We need to rethink our approach to the economy
Speech in the National Assembly on October 17th 2018
Preparations are accelerating for a No Deal Brexit. Stockpiling medicine and food is getting the attention of the media, but the reality for the Welsh economy could be far more austere.
Our economic policy has focused on providing support to so-called anchor companies.
Large multinationals with bases in Wales that we have favoured with grants and other financial inducements.
Once barriers start popping up that create costly delays,the judgements made in the global head offices of where to put future investment will quickly disfavour Wales.
As this week’s comments by Ford in Europe signalled, we may soon find that anchors are pulled up.
It seems to me that as part of that we must confront the fact that we cannot continue to give large grants to huge corporations to entice them to stay in our communities when the going gets tough.
The going is already tough, and we are pouring much needed resources into a sieve - watching our investments drained away to tax havens for little lasting return on the ground.
Wales has had great success in pursuing foreign capital, we have record low levels of unemployment. We have record levels of foreign direct investment. Yet, many people are still profoundly disconnected, working in fragile jobs for low wages.
The economy isn’t just about GVA. It’s also about people’s lived experiences and a foundational economy approach allows us to rethink.
Almost half of people in Wales are employed in what we might think of as the foundational economy.
The mundane, everyday part of our economy - the parts delivering basic goods and services in their community: care, food, energy and housing to name just some.
The parts that can’t easily shift when the international economy dips.
This grounded sector has been neglected by policy right across the UK as we’ve focused on the next shiny project, and the next ribbon cutting opportunity. We have to change that.
The purpose of today’s motion, tabled by myself, Vikki Howells, Jenny Rathbone, Hefin David, Adam Price and David Melding is to look again at the central importance of this overlooked sector of the our economy.
From the cross-party buy in to this motion, it is clear there’s an appetite for a new approach.
With my colleague Jenny Rathbone, I recently visited Preston to learn more about their approach to what they call “community wealth building”.
Since the financial crisis, and the failure of a grand new shopping centre that they were relying on to boost Preston, and in the face of continuing austerity, the council have been forced to rethink their approach to economic development.
Their definition of an anchor institution is profoundly different to ours. They use the term to describe institutions that are locally rooted and securely based - the local University, FE college, sixth form college, the County Council, the local housing Association and the police force
Together these anchors spent £750 million a year on purchasing goods and services, but just 5% of it in Preston, and less than 40% in the wider Lancashire area. So some £458 million of public money was leaking out of the Lancashire economy.
As a result of their new approach to harnessing their foundational economy these anchor institutions now use procurement to secure the best social value locally.
By auditing their 300 most valuable contracts each have been able to redirect spend to local firms - without impacting on cost or quality.
Now 17% of the spending by the local anchor institutions is retained within Preston (up from 5%), and 79% in Lancashire (up from 39%).
This has had demonstrable impact in Preston. An area that was once amongst the most deprived in England is now rising out of the depths.
Where wages in most of the UK have been static for over a decade, in Preston they are increasing.
And a big contribution to that has come from the local anchor institutions - Five of the six are now accredited living wage employers.
We need to be doing the same. Identifying who are the major players in our local economies and asking them to do their bit.
We must be clear to all these institutions across the public and private sector, that building up their local economies will provide them with secure foundation and a lasting future.
For the housing associations, their rents paid; for the health service, lower demand on service caused by poverty; for the police, reducing the causes of crime.
In Wales the public sector spends £5.5bn every year buying in goods and services. We could use that as a direct means of boosting our foundational economy.
This will require a new approach. An approach which is in keeping with the Well-being of Future Generations Act, which as point 3 of our motion points out, offers significant opportunity to allow us to go further than even Preston.
But to do it we need to make changes…
Our public sector will need to be empowered to procure in a way that delivers far more than the lowest price.
Local businesses will need increased support to bid and deliver on public sector contracts; And we’ll need to invest in higher skilled staff in local government with specialist purchasing skills, to drive a change in our approach.
