The economy and Wales

During the week it was interesting to interview Lord Howe to talk about his time as Chancellor of the Exchequer in Margaret Thatchers government. The mantra of that era was much the same as the mantra of today’s government ‘they had inherited a mess from the previous Labour government and had to take firm action to deal with it.’ This small extract of the interview was used in a package by my colleague Lynn Courney in Sharp End.

What struck me however in my informal discussion with Lord Howe was the philosophy of the time. There was the belief that Keynesian economics was out and the market should be allowed to do its own thing. Hence the growth of the financial sector and the over dependency on that sector of the  UK economy. With hindsight we now see what a mistake that was.

For us in Wales that period saw big structural changes to our economy. The new governments policy saw the acceleration of the decline that had already started under the Callaghan administration of our heavy industries.

There was a run down of the traditional heavy industry such as coal and steel. The jobs tied to the industries were never replaced with other manufacturing jobs, The  growth was in jobs tied to the service industry. As Max Boyce so wryly observed the ‘pit house was a supermarket now.’

But another aspect of the economy almost directly followed the unique situation the Conservatives found themselves in Wales. They had to govern a country that had a Labour majority. 
How, you might ask did they set about it? They developed the quango state.

These public bodies were established and on the Boards they put on Conservative supporters. Bodies such as the WDA, Development Board for Rural Wales, Tai Cymru etc. all had their placemen and women.

These bodies in time developed, grew and became major public sector employers.

With the advent of devolution many of the quangos were absorbed within the Welsh Assembly Government itself. They were no longer arms length organisations but part of the civil service.
A  convincing argument can, therefore, be put forward that Wales’s high dependency on the public sector for jobs can be directly attributed to the previous Conservative government’s policy. Whilst that government failed to a degree to build up manufacturing and private sector they certainly succeeded in crating the large public sector.  And the sector has continued to grow like Topsy. Now just under a quarter of the people of Wales in work are employed in it. 

There is a certain irony that  almost the first act of the Conservative - Liberal Democrat coalition has been to pronounce its determination to cut back on public expenditure. 
George Osborne’s budget made it clear that he expected to see all government departments’ budgets cut by twenty five percent.  Meaning a big cut back in jobs.

In Wales this will have a disproportionate effect because of our high dependency on such jobs. 

Wales will take a hit with again and despite the Assembly’s best endeavors can do little about it.