Putting the Foundational Economy into practice to tackle the climate emergency

 Speech to WISERD Foundational Economy Conference, September 9th 2021 

I’m in the north for a series of visits to learn about my new portfolio which includes housing, energy, transport, regeneration and forestry, amongst very many others. It was initially described as a Climate Change super-Ministry. But it could equally be called a foundry for the foundational economy. 

Tackling the fallout from global warning, a nature AND climate emergency, and stopping it getting any worse, is our priority. But as we do it we need to fashion solutions that also enhance our communities – advancing social justice and growing local economies as we go. 

That’s the lense I look at this job through. 

The scale of the climate challenge is not fully understood by many. In the next 10 years we have to achieve cuts in emissions greater than all the reductions we have managed in the whole of the last 30 years. And the cuts get more challenging still in the decades beyond this one. 

The first thing I did when I sat down with my colleague Julie James, the Minister for Climate Change, was to scan where our biggest challenges are in order to apply some early energy to get things shifting. Whilst it is often hard to see the woods for the trees, Wales’ lagging stats on forestry creation pointed to a real problem that requires attention. 

The UK Climate Change Committee tells us that if we have any hope of meeting our NetZero targets we need to plant 86 million trees in Wales within the next 9 years. That’s 5,000 hectres of woodland a year, every year – and that target goes up significantly for the next decade. Last year, just 290 hectares of woodland was planted in Wales and we’ve not managed to plan more than 2,000 hectares a year in my whole lifetime. So going from 290 to 5,000, and sustaining it, is a challenge we need to focus on. 

I led an initial deep-dive exercise with a small group who were empowered to be challenging, to identify the barriers to tree-planting and to identify ways of overcoming them. I set ourselves a non-negotiable and tough short-term deadline, and just before the Senedd broke for the summer I set out our conclusions and issued a call to arms to get this sorted, and to do so at pace. 

The point of this example is that here’s an imperative in tackling climate change. Not a nice to do, but a must do. But it’s also an opportunity. 

We need to change perceptions of Welsh timber being a staple for low value products like pallets and fencing, to one which is used for precision engineering, high quality, low-carbon house building: A stimulus for a new programme of high-tech green skills; A source of value added home insulation products. Demand for all these is rising and will get higher – there’s a projected 120% increase in global demand for timber for house building. 

But just 4% of Welsh wood is currently used to build Welsh homes. So what an opportunity we have to disrupt this and create a green dividend for Wales. 

The trees we plant are essential not just for addressing the climate and nature emergencies, but they provide an economic opening too. Our coal economy is gone, but a new wood economy is available to us if we mobilise an alliance for change. 

That mantra, ‘an alliance for change’ - Karel Williams’ mantra, has made an impression on me. And it's not surprising as Karel has been in the thick of the action with me over the last 3 years, helping guide our Foundational Economy Challenge Fund, through the pandemic working closely with us on how we responded to the PPE challenges in a way that helped local firms, and since the election bringing his Gramscian blend of intellectual pessimism and ‘optimism of the will’ together, working with me in our tree Deep Dive and on bringing life back into town centres. I really am grateful to him - and to Kevin Morgan, who has demonstrated similar commitment and application - for recognising the need to put academic research alongside practical implementation in the bowels of a devolved government – working with civil servants and Ministers to tackle familiar problems in fresher ways. 

As a result of this fusion when I announced the results of our Trees Deep Dive I also announced the beginning of work on a Timber Industrial Strategy for Wales, and a piece of work on how to draw in finance to fund tree planting in way that keeps control and wealth within our communities. 

This is Foundational Thinking in action. Building the wealth of communities, harnessing the everyday economy within our environmental limits. And doing it by building a coalition of the willing, an alliance for change if you will. 

For my next assignment I’m going to be conducting a similar deep dive exercise this autumn on the barriers to renewal energy. Same principle – bring together some awkward buggers, with people who are involved in daily delivery to find a set of levers that help us tackle climate change AND help us nourish the foundations of our local economies. 

As I mentioned a moment ago this portfolio has, alongside foresty and energy, housing, transport, planning, the environment and regeneration. In terms of the everyday economy, there’s lots of potential here. 