The barriers to do these things are not as high as we’ve convinced ourselves. The Experience in Preston shows that European procurement rules are not the problem that we tell ourselves they are, in fact the leader of the council, Matthew Brown, and his senior officials told me the reforms have been much easier to carry out than they had anticipated.
So Point 2 of our motion calls on the Welsh Government to meet with Preston City Council to discuss lessons that can be learnt.
They stressed to us that their approach is not one that should be applied uniformly: different places have different problems, and potential solutions.
For example, in Islington, where affordable workspace is in short supply the council have invested in bringing buildings back into community ownership to let micro and small sized enterprises rent at below market rates.
In Greater Manchester the Pension Fund has provided £50 million of lending, and equity capital, to SMEs.
In Scotland, Highlands and Islands Enterprise have been a leader in the development of community energy assets. Providing investment in an area overlooked by traditional financing.
In Wales, we have the kernel of a comprehensive approach.
There are signs of a new attitude to purchasing. A review of the National Procurement Service presents the opportunity to move away from a focus on high volume contracts for the lowest price.
Our “Economic Action Plan” commits us to supporting “foundational sectors” - we need to be much clearer about what this means, and the extent to which it means jettisoning the old ways of working. And I was encouraged by what the Cabinet Secretary had to say about his plans for a cross-cutting foundational approach during his most recent appearance at the Economy Committee.
But there is more to do. Point 4 of our motion calls on the Welsh Government to trial a range of different models of adult social care that recognises the importance of a localised foundational approach.
Too often people working in the sector are on low paid, zero hours contracts with no prospects of progression. Large firms are moving into the sector, and extracting significant profits for little return to care users and the public who fund them.
Whilst we have given a million pound to explore foundational approaches in social care, we still give yet larger sums of money to some of the worlds biggest companies to entice them to move or stay here. We need to tip the scales. In social care, and across our economy.
What I learnt in Preston above all else, is that their success is due to focussed leadership and vision. It has been embedded in the working culture of their anchors through the sustained effort of committed figureheads.
A foundational approach to the economy can be our vision, and the Welsh Government can take the lead.
The dawning reality of what Brexit will mean for our economy means we need to do it urgently.
Preparations are accelerating for a No Deal Brexit. Stockpiling medicine and food is getting the attention of the media, but the reality for the Welsh economy could be far more austere.
Our economic policy has focused on providing support to so-called anchor companies.
Large multinationals with bases in Wales that we have favoured with grants and other financial inducements.
Once barriers start popping up that create costly delays,the judgements made in the global head offices of where to put future investment will quickly disfavour Wales.
As this week’s comments by Ford in Europe signalled, we may soon find that anchors are pulled up.
It seems to me that as part of that we must confront the fact that we cannot continue to give large grants to huge corporations to entice them to stay in our communities when the going gets tough.
The going is already tough, and we are pouring much needed resources into a sieve - watching our investments drained away to tax havens for little lasting return on the ground.
Wales has had great success in pursuing foreign capital, we have record low levels of unemployment. We have record levels of foreign direct investment. Yet, many people are still profoundly disconnected, working in fragile jobs for low wages.
The economy isn’t just about GVA. It’s also about people’s lived experiences and a foundational economy approach allows us to rethink.
Almost half of people in Wales are employed in what we might think of as the foundational economy.
The mundane, everyday part of our economy - the parts delivering basic goods and services in their community: care, food, energy and housing to name just some.
The parts that can’t easily shift when the international economy dips.
This grounded sector has been neglected by policy right across the UK as we’ve focused on the next shiny project, and the next ribbon cutting opportunity. We have to change that.
The purpose of today’s motion, tabled by myself, Vikki Howells, Jenny Rathbone, Hefin David, Adam Price and David Melding is to look again at the central importance of this overlooked sector of the our economy.
From the cross-party buy in to this motion, it is clear there’s an appetite for a new approach.
With my colleague Jenny Rathbone, I recently visited Preston to learn more about their approach to what they call “community wealth building”.
Since the financial crisis, and the failure of a grand new shopping centre that they were relying on to boost Preston, and in the face of continuing austerity, the council have been forced to rethink their approach to economic development.
