The Lowdown on Growth Deals

Quite a lot has been said in the press recently about Growth Deals in different parts of Wales. Here I will try to explain briefly what Growth Deals are, what’s good and what’s bad about them, and how they fit in with Gwlad’s vision for a long-term future for the Welsh economy.

The essence of a Growth Deal is that a consortium of public and private sector organisations within a specific region – usually local councils, universities, government agencies and private companies – put together a consortium and formulate a business plan: much as any business might do if it were seeking new investment. The plan (or ‘bid’) is then put to the Government, both in Wales and in Westminster, saying in effect “if you will put this amount of money (typically an amount in the hundreds of millions of pounds) in from your budget, we’ll raise this (similar) amount from our own, it will spent on this (new infrastructure projects, widened access to education etc.), and we believe that the outcome will be this (in terms of new jobs created, average salaries increased, overall economic growth etc.)”

City Deals

The concept began with the City Deals granted to large cities and urban regions in England from 2012 onwards: Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham, Sheffield and numerous urban ‘regions’ (such as the Black Country) have received them, as have Glasgow, Aberdeen, Inverness, Edinburgh and Stirling in Scotland.

It will surprise no-one that Wales, under its sclerotic Labour administration, has been behind the curve. The first City Deal, for Cardiff, was agreed in March 2016 and Swansea followed in March 2017, each covering the rural areas around them and so in effect encompassing the whole of South East and South West Wales between them, and with total budgets of over £1 billion in each case. North Wales is well advanced in its bid to secure a deal, led by the North Wales Economic Ambition Board which is a consortium of all six North-Wales councils and various other bodies. The initial bid was submitted in December 2017 and negotiations have since been ongoing, with £120 million towards it set aside by the Chancellor, Philip Hammond, in last week’s budget. Nothing is currently in place for Mid Wales, though talks are taking place about forming a consortium to bid for such a deal as was reported in the link given above.

What’s Good

What’s good about Growth Deals is that they focus the attention of all who take part in them exactly where it should be: on growing the economy and creating the prosperity on which everything else depends. No country or region can have world-class health, education, care or environmental services if it doesn’t first and foremost have a world-class economy generating the wealth to finance them, and over recent decades the Welsh political elite has been slow to realise this. Another good thing is that they force organisations whose aims might sometimes be at odds with one another to work together towards one common goal: a principle which extends to local authorities led by different political parties, such as is the case with North Wales where the bid is jointly led by Labour-run Flintshire and Plaid Cymru-run Gwynedd with the active support of Conservative-run Wrexham, Conwy and Denbighshire councils.

What’s Not So Good

Professor Dylan Jones-Evans. Image credit

Despite the fanfares and large headline amounts of money involved, the ambitions of these Growth Deals are still relatively modest in the context of the economy as a whole. Professor Dylan Jones-Evans of the University of South Wales – always a voice to be taken seriously where the Welsh economy is concerned – has pointed out that while the goal of the Swansea City Region deal is to see 9,000 jobs created over 15 years from a budget of £1.2 billion, in fact the number of jobs in the region increased by 11,000 between June 2015 and December 2016 alone, simply as a result of underlying economic growth. There is therefore a great need to focus on the quality and nature of the jobs created, and not just their number, and to ensure that there is a good fit between the types of job created and the needs and skills of the local population. There is no ultimate benefit in creating large numbers of low-pay low-skill jobs which will leave the economy still languishing at the bottom of the UK incomes league.  Nor are large numbers of highly-skilled technology-sector jobs the answer if local people are not endowed with the skills to do them and better-qualified people must be brought in from elsewhere.

Another salient point made by Professor Jones-Evans is that Growth Deals can have a bias towards “supporting highly speculative building projects…rather than investing in the growing digital economy”. We have seen this in previous rounds of Welsh Government economic strategy, which has often focused on prestigious building projects which have remained empty or at best partially-occupied for years afterwards (such as the LG factory in Newport or the Techniums across Wales) instead of focusing on underlying transport and communications infrastructure, access to capital, and the skills base.

Gwlad’s view

From our perspective as a party with an all-Wales vision for economic prosperity, perhaps the biggest weakness of the Growth Deal concept is the narrowness of its regional focus. On the one hand, having large regions which include the Valleys within Cardiff’s deal, for example, means that relatively easy-to-achieve growth in Cardiff is hailed as a success for the region, even if the Valleys continue to languish as before. On the other, an excessive focus on one part of the country can undermine the whole at the expense of other parts of the country: an example of this is the North Wales Growth Deal’s focus on connections with the North West of England and with Ireland, while largely ignoring the rest of Wales and Mid Wales in particular.

The Way Forward

We want to see the Welsh economy grow, and we are happy to see the other parties in Wales working together to that end, so to that extent we applaud the Deals that are already in place and those being negotiated. Though not perfect, the concept has been shown to work well when carried out in England and Scotland, and it is a reproach to our moribund political system that we are so far behind the curve in Wales.

Nevertheless they are not a magic bullet, and we strongly believe that an all-Wales approach is needed – not dividing the country up into regions which themselves include areas with dramatically different needs, but seeing the country as an organic whole and playing to its strengths while acknowledging and confronting its weaknesses. Only by doing this can we ensure that areas like Mid Wales and the Valleys are not overlooked, and that the paucity of the country’s infrastructure – largely brought about by centuries of prioritising links to the English regions above the needs of Wales itself – can finally be addressed. Only then can Wales dream of achieving the levels of prosperity that a nation of over three million educated, diligent people with a long history of innovation and enterprise should have every reason to expect.

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