Wednesday, 13 April 2011

Grants, loans and vigorous wooing

The comparison between the relative success of the different parts of the UK in attracting new jobs made for interesting reading.  Clearly, Scotland is doing well – certainly better than Wales – in attracting inward investment.  What’s less clear though are the reasons for that better performance.
Certainly, the Scottish Government seems to have spent a lot of time and effort wooing potential investors, and to have been effective in so doing.  That need for long term persistent relationship-building was a point which Dylan Jones-Evans highlighted a while ago.  The focus provided for their efforts by Scottish Development International will ring some bells with those of us who rue the way in which the WDA baby was thrown out with the bathwater when it was merged into the Civil Service.
But one of the main points seems to be the fact that the Scottish Government has retained more of a system of grants than Wales has, and is able to offer more money to companies locating there.  For companies looking to the bottom line, significant financial incentives will always be a major factor.
That doesn’t make it right though, and I find myself somewhat torn between recognising the need to compete on the one hand, and the feeling that such competition is ultimately self-defeating on the other.  Cash payments to companies to encourage them to build their factories and offices in one place rather than another may buy jobs in the short term, but they also encourage a bidding war where different areas seek to compete by offering ever larger handouts.  And they encourage companies to think about moving again (or at least to say that they are thinking of doing so) in order to seek further future subsidies.
The approach also shifts an element of the risk - sometimes a significant element - from private capital to the taxpayer, whilst leaving the rewards safely in private hands.  But if everyone else is doing it, can we afford not to?
The great promise of the ERP was that it would switch the emphasis away from attracting inward investment towards developing indigenous companies.  But progress has been slow – painfully so – and it has sometimes looked as though internal reorganisation has taken priority over customer-facing action.   It also looks as though we have phased out the old before the new was really ready to start.
Wales needs action, and it needs that action to be faster than that of which government has to date shown itself capable.

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