Their definition of an anchor institution is profoundly different to ours. They use the term to describe institutions that are locally rooted and securely based - the local University, FE college, sixth form college, the County Council, the local housing Association and the police force
Together these anchors spent £750 million a year on purchasing goods and services, but just 5% of it in Preston, and less than 40% in the wider Lancashire area. So some £458 million of public money was leaking out of the Lancashire economy.
As a result of their new approach to harnessing their foundational economy these anchor institutions now use procurement to secure the best social value locally.
By auditing their 300 most valuable contracts each have been able to redirect spend to local firms - without impacting on cost or quality.
Now 17% of the spending by the local anchor institutions is retained within Preston (up from 5%), and 79% in Lancashire (up from 39%).
This has had demonstrable impact in Preston. An area that was once amongst the most deprived in England is now rising out of the depths.
Where wages in most of the UK have been static for over a decade, in Preston they are increasing.
And a big contribution to that has come from the local anchor institutions - Five of the six are now accredited living wage employers.
We need to be doing the same. Identifying who are the major players in our local economies and asking them to do their bit.
We must be clear to all these institutions across the public and private sector, that building up their local economies will provide them with secure foundation and a lasting future.
For the housing associations, their rents paid; for the health service, lower demand on service caused by poverty; for the police, reducing the causes of crime.
In Wales the public sector spends £5.5bn every year buying in goods and services. We could use that as a direct means of boosting our foundational economy.
This will require a new approach. An approach which is in keeping with the Well-being of Future Generations Act, which as point 3 of our motion points out, offers significant opportunity to allow us to go further than even Preston.
But to do it we need to make changes…
Our public sector will need to be empowered to procure in a way that delivers far more than the lowest price.
Local businesses will need increased support to bid and deliver on public sector contracts; And we’ll need to invest in higher skilled staff in local government with specialist purchasing skills, to drive a change in our approach.
The barriers to do these things are not as high as we’ve convinced ourselves. The Experience in Preston shows that European procurement rules are not the problem that we tell ourselves they are, in fact the leader of the council, Matthew Brown, and his senior officials told me the reforms have been much easier to carry out than they had anticipated.
So Point 2 of our motion calls on the Welsh Government to meet with Preston City Council to discuss lessons that can be learnt.
They stressed to us that their approach is not one that should be applied uniformly: different places have different problems, and potential solutions.
For example, in Islington, where affordable workspace is in short supply the council have invested in bringing buildings back into community ownership to let micro and small sized enterprises rent at below market rates.
In Greater Manchester the Pension Fund has provided £50 million of lending, and equity capital, to SMEs.
In Scotland, Highlands and Islands Enterprise have been a leader in the development of community energy assets. Providing investment in an area overlooked by traditional financing.
In Wales, we have the kernel of a comprehensive approach.
There are signs of a new attitude to purchasing. A review of the National Procurement Service presents the opportunity to move away from a focus on high volume contracts for the lowest price.
Our “Economic Action Plan” commits us to supporting “foundational sectors” - we need to be much clearer about what this means, and the extent to which it means jettisoning the old ways of working. And I was encouraged by what the Cabinet Secretary had to say about his plans for a cross-cutting foundational approach during his most recent appearance at the Economy Committee.
But there is more to do. Point 4 of our motion calls on the Welsh Government to trial a range of different models of adult social care that recognises the importance of a localised foundational approach.
Too often people working in the sector are on low paid, zero hours contracts with no prospects of progression. Large firms are moving into the sector, and extracting significant profits for little return to care users and the public who fund them.
Whilst we have given a million pound to explore foundational approaches in social care, we still give yet larger sums of money to some of the worlds biggest companies to entice them to move or stay here. We need to tip the scales. In social care, and across our economy.
What I learnt in Preston above all else, is that their success is due to focussed leadership and vision. It has been embedded in the working culture of their anchors through the sustained effort of committed figureheads.
A foundational approach to the economy can be our vision, and the Welsh Government can take the lead.
The dawning reality of what Brexit will mean for our economy means we need to do it urgently.
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