In transport we have a very ambitious target of a zero-emission bus fleet by 2028. It will require hundreds of millions of investment. It’s a climate-must. It’s also an economic opportunity. But without a deliberate and activist strategy new electric buses will be bought by our incredibly fragmented bus industry from China and elsewhere – indeed it is already happening. 

But if we can now build trains in Wales again, why can’t be build electric buses? Innovative and determined Welsh Government civil servants and Ministers saw the opportunity of a new Wales rail franchise in 2018 to harness the power of public spending to create quality Welsh jobs. With targeted inward investment we now have Spanish owned CAF assembling and maintaining 70 trains in Newport for Welsh passengers. No more hand-me down trains on our railways, made-in-Wales wagons are currently being built and tested here. 

Lets try and do similar - and better – for the new buses we’re going to need to meet our climate targets. Let us aggregate demand and create a domestic supply-chain, making sure we capture the value from this spend in Wales. Again here is foundational theory and practice coming together again. 

We need to aggregate demand according to the book, so let's roll up our sleeves and do it. Karel Williams, again, is currently working with civil servants and the brilliant James Davies, head of Industry Wales – a partnership forged in our Foundational Economy Ministerial Advisory Board, and honed in the work on PPE procurement - to figure out a plan. Once we have the foundations we’ll need to marshal another alliance for change to make it happen. It’s do-able, but only if we set out to do it. 

In housing I’ve asked Debbie Green of Coastal Housing, another pioneer in seeing the imperative of applying foundational thinking to the work of social landlords, to bring together a small group to work with us on taking forward the foundational economy agenda in housing. 

This is a key sector for mainstreaming the principle of social value into practice. And there is already a lot of good work going on we can build on. And it's important to say at this point that this work has been building in Wales for years, not led by the Government but by civil society. And parts of the social housing sector have been at the vanguard. 

And this is the work of teams. I am acutely that Karel, and Kevin and Debbie are supported by teams and collaborators who come together to ensure that the whole is greater than the parts. Practitioners and researchers feeding in ideas and challenge - doing what Raymond Williams challenged us to do. “To be truly radical is to make hope possible, rather than despair convincing” he said. And that is what the foundational economy movement in civil society has been doing. I want Government to put rocket-boosters under the important work that has taken place to mainstream and scale it. 

Over two years ago we set up our £4.5 Million Foundational Economy Challenge Fund to experiment and trial different approaches. This included supporting housing associations in Blaenau Gwent to examine the local supply chain to help local firms benefit from spending on optimised retrofit programmes. 

The fund also supported Keith Edwards to take forward the ground-breaking work he and others begun more than 10 years ago on a ‘Can-Do’ approach to procurement in social housing. 

That same philosophy is being advanced by the Centre for Local Economic Strategies in their work for us with 5 clusters of Public Service Boards. The Welsh public sector spends some £6.7bn each year on procurement, and we are determined to make strides to stop that money leaking from local economies. 

The emerging focus of the work with local anchor institutions is on localising procurement spend, and shortening supply chains. The Public Service Boards are showing an enthusiasm to focus on increasing local sourcing of food, the development of green skills to support our optimised retrofit programme in social housing, and a specific focus on decarbonisation of supply chains. 

Again this is work that helps reduce carbon emissions AND brings local economic benefit. This afternoon I’ve been to Bethesda to see the determined work being done by Partneriaeth Ogwen are doing on environmental projects and growing social enterprises in ex-slate mining communities. Helped by the Foundational Economy Challenge Fund and learning from similar projects and inspiring people in neighbouring communities. Genuinely organic local leadership, building a movement and an alliance for change. 

I was rightly told off by Kevin Morgan for saying that we were making up the foundational economy approach as we went. ‘The Basques’, he said. ‘Learn from the Basques! They say we build the road as we travel” 

Lesson learned. Painfully. 

We are building the road as we travel, one mile at a time. The purpose of our Foundational Economy Challenge Fund was to trial - to experiment. Forty seven projects were completed at the end of March and have now been evaluated. My colleague Vaughan Gething, the Minister for the Economy, has just announced a £2.5m programme to spread and scale the good practice that emerged. 

