Written - Publication of Economic Renewal: A New Direction

The Statement advises members of the publication of the Welsh Assembly Government’s ‘Economic Renewal: A New Direction’.

The document outlines how the Welsh Assembly Government is going to radically transform the way it supports the Welsh economy. It sets out the role Devolved Government can play in providing the best conditions and framework to enable the private sector to grow and flourish.  The vision aims to make Wales one of the best places in the world to live, to work and to thrive.

In future government resources will be targeted at tackling wide systemic issues within the Welsh Economy - investing in infrastructure, research & development and improving the conditions within which businesses operate. The Economic Renewal Programme will see a fundamental shift away from direct and generic support for companies to a focus on creating the right environment for businesses to succeed. 

The policy has been developed following extensive consultation with business, academia, trades unions and other key organisations and individuals.  The consistent feedback was that Government should take a more focused approach to business support and for resources to be concentrated where Government can add the most value – beyond what the private sector itself can deliver. 

The new approach includes:

• Developing high quality and sustainable infrastructure including a commitment to ensure that every business in Wales has access to Next Generation broadband by the middle of 2016.   Wales needs modern, sustainable infrastructure to underpin economic growth.  Investors and indigenous businesses must be able to count on communications, transport, energy and other infrastructure necessary for 21st Century enterprise.  We will work with the communications industry to improve mobile coverage and we will invest in the physical regeneration of our communities.
• Reducing the level of direct business support, with resources and funding moved to wider infrastructure development. Most of the finance that the Economy & Transport Department provides directly will be gradually moved to a repayable model.
• Supporting industry led investment in six key sectors where there are good growth prospects and where Wales has identifiable advantages, instead of the current 14.  These are: Creative industries, ICT, Energy and Environment, Advanced material and manufacturing, Life Sciences, Financial and Professional services. We will create sector teams, drawing on external, strategic, private sector and academic expertise to reflect this change.  We believe our role to be an enabler of growth rather than a direct deliverer of services to individual companies. Therefore we will reduce the level of direct business support beyond the start-up phase and move to more of an investment culture in our dealings with companies. Securing Foreign Direct Investment (FDI) and stimulating trade will be fully integrated into our approach and as such International Business Wales will cease to exist as a separate function within the Economy &Transport Department.
• Creating a more responsive planning system.  We will implement a package of planning process reforms and improve regulation that impacts on businesses.  We will also reduce bureaucracy in relation to public sector procurement – improving the service for suppliers and buyers. Our partners, especially local authorities, will have a vital role to play in delivering this strand.  As well as improving conditions for business we will develop the way we promote what Wales has to offer through the “Wales brand,” particularly around the business proposition to highlight our successes and counter negative perceptions.
• Focusing on broadening and deepening the base of skills in Wales so that companies can secure the right skills mix for developing their businesses, and to give individuals the opportunities to develop their careers. This includes bringing people that have become economically inactive back into the labour market. The foundation of any economy is its working population. We will ensure that our young people are motivated and ready for the world of work with the right attitudes and skills for the workplace.  We will help employers tackle the costs and wasted potential arising from low levels of literacy and numeracy in the workforce.  We will promote engagement in science, technology, engineering and maths and we will extend our Apprenticeships programme.  We will also work with our higher education providers to ensure that they become more engaged in support for the future economic success of Wales.
• Increasing investment in the priority areas for Research and Development by working with our universities and businesses as part of an end-to-end approach to commercialisation and encouraging innovation across the economy.  We will work with academia to build capacity in how they can support the needs of business in key sectors and we will focus resources where organisations in Wales have the best opportunity to maximise their research performance and economic impact.

To deliver this new approach there will be changes to the way the Assembly Government’s Economy & Transport Department operates.  A new infrastructure group is being created and the Department as a whole will be restructured in line with the new priorities to include six key sector teams.  The work of the regional teams will be refocused to provide an interface with the entire Department at the local and regional level. The Department will be led and driven by this opportunity to create an environment which encourages sustained economic development.  It will fill a gap in the market where the private sector will not play a role, but will exit quickly from areas where it is crowding out the market. 

The new policy direction will also require a similar shift in monitoring and evaluation to ensure success and value for money.   Alongside tracking the progress of a variety of socio-economic indicators, the Government will now set about developing a framework for measuring the performance of the Economic Renewal Programme.  This will be published in the autumn.

Although the Government’s ambitions are shaped, but not constrained, by the current economic climate, this change in direction should be seen as an opportunity to help build a stronger future for Wales. 

This programme is based on a shared vision and ambition of what needs to be done to create a more prosperous Wales.

We recognise that, over the long term, the performance of the Welsh economy has not met expectations.  This new approach sets out a clear, defined role for devolved government. It is not our role to get involved in the day to day running of business but we do have a significant part to play in creating the right environment to encourage entrepreneurship and to allow our private sector to flourish and grow. 

We want to create a high quality infrastructure so that businesses, large and small, are well connected within and beyond Wales. Our people, businesses and communities need the right facilities, skills and services where they live and work.

The culture of direct business support through grants has run its course. Our aim will be to encourage a stronger culture of investment and therefore the finance we provide going forward will be through repayable loans administered in a swift and responsive service. 

Our Single Investment Fund will be reallocated to primarily serve our two key economic development priorities, infrastructure and sectors. We do however also believe that we still have a role to play in working with regionally important growth businesses. We will make some of our funding available for this purpose.  Wales will also continue to be open to good ideas across the wider economy and we will retain the flexibility to fund strategic projects outside the key sectors that will deliver jobs and growth.  We will therefore reserve the right to consider high-quality proposals for support, including inward investment – but only if they represent significantly better value than projects identified within our sector pipelines. 

In the current economic and financial climate our investment needs to be smarter. We must concentrate our efforts and our resources on the policy levers over which we have the greatest degree of control and the impacts of which are most widely felt.

We are determined that the Economy & Transport Department should become a leader in the UK and the wider world.  The new Department will have a culture of delivery, proactively seeking out new opportunities, focusing where maximum value can be added.  We will become far more business led and able to respond more quickly to the ever changing and evolving world in which we live.  The strategic restructuring will lead to difficult decisions being made in the short term in order to ensure that the Department is properly and effectively aligned to deliver the government’s priorities.  The aim is to ensure that the necessary changes will be in place by the end of 2010.

We are also realistic – the Economic Renewal Programme will not yield immediate results. This is a long term approach taking precedent over short term headlines. This is about creating an excellent team, the best in Europe that can attract investment and create an environment for strong and sustained economic growth. It is a vision which requires a whole-government approach and I am grateful to my cabinet colleagues who are fully committed to making this work for Wales.