Could reform of the Welsh Development Agency and changes to the grant regime jeopardise the Welsh economic renaissance? James Robinson reports.
With debate raging over Labour’s proposed constitutional reforms, today’s St David’s Day celebrations have taken on added political significance.
Speaking in the House of Commons recently, John Major condemned Labour’s plans for constitutional change, which include the formation of a Welsh assembly, claiming: “The damage they could do is massive and the benefits they might bring are dubious.”
Tony Blair responded by attacking the Prime Minister’s well-publicised remark that Labour’s plans would put “1,000 years” of British history in peril. “You stand before us effectively as the candidate of no change,” said the Labour leader.
Blair plans a referendum on proposals for a Welsh Assembly this autumn should Labour come into power. But it will not be enough to satisfy the nationalists of Plaid Cymru. Much to their displeasure, the assembly would have no tax-raising or legislative powers.
Anxious wait
The verbal sparring will doubtless continue as the election draws nearer. But agents seem more concerned about the practical implications of Labour’s plans rather than their political ramifications. The party’s planned reform of the Principality’s numerous quangos are viewed with particular trepidation.
Labour’s proposals include a possible fusing of the activities of the Welsh quangos and non-departmental public bodies, whose budgets are controlled by the Welsh Office.
This could involve restructuring or merging the Welsh Development Agency (WDA), the Development Board for Rural Wales and the Land Authority for Wales.
Last month, Ron Davies, MP for Caerphilly and Shadow Secretary of State for Wales, outlined his plans: “Economic development in Wales is hampered by a plethora of public and private agencies with no clear division of functions and no clear sense of purpose. It is wasteful and bureaucratic to have the WDA, the Development Board for Rural Wales, the Welsh Office Industry Department, the Land Authority for Wales and Local Enterprise Agencies.
“I believe these bodies should be streamlined to achieve substantial cost savings, as well as creating a strategic framework and clear lines of communication. Such clear lines of political responsibility and accountability, ultimately to elected representatives in a Welsh Assembly, will provide this stability.”
Years of adverse publicity surrounding the WDA have made it an obvious target for zealous reformers. Outrage peaked in 1993, when the House of Commons Public Accounts Committee criticised the agency for lavishing public money on Concorde trips and handing out lucrative pay-offs to staff.
Many government quangos have been the target of such criticism, and Labour’s opposition to these unelected bodies is long-standing. But despite its colourful past, the WDA continues to win widespread praise from agents, especially for the part it has played in wooing foreign investors to the Principality.
In the past decade, Wales has attracted 15% of UK inward investment, even though the Principality accounts for just 5% of the UK’s population. Since April 1995, 191 companies have moved into Wales, investing between them more than £2.8bn and creating more than 16,000 jobs.
Changing role
Mark Hirons, partner at Hirons Morgan & Yapp, points out that the WDA’s role has changed significantly since its inception: “It has changed from being a provider of accommodation to bringing in inward investment.”
King Sturge partner Robert Croydon agrees: “Its role has shifted incredibly. It has taken on an enabling role: reclaiming and regenerating land. The WDA has been heavily criticised from inside and outside the area, for the most part unfairly. The success it has achieved during a recession is really quite significant.”
Croydon refutes Labour’s criticism of the WDA, claiming that its remarks are based on political prejudice rather than sound reasoning: “Labour’s criticism of the WDA is political criticism – pure and simple. It has seen the agency as a tool of the Secretary of State.”
Labour claims that, as an unelected body, the WDA is not accountable to the Welsh people. Yet, as Croydon points out: “The agency rarely does anything these days without the consensus of the democratically elected local authorities. The main problem is that Labour doesn’t like the senior people.”
Companies with an interest in Wales are also quick to defend the WDA.
“The WDA has done Wales an immense service,” said TBI chief executive Keith Brooks last October. “It has an important role to play in South Wales’ continuing growth. Labour should make sure that its plans to merge quangos and create a Welsh Assembly do not immobilise the good work of the Welsh Development Agency.
“A more efficient WDA would bring rewards to business in Wales. But a slimmed down, less powerful and constrained agency could have a negative impact on the Welsh economy.”
The agency is, in fact, set to change whether or not Labour wins the General Election. The government is keen to streamline the WDA’s role and, more specifically, there is increasing clamour for the agency to hand its urban regeneration role over to the local authorities.
Urban expertise
As Chesterton director Mike Reece explains, this too is causing concern. “The WDA is very good at urban regeneration. If it is decided that that role should be relinquished, I fear that regeneration will slow up.”
The consensus is that local authorities do not possess the expertise to carry out the regeneration role that the WDA has elevated to a fine art. This problem could become acute because an ever-increasing proportion of the large sites which will cater for the inward investors of the future are brownfield.
Changes in the grant regime are pushing development further to the west of Wales and to the north of Cardiff and Newport. New Assisted Area boundaries were drawn up in 1993 and most full development areas are now centred on the Heads of the Valleys area – where the vast majority of development sites are brownfield and in need of regeneration.
“In the next review, scheduled for 1998-99,” predicts Gerald Eve’s Chris Sutton, “the trend will continue and there will be a thin strip of development areas along the Heads of the Valleys.”
These changes are making it more difficult to attract inward investment. As Hirons points out: “At the moment, there are probably fewer than 10 sites with full development area status and getting on to a shortlist without full assisted area status is not easy.”
In intermediate areas, grants are typically half the size of those awarded in full development areas, although the amount of the handout is dependent on the level of capital expenditure and the number of jobs being created.
Not surprisingly, there is fierce opposition to any reduction in grant aid. “There is concern that the grant boundaries will shift again before economic stability is established – people might ‘up sticks’ and go elsewhere in five years’ time,” says Croydon. “Pulling out grants now when we haven’t yet seen the end of the economic upheavals that we have experienced means jobs will be lost. Indigenous industry is still fragile.”
That said, some are not overly concerned by the changes. As Hirons explains: “The majority of investment is due to the expansion of existing companies or companies coming in to supply existing companies – they have got to be in Wales, grants or no grants.”
In addition, as Anthony Jenkins of King Sturge points out: “There is sometimes very little difference between grants in full development areas and those in intermediate areas. Lots of development is still happening in intermediate areas”
Development can and is taking place in the more peripheral locations which the WDA is now seeking to promote. Korean forklift truck specialist Halla arrived in Merthyr Tydfill at the end of last year, creating several hundred jobs. Also last year, plastics transmission equipment manufacturer Fenner relocated from Hull to Maerdy, Rhondda.
“These locations would have been considered unoccupyable a few years ago, but infrastructure improvements have made all the difference,” says King Sturge partner Huw Thomas.
Land reclamation
Further sites have been earmarked. A 162ha (400 acre) former British Steel works at Velindre, near Cardiff, adjacent to the M4, is being regenerated. The WDA is also reclaiming land at the 26.3ha (65 acre) former Oak Dale Colliery site in Gwent.
But the fact that such sites require the WDA’s attention in order to be bought forward serves only to underline how vital the agency is considered to be.
Its future remains uncertain, but its fate – and that of Wales – will be much clearer on the morning after the General Election.
