A question of trust

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One of the points made frequently by those who wish to see the UK leave the EU is that the ‘European’ funds which areas such as Wales receive aren’t really European at all; they’re just UK funds cycled through Brussels.  On this basis, the argument goes, any UK government outside the EU could simply give the money directly to Wales and cut out the middle man.

The logic of that is inescapable, and the usual counter argument is that whilst it may theoretically be true, the UK government could not be depended on to do that.  I agree with that as well in practice, but boiling the issue down to who we trust least means that it isn’t really an economic argument at all.

Last week, when he was in Wales, Cameron himself made it clear that he could not and would not guarantee to replace EU funding with equivalent UK funding in the event of a UK exit.  It was refreshingly honest, but I can’t help feeling that it’s rather strange for any politician, and perhaps especially for a Prime Minister, to try and win any argument by saying, in effect, “You can’t trust me”.  It’s a strange world sometimes.

Auditing and re-auditing

Tweet All of those involved in spending public money have a responsibility for ensuring that it is spent cost effectively and in accordance with the organisations' agreed aims and objectives.  That is as it should be, and it means that all public bodies have agreed internal and external audit processes to verify that it actually happens.

Sometimes, however, the fragmented nature of Wales’ governmental structures means that the same activities can, effectively, be audited multiple times at multiple levels.  European funding is one example which leaps to mind.

The EU of course has its own processes for verifying that money has been spent in accordance with the terms of any grants given.  And that includes the money coming to Wales under the Convergence scheme.

As a result of an attempt by the One Wales government to appear to be more strategic in its approach – which seems to have convinced the ministers but I doubt that they convinced anyone else – an extra layer of funding 'bodies' or consortia was effectively introduced; and the Welsh government audits the way the money it allocates to those funding bodies is spent.

Those bodies in turn audit the way in which the money is spent by the bodies to which it is allocated by them.  Many of those are local authorities, who again have their own audit processes.

So some European funding is being audited at least four times as it passes through different levels of public authority.  That inevitably means that less money and effort are spent on the direct activities concerned.  Even if the audit costs come out of “other” funding rather than out of the grant funding itself, it still means that money is being used to check what is being done and how rather than actually doing something.

At each level, the argument is the same – “we’re dealing with public money, and have to demonstrate that the doing it properly” – and each level has to assemble, collate, and file its evidence of what has actually been done and how.

Now if “Public Sector Wales” was a single unified structure, would we still want or need to audit the same things several times at different levels or would a unified body have just a single set of audit processes?  Could we – and would we – be able to divert more resources into doing things instead of checking up on what other people are doing?

I’m not arguing here for creating a unified structure for the Welsh public services (although the idea is not without some merit).  There is, though, an argument for looking at a single unified audit structure and process for the Welsh public sector, which means that any activity is only subject to a single audit, and that other bodies then accept the veracity of what they’re being told rather than re-check.  Excessive trust can certainly bring problems of its own; but excessive distrust is costing us time and money which could be more usefully deployed elsewhere.

More funds from the EC

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Whilst the third round of European funding will be welcome in Wales, it is disappointing, to say the least, that we should still be in a position where we qualify for such aid.  We have managed, as a nation, to get through two sizeable tranches of such aid with no obvious movement towards the stated objective of closing the gap in GVA.

The first round, Objective One, seems to have been largely frittered away on a series of projects most of which looked good in themselves, but which seem to have realised little long term benefit.  At the time, the impression that I had was of a large pot of money for which projects could bid, accompanied by a complex bureaucracy, within which some of the money was spent on advising others how to apply for it and then spend it.  There never seemed to be any ‘big picture’ view of what the outcomes should be; it didn’t look joined up.

For the second round, the government said that it was going to be more strategic by having fewer and larger projects.  I wasn’t convinced that they succeeded.  The words were all there, but in some cases it looked as though having ‘fewer and larger projects’ simply amounted to giving large sums to consortia of councils which then took on the distribution to the same sort of projects as in the first phase.  The difference was simply that there was an additional layer of bureaucracy between the Government and the projects being funded.

