What does ‘levelling up’ mean in practice for Wales? While debate around the definition continues, the long awaited White Paper has now been published. However, questions remain around how results will be achieved.
At the IWA Economy Summit in November Vaughan Gething MS, the Welsh Minister for Economy, commented that levelling up might be framed as social and economic justice for Wales. Levelling up is an important conversation for Wales. There are specific characteristics of the Welsh economy that require enhanced support if levelling up is to be achieved. While Wales performs well in terms of employment statistics; there is a noteworthy productivity gap with the rest of the UK, with direct implications for wages. Wales has the lowest areas of productivity in the UK, and areas with the lowest competitiveness. As well as there being economic inequality between Wales and the rest of the UK, there is also inequality between and within local authorities in Wales.
My work on the Welsh economy at WCPP points to three problems Wales needs to solve to be able to ‘level up’:
- a fragmented funding system;
- a lack of coordination; and
- short termism in politics.
Firstly, fragmentation of funding is related to the replacement of EU structural funding with the competitive bidding process for the Levelling Up Fund, Community Renewal Fund and to-be-launched Shared Prosperity Fund. Controlled and designed by the UK Government, the requirement that local authorities must bid for funding may bring negative side effects. The funding rounds risk exacerbating existing inequalities in capacity between Wales’ 22 local authorities. Furthermore, continuing the EU legacy of support for pan-Wales projects is more challenging with the new focus on localism, as regional and Wales-wide initiatives such as transport links are critical for supporting economic development.
Secondly, productivity growth of all areas, including the catch up of areas of slower growth, is important for levelling up in Wales. While there are various drivers of productivity, including inward investment and digital connectivity, infrastructure, entrepreneurship, skills, innovation and R&D; it is widely recognised more attention needs to be given to a coordinated policy response. For instance, we know that we need high quality, high skilled jobs in dynamic industries and that this requires coordinated investment in skills, transport, R&D, working places, and developing clusters with supportive supply chains. This demands a package of investment that sits within a vision of economic development, not isolated projects.
Thirdly, short termism is particularly challenging as to level up will require a reversal of long standing structural features, and therefore cannot be achieved in one political term. It necessitates a long term commitment which reflects an agreement between the UK and Welsh Governments; and a drive to follow through with the type of institutional change that is really needed to make a difference. These changes are politically challenging as they are likely to threaten established interests and for Wales may involve revisiting old debates around the restructuring of local authorities.
These challenges are strongly felt in Wales, as they are across the UK. However the removal of the control of the replacement EU funds from the Welsh Government and the introduction of competition for fund disbursements may well hamper efforts to level up.
These challenges are linked to questions around how the Welsh Government is responding to the UK Government’s discussion and political priorities, and how the Welsh Government can leverage space for such an important conversation; a conversation that has been called for with an increasingly louder voice during the Covid-19 pandemic.
While it is ultimately important to address long term challenges to level up, practical steps are being taken in the shorter term to support Welsh authorities in their funding bids. These include providing shared assistance for bid development by building on existing partnerships.
In the medium term it will be important to contextualise levelling up within Welsh Government policy and legislation to make links to challenges that are specific to Wales; and to continue the conversation about the challenges and potential solutions, particularly considering the impact of levelling up on inequalities, between Wales and the rest of the UK and within Wales itself.
WCPP has worked on a range of these issues over the last few years.
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