24/11/2003

Wales’s relatively weak devolution settlement has left it at a disadvantage in formulating innovative economic policies to deal with the loss of manufacturing jobs when compared with Scotland.

This is one conclusion drawn in Second Term Challenge , published by the Institute of Welsh Affairs in association with the Constitution Unit at University College, London. The new book, arising from a conference held by the two organisations in the wake of the May 2003 election, examines the tasks facing the National Assembly for Wales as it proceeds into its second term.

Professor Phil Cooke, director of the Centre for Advanced Studies in Cardiff University, argues that Scottish policy has been able to develop innovative instruments with a strong focus on knowledge-based economic development strategy. In contrast Wales’s entrepreneurship and innovation-supporting policies have not been systematically integrated, lack synergies and have under-performed.

“Weak devolution, of the kind that may also be expected for the English regions, is a poor option for dynamic, experimental policy making,” says Professor Cooke. “This is exacerbated where a weak lower tier, as in Wales, is faced with strong constraints from both the nation state and supranational levels.”

In the run-up to the May 2003 elections First Minister Rhodri Morgan claimed that he had placed ‘clear, red water’ between his administration in Cardiff and Tony Blair’s ‘New Labour’ Government at Westminster. The Editor of Second Term Challenge, IWA Director, John Osmond, said, “The challenge for the second term is to put this distinctive profile into effective practice. So far it has been largely expressed as declaratory policy statements. Following closely behind is another challenge: to improve the structures and extend the powers of the Assembly to give the Assembly Government the discretion it needs to put its policies into effect.”

In the book Professor David Reynolds of the University of Exeter deals with education policy, Scott Greer of the Constitution Unit examines health policy, and Professor Iain MacLean of Nuffield College, Oxford, looks at the operation of the Barnett Formula which underpins the Assembly’s finances. Professor Robert Hazell, Director of the Constitution Unit, analyses how Labour will deal with recommendations that are likely to come from the Richard Commission on the Assembly’s powers in early 2004.

Professor Cooke argues that the loss of manufacturing jobs (largely as a result of UK economic policy favouring a strong pound) hit cotland before Wales. However, the Scots responded much more vigorously. The biosciences, medical science and e-science were prioritised as part of a Science Strategy for Scotland. In contrast, a more precautionary approach was adopted in Wales using the Welsh Development Agency and ELWa to implement public sector driven initiatives. Typical initiatives were the Entrepreneurship Action Plan, the Knowledge Exploitation Fund and Finance Wales. In each case there was under-performance on over-ambitious targets.

A complicating factor was the huge scale of the funding that simultaneously became available through the Objective One programme and the issues that arose in deciding how this should be allocated and managed.

Professor Cooke concludes that the Assembly’s weakness as an institution meant it was only able to do two things when faced with the challenge of the loss of jobs in manufacturing. Firstly, it took over job-generation activity itself through enlarging public administration employment, paid for from the block grant. Between 1998 and 2002 some 67,000 jobs were created in public administration, overwhelmingly in health and education, more than offsetting the loss of 44,000 private sector jobs.

He notes that, by and large, this meant replacing higher value adding, higher productivity, export earning jobs with others likely to be increasingly reliant on financial transfers from Whitehall. “Wales is becoming more dependent, not less, on London for the underwriting of its economic future,” he says.

The second option available to the Assembly Government, which it also took up, was to re-organise the administrative apparatus it controlled. This it did by partially dismantling ELWa, by increasing the responsibilities of the WDA and by restructuring the health service.

Professor Cooke concludes that the stronger powers given to the Scottish Parliament have enabled its Executive to be more adventurous in policy making: “The Richard Commission reports in early 2004 on the question of whether the Welsh Assembly warrants more power. Scotland’s stronger settlement and more autonomous Parliament give its functionaries greater confidence. “In turn this enables them to focus on a clear strategy and push measures through against vested interest to achieve agreed policy objectives regarding economic development” he said.

Source:	Institute of Welsh Affairs
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