None of those involved are likely to admit any of this, of course; they were all caught up in the spin and presentation of success, the publicity which flowed to councils and ministers from a whole stream of flashy looking projects.  But phase 2 looks to have been as big a failure as phase 1 in practice.

Perhaps there’s something in the character of Wales as a nation, or in our style of politics which made this inevitable, but it seemed at times that being seen to share the cash around fairly and evenly, to ensure that there were projects benefitting in each and every corner of the aided region, was more important than ensuring that the GVA objective was achieved.

Whatever the cause, as we prepare for a third round of funding, I cannot say that I feel any real optimism that any lessons have been learned.  I still see no ‘grand plan’ for what we want to achieve or where we want to be at the end of the next round; and I suspect that, as a result, we’ll fall back on the tried-and- found-wanting approach of saying ‘Look, here’s a pot of money, who wants to bid for some?’, and then doling the cash out to the most telegenic proposals.

It’s not as if the Welsh Government is lacking in strategies; they’ve got several shelf-fulls of them in the Bay.  It’s more that there is a complete disconnect between those box-ticking strategies and actual government action.  A government which was serious about reducing the GVA gap would, by now, have a plan for doing so, and would see the inflow of large amounts of cash as being an opportunity to implement elements of that plan.  I won’t hold my breath.

Winners and losers

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Yesterday’s report about Jack Straw’s little faux-pas echoes the report from last Friday about Wales’ contributions to, and receipts from, the EU.  Last week’s headline suggests that Wales pays more into EU structural funds than it gets back and is thus getting a bad deal; Straw’s case yesterday was that the UK is getting a bad deal.

Superficially, Jack Straw has a point.  If the UK did not contribute to the EU’s structural funds, the UK would have more money to spend on regional assistance within the UK.  I can’t argue with that; but it isn’t that simple.

The first complication is that the fact that the UK Government ‘could’ do something doesn’t mean that it ‘would’ do something.  ‘Regional’ assistance policy has been inconsistent at best within the UK over the decades, and I think we can be forgiven for suspecting that the UK Government might simply trouser the cash and use it to fund tax cuts, or wars, or whatever.  There’s absolutely no guarantee that we’d see any of it, which is the basis of much of the argument against what Straw said.

That raises another issue, though.  Is the fact that we might trust one government – the EU – more than another – the UK – really the best way to decide where regional policy should be made?  I don’t think it can be or should be.  It isn’t radically different from the argument put forward by some anti-devolutionists – they trust the UK government more than the Welsh one and therefore want power to remain there.  If we’re consistent, we should surely separate the issue of where policy is made from the substance of that policy.  We need a better reason than distrust of London to want the decisions to be made in Brussels.

Nor is it good enough to decide whether participation in the EU structural funds is worthwhile on the basis of a simple comparison of how much we put in and how much we get back.  On that basis, only the poorest countries would want to contribute – but there’d be nothing left for them to withdraw.  And that’s ultimately the whole point of the EU structural funds – the most well-off put in more and the least well-off get more back.

It’s fundamentally a question of whether we support redistribution or not – looking at it in terms of what we get is a much narrower viewpoint.  We tend to forget sometimes that the UK is one of the wealthiest countries in the UK; it is inevitable that the UK will therefore be a big net contributor. 

The problem for Wales is that we’re a poor region within a wealthy state.  We only get Convergence Funding (like Objective One funding before it) because of some creative work drawing a line across Wales in order to invent a region which didn’t exist before, and which exists for no other purpose than to qualify for the funding.

That shows the complexity of the issue of redistributive policies – drawing the right lines in the right places (and not necessarily following accepted regional or national boundaries) can make a huge difference to the perception of wealth and poverty without making any difference whatsoever to the actual wealth or poverty of the people affected.

There was one other point raised by the Open Europe report which has received little attention.  That is the extent to which the whole process is managed efficiently and effectively, and whether the same amount of funding could deliver more effect on the periphery with less bureaucracy at the centre.  I think that they have a point there; I just don’t agree that dismantling the whole policy is the best way of resolving it.