House of Commons - Welsh Affairs

Select Committee on Welsh Affairs Fourth Report

III Public sector support for industry

SUPPORTING ORGANISATIONS

25. There is a complex network of publicly-funded organisations designed to assist and encourage industry in Wales, both indigenous and inward. The Welsh Office itself provides a number of grants and support programmes. Until merged with the WDA in October 1998, the Development Board for Rural Wales (DBRW) provided services to businesses in the Mid Wales area. The old WDA served the rest of the country. The new WDA now has a central Business Development Division and four Regional Offices. Local Authorities have a role in promoting local economic development. The Training and Enterprise Councils (TECs) are involved in business support, as well as in training. There are Business Connect consortia. In some areas, there are Enterprise Agencies. There are now to be four Regional Economic Fora. It is not surprising that business people or aspiring business people find this confusing. We do too. It has been remarkably hard to fathom who does what and where in supporting business: the pattern differs greatly from one part of Wales to another. Many of our witnesses have suggested that the number of organisations involved should be reduced. There is no clear consensus, however, about which should go.

The Welsh Office

26. Some business support services, primarily grant schemes, are provided by the Welsh Office itself.[35] Through its Industrial Development Division, within the Industry and Training Department, it administers Regional Selective Assistance and a number of grants to encourage innovation. It offers advice to businesses on energy and waste management, and runs a number of minor schemes often involving grant aid. It also provides an Overseas Trade Service.

27. The Welsh Office, through its Economic Development Group, also administers European Structural Fund moneys on behalf of the European Union. It struck us as curious that European Structural Funds should be administered by a separate department of the Welsh Office from Regional Selective Assistance. The Minister assured us that the division of responsibilities works well in practice and that the two groups work closely together.[36] From the outside, however, it appears that there is little attempt to co-ordinate the distribution of European Regional Development Fund moneys with the administration of RSA and other Welsh Office grants. We return to this below. Doubtless the National Assembly will wish to consider the internal organisation of the Welsh Office in due course.

28. Many of our witnesses suggested that the Welsh Office's business support functions should be transferred to the new WDA. The Welsh Local Government Association (WLGA), for example, argued that all the Welsh Office Industry Department's programmes should be transferred to the WDA, allowing the Welsh Office to concentrate on strategic, policy issues and the WDA to offer a comprehensive package of services.[37] The WDA itself, perhaps not surprisingly, is keen to acquire the Welsh Office's business service programmes, including responsibility for RSA and export promotion.[38] The Minister was unenthusiastic about this suggestion, emphasising the importance of financial probity and of maintaining supervision of grant funding.[39] The implication seemed to be that he thought the WDA was not safe with the money. Clearly there must be very tight controls on the spending of public money, but we believe that could be achieved within the WDA. If the Welsh Office really thinks otherwise, it should be doing something very urgently to overhaul the WDA's management and financial systems. However, it may be that there is a case for the Welsh Office retaining responsibility for administering Regional Selective Assistance, because of its size and strategic significance, and in order to allow better co-ordination with European Structural Funds and Common Agricultural Policy (CAP) moneys. (We note that in Scotland RSA is administered by the Scottish Office, not by Scottish Enterprise.) However, the arguments for transferring minor grants and business services to the WDA seem to us to be strong. We hold to the view, expressed in our First Report, that this should be one of the first matters which the National Assembly addresses.[40] We recommend that the business services programmes now run by the Welsh Office Industry and Training Department be transferred to the WDA, but that responsibility for RSA should remain with the Welsh Office. The role of the Welsh Office should primarily be policy direction and strategic oversight, with service provision delegated to the WDA.

