Change the mindset and you can fix the economy

We've passed, now we're off: Wales needs to find better ways of retaining graduates, the Lib Dems argue

DEVELOPING a strong business sector has been high on the Welsh political agenda this week. On Monday, the Deputy First Minister announced that he was aiming to end the grants culture for large businesses. On Tuesday, two independent reports highlighted the fact that International Business Wales was a weak brand, bottom of the 12 UK regions for safeguarding jobs. Mismanagement and neglect had reigned too long in the agency the Government had created from the Welsh Development Agency.

On Thursday, new unemployment statistics were released that showed unemployment is now 9.1% and has been rising faster than all other parts of the UK. Today, the Welsh Liberal Democrats Conference begins in Wrexham. We will agree on policies designed to safeguard Wales’ economic future, because Wales badly needs a fresh start.

Let’s talk straight: Welsh economic fortunes are at a critical juncture. Our economy is worth less than 75% of the UK average. Too many of our jobs are in the public sector, a situation which discourages inward investment. Then there’s the public debt and public spending context, which will lead to bleak budgets for a decade ahead.

Ideologically, we need to be more ambitious as a nation. Only ambition can break the cycle of inevitable failure. We have a strong basis for growth and could become a cutting-edge, sustainable, technology-led economy. There is no sound reason to accept the status quo, nor to believe we cannot, in the medium-term, aim significantly higher.

Much potential lies in enabling small and medium-sized enterprises to grow and excel. At present, 99% of businesses in Wales are SMEs. These businesses tend to be more socially and environmentally focused. Profit from SMEs tends to stay in the local communities, rather than flowing down the M4 to head offices in London. Our proposals for regional stock exchanges, covered in more detail by my colleague Jenny Randerson on WalesHome.org just yesterday, highlight our commitment to radical, market-enabling solutions in Wales.

But as well as facilitating the entrepreneurialism of the Welsh people, we must better protect and enhance the structural, environmental and cultural capital which underpins our economy. It is the health of our nation, in the broadest sense, that will ensure better times are ahead. So we must better capitalise on the investments we already make in people, capturing more of the talent and expertise that comes from, and comes to Wales. If Wales is a great place to study, there’s no reason we can’t provide a great place to do business. The two sectors – educational and economic – should be given every opportunity to work together. Wales has 17% more university students per head than England, providing Wales with a huge pool of talented graduates. Unfortunately, many of these graduates leave Wales because there are not enough high-skilled, well-paid jobs to keep them here. Our proposals to connect designated economic opportunity areas with existing research centres seek to plug the brain drain.

Likewise our cultural capital must be better harnessed. There are already schemes to promote Wales as a tourist destination and to promote traditional Welsh products (like food and drink) abroad. We can go much further in making sure that what we make and offer here is sold overseas. Small nations, with rich cultural heritage can succeed if they show confidence and ambition, as many of our European neighbours have.

Promotion of the Welsh language is central to reaffirming our cultural confidence, providing a good business case to back up the moral case for protecting and nurturing the language. We should also think radically about our capacity to promote other languages – indeed our desired bilingualism could so easily be framed within an effort towards multilingualism, bringing all the benefits an outward-looking nation enjoys. A wider effort to bring economic education back into the classroom would do little harm, in this regard.

There certainly needs to be a policy shift in the Welsh Government’s approach to economic development. Ieuan Wyn Jones’ announcement on Monday was a welcome, if belated admission of strategic drift. I am concerned that the comments sent a confusing signal to the wider market. It may be that we will work differently, it may be that there is no money left for the old ways. But since the alternative offer is not yet in place, why show our cards? I suspect the damning IBW report forced the Minister’s hand.

It was also alarming that the First and Deputy First Ministers had taken so long to realise it was what Wales offered businesses here and overseas, not how much we spent on business, that mattered most. Radical proposals for rail transport, a new green economy, Severn tidal power and economic opportunity zones will all be debated at conference in Wrexham this weekend. We haven’t been sleeping in opposition and we’re getting ready for Government.

Many of our proposals dovetail with the need to begin a transition from a public sector reliant economy, into an economy enabled by Government. For example, we would roll much of the myriad grants and support schemes, all too often force-fed to businesses, into a single rate relief scheme. After all, for a business with a turnover of less than £50,000, business rates can be equivalent to over a third of their profits. When cashflow is crucial to the survival of business, such a scheme could be essential to saving business and jobs and encouraging entrepreneurialism.

Wales must urgently develop the future-fit infrastructure needed to succeed. We would invest in the very best broadband infrastructure, where today, there is no access for too many Welsh people. High speed internet access should be treated like any other utility, taken into account in planning and development and decisions. You might see an inability to tackle rural broadband as characteristic of our failure to develop the Welsh ‘offer’. Broadband, for a rural nation, should have been seen as an opportunity, not a challenge. Simlilarly, as European neighbours have used European funding to overhaul their transport and energy infrastructure, Wales emerges from a period of excess with the same-old sense of disconnection. It doesn’t have to be like this.

Central to improving the Welsh offer will be investment in our skills base. Last week, an Assembly Committee proved that investment in higher education is beneficial to the economy – for every £1 spent, the economy benefits by £5.30. Further education is so valuable that virtually every FE College is oversubscribed. In light of recent cuts, an audit of the Government’s priorities is certainly required.

But the Government is carrying on with the same-old gradualist approach to governing, seeing itself as the provider, as deliverer of economic capital. The same is true of their approach to local government, to schools, universities and hospitals. Money and support is available, but it’s use is precisely prescribed and those delivering services are far removed from strategic planning.

It’s time to move from a governmental mindset that assumes ministers know best, to an enabling, inclusive approach. Our economy will only thrive when we set the creativity and skills of the people who live here free. In this regard the setting up of economic summits in response to crisis and not before, was telling. In developing strategy, the Government needs to allow for the diverse possibility, for innovation – not just promote more of what we’re good at. Strategic planning must be opened up to capture the ideas, innovations and needs of those we seek to enable.

By making a fresh start, freeing our business from red-tape and investing in enhancing Welsh capital, we can give businesses, universities and public services every chance to innovate, grow and excel.