenau Gwent and EU funds

Economy A sign saying EU and Brexit
ViewsDecember 22nd, 2016

The vote to leave the EU was the most significant event of 2016, if not of a generation.  Six months after referendum, Victoria Winckler reflects on why the areas which received the most EU funds voted to leave.

Wales’ vote to leave the EU was greeted with widespread disbelief. How could somewhere where towns were ‘showered with cash’ vote against its own interests? Why had so many people in Wales apparently ‘shot themselves in the foot’? Or even, why had the ‘turkeys voted for Christmas‘?

The explanations that have been offered range from the failures of the remain campaign itself to the weakness of Welsh media to the nature of devolution to Wales, to name but three.

In fact the explanation is much simpler – EU funds simply didn’t do what they were supposed to.

The statistics on the economy speak for themselves. Despite 16 years of the EU’s maximum level of help, Blaenau Gwent – the most pro-leave local authority area in Wales – saw a decline in the number of jobs in the area. Neighbouring Merthyr Tydfil, Caerphilly and Torfaen, also leave-voting areas, saw barely perceptible growth (2 – 3,000 more jobs in each). If these towns were ‘showered with cash’ it appears to have gone straight down the drain.

Throw into the mix some of the sobering figures on earnings, which show that a male on median wages in Blaenau Gwent is now more than £71 a week worse off in real terms than in the early 2000s, and it’s pretty clear that whatever else EU funds may have achieved, they didn’t boost the fortunes of Blaenau Gwent and many other parts of Wales.

So what’s gone wrong?

There are three big reasons why EU funds failed to do the trick.

Too little, too late

A huge deal has been made of Wales’ EU structural funds over the years. Such has been their prominence that a row over match-funding toppled Wales’ first First Minister, Alun Michael, in 2000. And they’ve taken up an inordinate number of headlines and Assembly debating time ever since.

They frankly don’t deserve this coverage, because the actual spend – about £4 billion over 20 years – is a drop in the public spending ocean. The average annual allocation of about £200 million (i.e. £4 billion divided by 20) is just 1.5% of the Welsh Government’s budget. Indeed EU funds are tiny compared with mega-cash splashed by the UK Government, like £9 billion on the 2012 Olympics or £14.8 billion spent over nine years on Cross Rail 1. Even England’s Regional Growth Fund – which may well have passed you by – beats Wales’ EU funding with £3.2 billion over five years.

EU funding pales even further into insignificance when the huge problems Wales faced are taken into account. Over the 1980s and 1990s parts of Wales had seen their local economy devastated as a result of coal and steel closures and multiple recessions. In truth, EU funding simply wasn’t enough to address problems on this scale.

Swimming against the tide

No matter how great the funding, regenerating areas like Blaenau Gwent was always going to be tough because the efforts were swimming against the economic tide.

There was no meaningful UK regional policy throughout this period, resulting in an ever-increasing concentration of growth in London and the south-east. Wales did well for some of this time, but nothing like as well as the south-east of England.

Manufacturing across the UK has been in long-term decline, haemorrhaging jobs in West Wales and the Valleys. In the fourteen years 2001-2015, 27,000 manufacturing jobs disappeared. The elephant in the room is that a proportion of these jobs didn’t vanish into thin air but were relocated elsewhere in the EU, whether it was Continental Teves shifting production to Slovakia or Merthyr Tydfil’s Sekisui moving to the Netherlands. Not unreasonably, the public saw the EU giving money to West Wales and the Valleys to create jobs at the same time as the EU single market encouraged job loss – go figure that one.

Too often what replaced the jobs lost were part-time, precarious, low paid jobs in services.  Work practices that were unheard of in 2000, like zero-hours contracts, commission-only ‘jobs’ and the gig economy, became commonplace. And sometimes, people saw local employers actively recruiting workers from Poland, Lithuania or Portugal to fill those newly-created jobs. Even though the numbers of migrant workers are very small, the irony of EU money being used to help to create jobs that were then filled by workers from elsewhere in the EU was not lost.

