Archive for June, 2010

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.

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Periods leave their mark

There’s a time for everything, and marking time is important to everyone. A certain day is all important to each one of us. The birth day, wedding day and the date of death.

Not only are some days important but some years – the year that you start school or college, the first job or even retirement.

Each one are significant to us as individuals.

Its also similar for society. Time is noted and some days are celebrated. The years of the two world wars, armistice day, Coronation day and for some even the day of the investiture. And to us Welsh Saint David’s day and for many that remember with shame Tryweryn and with sadness, Aberfan.

Some political years are remembered, for good or ill.

The thirties of the last century with high unemployment, poverty and despair have left a scar on the generation of the time. Despite many of us having been born way after the era, it is still part of our ‘psyche’ as a nation.

As also 1945 – the end of the war and the advent of Clem Attlee as prime minister and a Labour government with a majority which established the welfare state, the national health service and nationalized many key industries.

Despite us changing governments many times since then, little impression was made until the coming of Maggie Thatcher in 1979. Her philosophy that there was no such thing as society, it was the individual that was all important. Almost all industries were privatised, and she made many of us shareholders and capitalists.

Many were buying shares in the once state owned industries. The regulation of the City of London and the financial sector in general was eased.

There was a negative side to all this. Wales lost its heavy industries and great was the cost to many a community in South Wales. Despite this all the period of her premiership was memorable.

Her successors changed very little. It was very unlikely that John Major would change much, but what was disappointing to many Blair and Brown followed the same path. And in some respects it is why we are in the economic mess we find ourselves at the moment. Because, it was the light touch on regulating the banks that caused them to take risks and hence the hole we’re in.

What about 2010? Will this be an year to remember? It is quite likely that it will.

All the signs are there. It is quiet possible that our society will undergo fundamental change. If there is a substantial cut back in public expenditure, most of us will be affected. Some services will disappear totally, others will be transferred either to the private or voluntary sector. The welfare state will shrink almost out of existence and as certain as night follows day the economy will be back in recession again.

Oh yes, its possible that we’ll remember the time with bitterness.

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Listening to the cuckoo sing

There is tradition in parts of Wales that when you hear the cuckoo sing for the first time each year if you shake some coins in either your pocket or purse prosperity will come your way. So my advice to you dear reader is to go out and listen for the bird before George Osborne gets on his feet to deliver his first budget.

But you may say we’ve already had one budget in April why do we need another so soon? A fair question, why indeed?

Its because the strategy of the new government is totally different to that of Mr Brown’s government.

Alistair Darling’s approach was to tackle the problem gradually. His biggest worry was to through the country back into recession by acting in haste on the debt. Indeed the strategy had the backing of the Liberal Democrats especially their economic ‘guru’ Vince Cable.

But he, like his party has changed his tune. That’s what power does!

Now the most important thing, according to the coalition, is to rush in and deal with the problem immediately. And the strategy? Firstly, to start to cut public expenditure. We’ve had a taste of this already from the unfortunate David Law, and we’ll have more in the Autumn when his successor starts on the comprehensive spending review.

But now the other side of the coin, the Budget. As George Osborne has made it clear for some time, an urgent budget is required to increase and improve the public accounts.

He is eager to get more of us to cut back on our personal debt and make us more careful and less profligate. As the Bank of England is independent of the Treasury its not possible to change our behaviour by using interest rates. It is therefore necessary to deal with the problem directly. How?

Take the money straight from our pockets. VAT will certainly go up. Some benefits will be frozen and some will vanish all together. There will be less money redistributed than previously.

What ever the details of the Budget, the public will ask but one question, is it fair? Will the burden of the situation the country finds itself in be shared equally amongst us all? There is a suspicion that the Conservative government will look after their friends, the rich and privileged, and it will be the rest of us that will bear the cost. We’ll see.

What is certain, it is at the start of a term of office that a government will take the most unpopular decisions. So we can expect a rather tough three years.

So we live in hope that the cuckoo sings in the next week or so.

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