Reinstating economic development agency essential to prosperity

Professor Brian Morgan assesses the political parties’positions on seeking to create a new Welsh Development Agency

WITH just a day to go before the 2021 Senedd election, it is interesting that, despite the leadership debates highlighting the political differences between the parties, their manifesto pledges contain some surprising similarities.

For example:

■ Plaid Cymru plans to establish “Prosperity Wales”, an arm’s-length allWales development agency to provide effective policy delivery;

■ the Conservative Party talks of creating a reformed Welsh Development Agency and locating it in north Wales; and

■ even the Labour Party pledges that each Welsh region will be allowed to develop their future economies using regional committees to co-ordinate transport and planning.

These pledges are in line with the conclusions of the recently-published OECD report on The Future of Regional Development in Wales (2020).

This called for a more coherent and co-ordinated approach to the delivery of regional development and suggested that economic policy could be improved by the implementation of a new institutional structure, “such as a regional development agency”.

Numerous other reports in recent years have supported the conclusion that economic development agencies have the capacity to improve the delivery of regional policy.

For example, a recent report produced for the Hodge Research Programme at Cardiff Metropolitan University concluded that a key policy initiative to raise productivity would be to set up an arm’s-length regional structure for delivering the high-end business support services needed by Welsh firms.

So nearly two decades after the Welsh Development Agency was abolished, the logic of that decision is again

‘Abolishing the WDA has turned out to be the worst economic policy decision in living memory...’

being brought into question. This will come as no surprise to Welsh businesses which have waited in vain for an effective substitute to emerge.

Where is the one-stop shop, single point of contact and focus on delivery that was the hallmark of the WDA?

Indeed, five years after its abolition, I wrote in this newspaper: “Abolishing the WDA has turned out to be the worst economic policy decision in living memory.”

And why was no “evidence-based policy paper” produced to support the decision?

It was a purely political choice. Consequently, within a few years of its abolition, the folly of this decision became all too evident – it undermined economic prosperity (putting our relative GDP per head on a downward trajectory), it reduced the availability of industrial property to support employment growth (especially in the Valleys), and it led directly to a significant reduction in the inflow of inward investment into Wales – we went from being near the top of the inward investment league table to the bottom.

In 2021, with Welsh prosperity still languishing nearly 30% below the UK average, I stand by my earlier verdict.

It was a serious policy mistake. It is no surprise to me that reinstating an economic development agency in Wales is featuring so strongly in the manifesto commitments of the major parties for these elections.

A new WDA would need to be arm’s-length from government but accountable to ministers through an annual high-level remit letter and have an independent board.

What are the chances of this happening?

If there is no overall majority for Labour in the forthcoming election, I cannot see much prospect of political agreement between Labour and the Conservatives.

However, I think some sort of political arrangement with Plaid is possible and it could lead to a version of their Prosperity Wales (an arm’slength agency) being introduced as part of a coalition agreement.

To my mind, that outcome would be a massive improvement on the present arrangements for the delivery of regional economic policy in Wales.

Indeed, the evidence is overwhelming that without a dynamic, innovative development agency, like the ones they have in Ireland and Scotland, it will become increasingly difficult to raise prosperity levels and regenerate the Welsh economy post-Covid.

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