Policy failure

Last but not least, with the benefit of hindsight it’s now clear that EU funding could have been used more effectively. There have been some excellent individual schemes funded by ERDF and ESF. Unfortunately taken as a whole they haven’t delivered much economic change. Indeed with the level of hype that surrounded the funds especially in the early days, it was inevitable that people would feel let down.

Crucially EU funds haven’t had enough of an impact in the hardest hit areas of the south Wales valleys (or parts of north Wales too) to make enough of a difference.  True, the evidence of EU-supported schemes is all around, be it the A465, the Ebbw Vale Learning Zone or town centre improvements across the valleys. But these infrastructure schemes have yet to generate tangible economic benefits.

On top of this, many EU investments are essentially more of the same – the A465 was already there, Ebbw Vale already had a college, we already have apprenticeships. So public awareness of the benefits are inevitably muted. And add to this the fact that other parts of the UK upgrade their infrastructure without EU help – and you can begin to see why people might be sceptical.

What next?

Brexit will of course mean the end of EU funding. It seems highly unlikely that the UK government will make up the shortfall in full.

Much more important than this, however, is getting in place economic policies that ensure that places like Merthyr Tydfil and Blaenau Gwent get what they need – half decent, reasonably secure jobs within a reasonable travelling distance of their homes.

To do this will require an effective UK regional policy. It will also need a radical programme in Wales to create ‘better jobs closer to home’. And it will need action to improve pay and conditions at work.  Because, dear journalists, the turkeys didn’t vote for Christmas – they voted for the better future that the EU had failed to deliver.

Victoria Winckler is Director of the Bevan Foundation. She was instrumental in securing Objective 1 status for West Wales and the Valleys, in writing its first programme, and was a non-executive Director of the then Welsh European Programme Executive.  

She is interviewed about Brexit on BBC News at 6 pm on Thursday 22nd December. 

Tagged with: South Wales Valleys

2 Responses

  1. Tim Williams says:

    Sensible piece. EU funds were a)marginal and b) not spent strategically. The WEFO role was a disaster but the biggest failing was the lack of leadership and strategic direction from the Welsh Government.

    As to the future, the Welsh Government has to start making devolution work. One thing they seem to have forgotten is that they need to be attempting to shape UK government programmes – for urban regeneration, transport, regional policy – and making bids for national funds. They also seem to have omitted to innovate around the funding possibilities or seek new sources of funding/borrowing. The cutting of the Severn Bridge toll is a perfect example. They should have sought to a)reduce the price marginally for political reasons but also b)put their half of the income into a fund or a bond from which they could finance the new Valleys rail network – not wasting scarce Welsh budget money on a spurious widening of the M4 which with the drop in the Severn Toll is already out of date as the extra demand induced will fill the widened road within two years if not two weeks.

    As to the EU , progressive shouldn’t make the assumption that it is as progressive as it was in the 60s and 70s. Since Maastricht it has acted as a tool of regressive German economic policy and has become pro austerity. Its abuse of Greek democracy in the interests of German and French banks was appalling and its handling of mass migration a disaster. what’s to like?

  2. Philip Owen says:

    Why wasn’t EU money spent on improving connectivity? For example, reconnecting Carmarthen to Aberystwyth by train.

    That it was too little too late is not a reason to leave the EU. As you suggest, a UK approach will involve even less structural funding. See electrification to Swansea.

    Improving the road links from Bridgend to Pontypool would have been more imaginative than widening the A465.

    The Techniums were so-so. Only SA1 and OpTIC (not originally a Technium) seem to have delivered but they were worth a try. The OpTIC model of shared resources worked well. None of the others adopted that. Of course, property development is perhaps better left to the market. The Scandinavians have excellent social support but their market sector is unsubsidized and ruthlessly competitive.

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