EU Funds converging into the public sector

We at Cambria Politico predicted last year that the ‘credit crunch’ would result in EU Convergence Funds being  ’subsumed’  or diverted into  public sector coffers and never see the light of day in the real Welsh economy where it is urgently needed and where it was intended to be delivered. The following article by Wyn Pryce illustrates how this was done to Objective One funding and is being done now to Convergence Funds.

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For many years the West Wales Business Initiative (WWBI) has expressed concerns about the economic policies of the Welsh Assembly, the size of the Public Sector in Wales and the consequent imbalance of the Welsh economy.

We have argued that the Assembly Government has channeled UK and EC resource into a rapidly growing Public Sector in Wales to the detriment of the private sector. Throughout the “so-called” good years of 1999-2007, when UK GDP rose significantly, the private business sector in Wales has declined. The opportunity to rebalance the Welsh economy was missed.

We have warned several times in submissions to Ministers and Civil Servants of the outcome of these mis-directed strategies. As scarce resources have been poured into the public sector so there was less for the private sector.

In the words of Welsh economist Ted Nevin in his Textbook of Economic Analysis, “Scarcity is the foundation of Economics”. Resources are scarce and have to be competed for. There is also the Opportunity Cost: the alternative use of resource. If you do one thing, you cannot do another. Whatever that may be. You cannot do, or have everything. Therefore, there is a choice. The Assembly has chosen to divert resource into the public sector. The majority of this into wages. 71% of the total Welsh economy is now dependent on the public sector.

Some commentators have stated that the public sector is now greater in Wales than in Russia in the 70’s or China in the 80’s. Therefore something has had to give. At the moment Wales is the “basket case” of the UK.In 2006 we submitted a response to the Wales- A Vibrant Economy strategic document. We flagged up a number of concerns that if then addressed would have put the Wales economy in a far stronger position by 2008.

To compound this the Assembly has also adopted policies that contributed to the further decline of the business sector, such as ;

1      The majority of procurement policies for construction/infrastructure can only be met by large scale contractors from outside Wales.

2    Cutbacks to the economic development budget and in particular to manufacturing companies.

3     Low levels of investment in transport.

4     Industrial land scarcity, Raised Planning conditions and costs.

5    Insufficient housing build.

6    Diversion of EC funds into WAG budgets.

The Assembly Government does not understand that Welsh companies do not look for handouts. Modern productive equipment is expensive. Loan valuation security in Wales is less than in other parts of the UK. Banks perceive Wales as being high risk, especially from a property viewpoint.In January 08 a delegation from the WWBI met with the Deputy First Minister (DFM), Mr Ieuan Wyn Jones. We had tried for months to get a meeting with the DFM but had been told that he was fully committed. Eventually after we met with Rhodri Glyn Thomas AM, the DFM agreed to meet at the offices of Pembrokeshire County Council  at 0900 hrs on January 31 2008.

Our delegation, consisting of Richard Packman, MD of PBI, Bob Jones, MD of Dawnus Construction Ltd, a Director of United Aerospace Ltd and myself arrived at 0850. The Regional Director of WAG, Mrs E Marks, arrived at 0910. The DFM arrived at 0930 without a word of apology.

At 0945 Mrs Marks said that they had to leave for another meeting. The meeting was wound up at 0950, following our expression of disappointment at the time allowed and the failure to discuss substantive issues. We had hardly got started.

Following this, I wrote a personal letter to Mr Jones and the letter was handed to him when he arrived at a private Centennial service at his fathers old Chapel  on Sunday 3 February 2008. This letter he has denied receiving. The above series of events led to the WWBI launching our Petition in the Summer/Autumn of 2008.

The Petition read :  Through this Petition, we the undersigned call upon the National Assembly Enterprise and Learning Committee to launch an investigation into the economic use of the European funding received by Wales since 2000 and into the proposed mechanisms for delivery of the Convergence funds in 2007-2014.

