Walesbusiness.org

Does the Welsh Government have the correct tools for the job?

FOR someone with a reputation for playing her cards close to her chest, Edwina Hart still managed to surprise AMs in her first few months in post with a couple of announcements (and a lot of stories) on how she will move forward the Welsh Government’s plans for economic development.

For those that have waited months and perhaps even years to see the Economic Renewal Programme take shape, there will have been some frustration that at least some of it – such as the technium sell-offs – is under review pending a big announcement at an as-yet unspecified date in the autumn. This follows on from the painfully long period it took to appoint the sector panels – which may or may not have already lost the capacity to develop policy.

There is a convincing argument that the barbarians are already at the gates of the Welsh economy. But equally others have argued that the ERP is not a catch-all programme of policy. Rather it is a collection of ideas that require further work – considerable further work.

Nevertheless, it takes some discipline not to be spooked by the stats. Wherever one looks – economic inactivity and claimant counts, average earnings, enterprise data, investment, stock market visibility, competitiveness – the indicators are truly worrying. This has inevitably led to charges of complacency being laid against ministers.

But equally what is often missing is an understanding of what the governments in Westminster and Cardiff Bay can do to positively change the Welsh economy. Hart is right when she says: “many of the macro economic levers are the responsibility of the UK Government.” A change in interest rates would have a more profound impact on businesses here than any Welsh Government initiative, even with its new powers. Unfortunately, the blame for this confusion lies mostly with political parties, who are prepared to sacrifice fact for the sake of (we presume) short term political gain and claim that the First Minister and his cabinet are the culprits.

So setting aside the delay, an honest debate around Hart’s programme when it is announced, free from grandstanding, would clearly be of benefit. But more importantly, where should it focus?

Paradoxically, if we recognise and focus on where the Welsh Government can make a real difference to the economy, the responsibility lies not with Hart but with her colleague, the education minister Leighton Andrews, because there is a powerful argument that if the school system in Wales gets sorted, the rest will look after itself.

This much is recognised by business. In its manifests for this year’s Assembly elections, the Institute of Directors made workforce skills a priority, arguing:

“Our skill levels in Wales are frighteningly low.  While the gap has been narrowing some 14% of working age people in Wales have no qualifications compared to 11% elsewhere in the UK. And 58% of those without qualifications are not in work. And despite the economic recession almost 60% of IoD employers have recently reported that skills gaps were holding back the growth of their firms.

“More worrying for the longer-term is our educational performance.  Since devolution education performance in Wales has been disappointing, with a gap emerging in performance at secondary level compared to the rest of the UK. In 2010 the proportion of our children achieving the expected level in maths at age 14 was seven percentage points below England. In 2001 the gap had been three points. Similar trends are apparent in English and Science. International data has confirmed this decline in performance against a wider set of countries since 2000.  This decline will have a long-term adverse impact on our relative economic prosperity and must be reversed. The new government must be prepared to tackle the causes of our declining comparative educational performance.”

Privately, business owners frequently complain of graduates arriving unable to compose letters or carry out a raft of basic business skills. Ministers in the past have been too quick to counter this with the shoot-the-messenger accusations of doing down the achievements of students, although this may no longer be the case given the energy that Andrews is bringing to his role.

This is important because while improving the Welsh education system so that it is good enough to answer at least some of the economy’s woes is a turn-the-tanker exercise, there are shorter-term benefits.

Let’s use Ogmore as an example, a constituency that has suffered many of the problems of post-industrialisation seen across the south Wales coalfield. Here, some 23% – almost a quarter – of working age adults have no qualifications. When inward investors look at locations in Wales, the first thing they consider is the education profile of the local workforce, because it begins to give them a good idea of who they can employ. Undoubtedly, there is much that Ogmore can offer, but should we expect these prospective employers to go digging after seeing such an arresting statistic?

No one is saying that the Welsh Government hasn’t recognised the links. Its Apprenticeships in Wales scheme was widely welcomed, and the country can still – just about – trade on its reputation for manufacturing excellence. Nevertheless, surely there exists in areas like Ogmore the opportunity for “quick hit” fixes – initiatives to equip with qualifications those working age adults who have no GCSEs?

Ministers could be asking if focusing in such a way will help attract inwards investors in the medium term while engendering an understanding across the entire Welsh workforce that skills, training and qualifications are key to personal improvement. That way, the whole economy reaps the wider benefits.