Wales’ economic policies shouldn’t be pie in the sky
The focus of today’s article is some economic basics that we need to get right – some belated and yet urgent changes that should to get Wales back on a path that will deliver real growth, jobs and prosperity.
To put this into context, let us look briefly at where we are in the current international outlook. Not that this outlook is the reason why we must act but rather that it highlights how deleterious our economic policies have been and continue to be.
We have a very open economy – and we are highly dependent on international trade for our standard of living. So the global economy – and its overall state of health – matters to us. And right now what we see is not very encouraging.
Here we are – five years into the global economic crisis – and the end is not yet in sight. The anxieties from the unresolved Eurocrisis are stalling the global recovery. Some major overseas markets appear to be faltering and China’s prodigious growth is slowing. Internationally, there is a pervasive air of uncertainty. Here in Wales the economic indicators are mixed.
For example there was an unexpectedly good growth rate for the first quarter of the year. But most economic commentators are cautious because the signals are ambiguous. The sort of words that are being used to describe the UK’s economic outlook are “uninspiring”, “lacklustre”, and “lumpy even grumpy” growth. In short, no one is popping champagne corks!
And it does seem that, faced with international and domestic uncertainty the UK Government has decided to add to these anxieties. The Government has lapsed into a state of resignation – there is more than a whiff of defeatism in its economic policy, because what we are not seeing is a concrete – actionable – plan that would encourage businesses to invest.
There was nothing significant in the Autumn Statement that would boost Wales’ economic performance. In these economic times credibility is paramount, so for Treasury forecasts and fiscal plans to fall over so soon is lamentable.
There is a need for a comprehensive economic policy that will strengthen our economy, seriously increase profits, and create jobs. International and domestic conditions make it imperative to apply economic policies that serve our interests, and that is why our policies need to envisage an economic programme that is practical and designed to put us on a path to prosperity. Much of that economic programme is not new but after decades of slide it is more critical than ever.
Exporting and manufacturing will be vital to our future success and our economic policy needs to give proper priority to this vital sector. We are the first to acknowledge the crucial role of our exporters and manufacturers. Exports have been rising – and that is to be applauded – but we still face an on-going balance of payments deficit.
We need to encourage innovation and diversification in order to build on our current export capacity, which means allocating extra resources to support innovation in areas such as research and development and the investigation of potential export markets. We should provide tax incentives for new market investigation and development by exporters. Whether it is logs or leather we all know Wales has a range of raw materials that offer great scope for value added. Designing appropriate tax incentives that will support potential new export products makes sense. In addition, it is imperative that all the relevant government agencies work together to support the export and manufacturing base.
It’s time to stop manufacturing being treated as the Cinderella of the economy and give it the priority it deserves. It is no surprise that the countries that have come through the global economic crisis in the best shape are those that have a thriving manufacturing base such as Germany, Sweden and Singapore. As a small open economy facing fierce competition from many countries our manufacturing base is always under threat.
It is important we help the manufacturing sector with R&D support, incentives to develop new markets and sensible public sector purchasing policy. Too much of our manufacturing capacity has already been sacrificed on the altar of so called ‘free trade’. Some call this offshoring or outsourcing – others call it ‘job theft’.
It is time to put the interests of Welsh companies and their employees first. The steps we need to action do not need to be extravagant – they shouldn’t be pie in the sky. They need to be practical, feasible and affordable, and there are a number of successful overseas precedents for us to look at.
In this age of austerity, all economic policies have to be credible. We should not be proposing just throwing large amounts of extra spending to improve our economic performance, rather on economic policy – in contrast to the UK Government – we should know where we want to go to build a prosperous Wales, not an impoverished one.