29. The Welsh Office has direct responsibility for export promotion through its Overseas Trade Service.[41] Many of those we met were critical of the manner in which export promotion is managed, suggesting that there was too much emphasis on trade missions[42]. Many witnesses argued that responsibility for export promotion should be transferred from the Welsh Office to the new WDA. The WDA itself is keen to take on this role.[43] CBI Wales, for example, argued that bringing inward and trade promotion under one roof would lead to better co-ordination and use of resources.[44] How much synergy there would be between export promotion and inward investment is hard to say (each is said to be highly specialist) but there would surely be scope to reduce overheads abroad. Joint inward / trade promotion offices abroad could provide invaluable assistance to small businesses, in particular, in networking overseas. The Federation of Small Businesses Wales suggested that the WDA should establish an Export Promotion Board, along the lines of the Hong Kong Development Centre.[45]An alternative possibility would be to follow the Scottish model. There, export promotion is the responsibility of Scottish Trade International, which is a joint venture of the Scottish Office and Scottish Enterprise. The representative of Scottish Trade International whom we met in Glasgow felt that this had the advantages of being outside the Scottish Office (and therefore having greater commerciality and freedom of action) while retaining its useful close contacts with the civil service (especially the Foreign and Commonwealth Office). In Catalonia, there were two independent bodies, one (CIDEM[46]) having responsibility for attracting inward investment, the other (COPCA[47]) having the prime function of promoting exports and outward investment by Catalan companies overseas. We were told, however, that they work closely together.[48] The Catalans place much emphasis on promoting exports as an engine of growth in the domestic economy. In our view export promotion would be better carried out by a more commercially-oriented body than the Welsh Office. We incline to the view that integrating it in the new WDA would be best. However, the National Assembly may wish to look at alternative models before deciding on its preferred structure.

30. Pathway to Prosperity announced that the Welsh Office Industry and Training Department would be opening a new office in South-West Wales along the lines of its existing office in Colwyn Bay.[49] It seemed to us surprising, to say the least, that the Welsh Office should be going it alone in this way, at a time when other services are being brought together. Where the new office will be is undecided: the Minister told us that colocation with the WDA regional office was a possibility, but that the Welsh Office's Agricultural office in Carmarthen was also under consideration.[50] The Minister did not think it was necessary for the Welsh Office to mirror the regional divisions of the WDA and the National Assembly.[51] While we accept that there may be little point in the Welsh Office having a regional office in South-East Wales, since that region is well served by the Welsh Office in Cardiff, we believe there would be benefit in the Welsh Office reflecting the same regional patterns as everyone else. We recommend that the Welsh Office reconsider its need for regional offices. If regional offices are necessary, they should be co-located with the WDA regional offices, if at all practicable. At the very least, the Welsh Office's business support services should reflect the same regional divisions as the WDA and the National Assembly.

TECs

31. TECs also provide business services, both directly and by funding others (local enterprise agencies, Business Connect consortia etc). The Chairman of the Welsh Council of TECs estimated that 90% of TECs' work is on training and only 10% on enterprise, though he emphasised that the two are intrinsically linked.[52] Some TECs appear to be much better thought of than others. Gwent TEC, for example, has a very good reputation.[53] The Minister felt that "by and large they are doing a good job", but he appeared to have an open mind about their future.[54] The 6 Welsh TECs are currently being reconfigured: from April 1999 there will be only 4 TECs (North Wales, Mid Wales, West Wales and South East Wales) matching the boundaries of the WDA, National Assembly and regional economic fora regions.[55] The Government is also trying to encourage wider participation on TEC boards, and greater accountability by including elected local authority members.[56] While these changes are welcome, we wonder whether more radical change would not have been better.

32. Many of our witnesses felt that TECs were the most expendable of the organisations involved in business support in Wales. Some felt that the TECs should be abolished altogether, others felt that TECs played a useful training role but that their enterprise functions should be transferred to the new WDA. The Chairman of WDA told us that he would "like to see a very close co-ordination if not total merger".[57] The WLGA argued that responsibility for TECs' enterprise programmes should be transferred to local authorities, and that their training and labour market role should also be reviewed.[58] The arguments for transferring TECs' enterprise functions, and budgets, to the regional offices of the WDA appear to us to be strong. The TECs' training role is beyond the scope of this inquiry: it is essential that training be very closely linked to the needs of industry and any organisational change would have to ensure very close liaison with industry. However, we would urge the National Assembly to give consideration at the earliest opportunity to the future of TECs. We are not convinced that the work which TECs do, valuable though it is in many cases, justifies their costs and the existence of yet another organisational tier.