In particular we are concerned with conflicting strategies, such as the ability of both WAG and Local Authorities to act as both Judge and Jury, whilst at the same time competing with the private sector for these scarce resources.

This Petition was meant to instigate an independent enquiry into the money spent under Objective 1 and what it actually achieved. Also, into the delivery mechanisms set up by WAG for the 2007-2014 Convergence Funds.

When the Assembly launched its OB1 programme in 1999 we had expressed our concerns to Rhodri Morgan. Indeed, the way that programme was planned led us to contact Graham Meadows, Head of Directorate General XV1 – Regional Policy and cohesion at European Commission office in Brussels. In his reply he made clear the need to use the funds for ” economic wellbeing “.

We do not believe that the programme implemented set out to achieve these aims. Rather it was a method by which EC funds could be used to realise the political aims of the Assembly.

Statistical information highlights the total failure of the Objective 1 Programme in Wales with GVA per head now down to 64% of the UK average compared to 78% in 1998. At the same time the private sector did manage to get a few projects through the net, but against a culture of bureaucracy, mis-information and delaying tactics by civil servants.In January 2007 another round of EC funding commenced known as Convergence Funds. To date little has happened let alone been achieved. As well as delays there has been the problem of private sector access. We believe the whole process has been designed to bar the private sector from direct access.

An example ; There are 2 significant projects proposed for the Amman Valley, both private sector led.  One involves the regeneration of a redundant coal mine into a mixed development of affordable housing and 30,000 sq ft of SME industrial units. Meetings were held with WAG officials and in fact WAG made a contribution  engineering studies. A WAG officer undertook to look into ERDF funding.

We were told that an application had to go via Carmarthenshire County Council (CCC) Regeneration Department. We tried several times to meet with them but were then told that any application had to be within a strategic framework area, and that the only area in Carmarthenshire so designated was Cross Hands. We wrote to CCC, WAG and local Councillors to ask that the Amman Valley be included. We were refused.

The other project involves the building of 5 industrial units (50,000 sq ft) at Capel Hendre near junction 49 of the M4. Again we asked that this site – within 2 miles of Cross Hands be included. Again we were told no.

We subsequently learned that CCC was in the process of negotiating to buy 50 acres of land at Cross Hands to develop an Industrial Estate using Convergence Funds. These units, when built, were to be rented out to business at market rent, thereby generating future income for the County Council.

We submitted in our request for an independent enquiry, that the CF programme has been designed to exclude the private sector from applying, in order to channel the EC monies into WAG and County Council budgets, thereby supplementing their income.

Note that nearly every scheme/project put forward to date for CF involves the growth in public sector jobs.  Carmarthenshire County Council in particular are notorious in their pursuit of screwing more and more money out of the private sector to fuel the growth in their salaries and empire building.  Their pension contributions alone have doubled in the past 4 years to an annual £20m. Yet their ability to waste money often in competition to the private sector is unbounded. They own 3 Golf courses. One of which has run up debts of over £2m and continues to lose £200k p.a.

They have also charged the building sector over £2m in the past 3 years for commuted sums. What they say are contributions to the local community. Yet only £80k of this money has been spent. Where is the other money. In Iceland ?

Our Petition was referred to the E&L Committee in November and we were forwarded a copy of a letter dated 9 December 2008. We received an e-mail dated 2 January 2009 saying it was to be considered by the E&L committee as part of a wider enquiry into the welsh economy.

In mid February we received another e-mail confirming the above. Then we learned that an “Enquiry into the current international economic downturn” had been started by the E&L committee. I immediately contacted the secretariat to find out what was going on ?

Eventually we were invited to present out evidence to the Committee and this took place on 19 March at the Bay. WE put forward our Economic Plan ( see below – and argued for speed and urgency. Go to link  http://www.senedd.tv/archiveplayer.jsf?b=flash_200k&v=en_800000_19_03_2009&t=28

We received a fair hearing from the committee members, but only time will tell whether the Assembly Government has the determination, skill and knowledge to drive this forward.

Wyn Pryce