The fund is prioritising work in social care, advancing schemes to help recruitment in the sector, furthering a programme of work experience for adults with learning difficulties, and scaling the ‘Micro Care’ model in Flintshire, to improve the quality of care and the pay of carers. 

 In Carmarthenshire we’re giving extra support to the local food sector with funding for producers to cook and freeze produce for sale. In Gwent we’re backing a further programme of Community Wealth Building with local anchor institutions. Across the central valleys we’re funding a programme to grow the digital capability of 1,000 high street businesses to set up delivery and click/collect services; And in the northern valleys, complementing our work on tree planting and timber harvesting, we’re supporting a promising project to help deprived communities manage the landscape that surrounds their villages - to shape, and benefit from, the environment across their skyline. 

We’re also extending support for a Community of Practice to spread learning and to help build alliances for change. The experience of working together on securing PPE supplies in the pandemic was instructive. We all had a reliance on low-cost goods from a long international supply chain. And when the crisis hit, it fell apart. 

Thankfully we were very placed to respond with resilience, our professional and planned procurement systems through NHS Wales Shared Services came into their own. Whereas the NHS in England was fragmented, the more co-operative systems in Wales across health and social care pulled together. Not only did we not run out of PPE, we were able to offer mutual aid to the NHS in England, Scotland and Northern Ireland. And as recent audit reports have shown, we did it at a significantly lower cost, and without any whiff of scandal of contracts given to political chums. 

A key learning from the experience though was the need for resilient local procurement. We saw from the appetite of Welsh firms to re-tool in the crisis that there is a willing band of capable SMEs who want to supply the public sector, and who are more than capable of innovation. 

And through our joint working with industry, the NHS and social care, we have been looking at opportunities for re-shoring manufacturing, not just of low cost goods from low cost countries, but higher value goods which are currently sourced from high-labour cost countries such as USA and Germany. And there are plenty of opportunities where we are spending significant sums, from medical devices to artificial hips, that could be made in Wales. There is significant opportunity, but it will require planned and purposeful intervention from an alliance for change for the potential to be realised. 

As part of our recent announcement of next steps I’m delighted that we’re funding a £500,000 ‘Foundational Economy Health Plan’. This is to look at how the NHS can deploy its power as a major anchor institution to stimulate local supply chains. This will not only address population health by improving local prosperity, but it will cut carbon with shorter supply chains. The intention is for our NHS Wales Shared Services Partnership to spend an extra £8.4m with local businesses, getting the public pound working for Wales. 

On top of this is our manifesto commitment of a Backing Local Firms Fund which will focus on food; green skills for energy efficient measures in social housing; and social care. 

 The public sector has a leadership role to play in stimulating change. But let's be clear that the prize is wider. While the public sector spends approximately £90m each year on food - and we want to do more to ensure that benefits local producers. This is the equivalent of the annual turnover of just one major supermarket to the west of Cardiff. 

The annual overall spend with supermarkets and the hospitality sector across Wales amounts to £3bn each year. To reduce food miles, and the carbon impacts of food imported from across the world, our challenge is to deliver a climate dividend, and to bolster local economies. And our Backing Local Firms Fund will take steps to help this. 

Of course none of this is easy. And to my great frustration none of this can be delivered quickly either. And that is the challenge we all face. The UN has said that the climate crisis is a Code Red for humanity. It demands significant changes to the way we go about our business. And it demands them quickly if we are to have any hope of stopping climate change becoming a runaway phenomenon. 

The changes are not optional. The option we have is do we let dramatic change happen to us, or do we take heed of the warnings and manage the change. 

The Foundational Economy movement gives us a framework to help us manage the change in ways that also benefits the everyday essential services we all rely on. 

As our experience in Wales over the last three years of trying to put these Foundational Economy principles into practice shows, it can be done: through research, analysis and action by a co-ordinated alliance for change. 

Growing up I used to love to listen to Max Boyce’s album The Incredible Plan. And you can do no better for a political philosophy, because as he said, ‘where’s there’s a will, there’s a way’.

Lee Waters MS is Deputy Minister for Climate Change in the Welsh Government