Enterprise Agencies

33. Much, but not all, of Wales is covered by a network of Enterprise Agencies. There are 15 enterprise agencies in operation: Antur Dwyryd Llyn (South Gwynedd), Antur Menai (Anglesey and North Gwynedd), Antur Teifi (Ceredigion), Business Connect Neath Port Talbot, Business in Focus (Bridgend and Rhondda Cynon Taff)[59], Cardiff and Vale Enterprise, Carmarthenshire Enterprise[60], Clwydfro Enterprise Agency (rural areas of Denbighshire and Conwy), Coastal Enterprise Agency (Coastal Denbighshire and Conwy), Deeside Enterprise Trust (Flintshire - Shotton), Delyn Business Partnership (Flintshire - Holywell), Pembrokeshire Business Initiative, Newport and Gwent Enterprise (Newport, Torfaen and Monmouthshire), Valleys Enterprise (SE Wales Valleys) and Wrexham Enterprise. There is no enterprise agency in the Swansea area. We were impressed by the role taken by Antur Teifi in West Wales; it may be that some other enterprise agencies are less professional or dynamic. They have the advantage of being "grass roots" organisations, formed by and close to local businesses, but problems can arise because they are such diverse organisations with very little democratic accountability and their long-term planning is hampered by insecure funding. To formalise them would bear the risk of losing the "grass roots" character that is their strength. On the other hand it might be unwise to commit to the enterprise agencies greater responsibilities, and more public money, without making them more accountable. The Welsh Office should consider earmarking funding for the enterprise agencies, while working with them to develop rigorous performance measurements and greater consistency of service delivery across the whole sector.

34. We were impressed, from our visit to Ross and Cromarty, by the way in which the Local Enterprise Companies (LECs) appear to operate in Scotland. LECs are something between our TECs and enterprise agencies. Highlands and Islands Enterprise effectively sub-contracts much of its work to the LECs in its area.[61] As a result there appears to be much less duplication than there is in Wales. We considered whether the enterprise agencies could play a similar role in Wales, perhaps acting as local agents of the WDA, even obviating the need for WDA regional offices. As presently formulated, the enterprise agencies are not sufficiently formalised to take on this role. However, if it were decided to abolish the TECs, the role of the enterprise agencies could be enhanced. The leaner Scottish model merits further study.

Local authorities

35. Local authorities too play an important part in promoting economic development, though at present they have no statutory duty to do so.[62] Local authorities are a key partner in "Team Wales", playing an important part in attracting inward investors to their area.[63] Local authorities played a crucial role in securing the LG project for Wales, for example, and have put considerable funds into this. Some, it appears, are more active than others.[64] Some of those we met were critical of their local authorities, suggesting that they achieved very little in promoting economic development and were remote from business. It appears that, in some areas, there is duplication, and lack of co-ordination, between local authorities and local enterprise agencies; and there is little co-ordination between unitary authorities. Some of what they do could be better, and more cost-effectively, done collectively. It is to be hoped that the Regional Economic Fora will encourage greater co-ordination between unitary authorities and more strategic thinking, especially on cross-border issues. Partnership between the local authorities and the National Assembly will be vital to furthering the economic development of Wales.

35 See Evidence, pp 139-141, 144; also Q 400. Back

36 Q 399. Back

37 Evidence, p 118, paragraph 23; also Q 258. Back

38 Evidence, p 136, paragraph 6.2; Qq 381-384. Back

39 Q 401. Back

40 First Report (HC 329-I), paragraphs 13 to 17. See also Government Reply, Second Special Report of the Welsh Affairs Committee, Session 1997-98, HC 750. Back

41 Evidence, p 139, paragraph 17. Back

42 Eg Q 39. Back

43 Q 351. Back

44 Evidence, p 129. Back

45 Evidence, pp 94-95, paragraphs 9.1-9.3. Back

46 Centre d'Informacio i Desenvolupament Empresarial. Back