Today is Wales’ national day. I personally remember it being a day where you dressed up in itchy woolen trousers, a miniature waistcoat and a flat cap. Oh yes, and it was all topped off with a daffodil or leek tied to my lapel that was about half the size of me. We would then spend the entire day sat in a cold hall in a border village getting prizes for handwriting and reciting poetry in a language not one of us spoke.
Nowadays I see it more as a chance to take a look back at my homeland and wish better times lay ahead for the country. Wales has languished at the bottom of the UK league tables for decades now in education, productivity, incomes, and health. It’s depressing. It needn’t be this way.
Wales was once a by-word for capitalist ambition. The Coal and Shipping Exchange, in Cardiff Bay, was completed in 1886 by Edwin Seward as Cardiff became the busiest coal port in the world. The centre saw 10,000 people per day at its height walk through the building, conducting trade negotiations for coal from the South Wales Valleys to be sent across the world. In 1904 the building saw the first ever £1,000,000 contract signed.
A lot of time is spent in political debate in Wales on the effect of privatisation, the effect of reduction in state subsidies and the impact changing demographics and industries has had on Welsh communities. But little is ever mentioned about the impact of nationalisation on the private sector in Wales. The companies that brokers and traders at the Coal Exchange were negotiating on behalf of were privately owned until nationalisation of coal mining in 1947.
The private ownership of companies, and the market reflection of prices resulted in much more elastic labour markets. Between 1851 and 1911, some 366,000 people moved into the South Wales’ coal mining areas. The peak of this migration occurred at the height of Wales’ production power between 1901 and 1911 when 129,000 people moved into the area. These were heavily international areas, with migrants not just from Wales (and large numbers from England, Scotland and Ireland) but also from Spain, Italy, Russians, Poles and French moving to the site of an economic boom. Oddly enough migration brought wealth, vibrancy and a sense of opportunity to locals as well as to newcomers, there were few calls to restrict the flow of labour back in the late nineteenth and early twentieth centuries.
But resource booms that can’t compete with new entrants on the world stage also faced busts. Between 1919 to 1939, after the First World War, there was mass unemployment. Fewer jobs and price responsive mines meant 500,000 people left the valley communities during the interwar years. The Rhondda saw around 36% of its population leave between 1921 and 1951.
Nationalisation stymied the flow, with security cited as part of the reason why taxpayers from across the UK should subsidise loss-making mines and industries. It saw control move from private owners to Whitehall and the costs of extraction and contract fulfillment moved to the general taxpayer. Oddly enough political pressure kept subsidies flowing for decades and the final curtailment (under Wilson and then Thatcher) meant a heavier and more sustained negative shock to the economies of these regions. Public ownership meant also that what was profitable didn’t even stay in the area or provide dividends to shareholders. Government, not shareholders, determined what was the priority and government often chooses losers. It shouldn’t be of any surprise that productivity and GDP per capita is lower in Wales now than in the rest of the UK.
To this day Wales has an over-reliance on public sector employment. 27.6% of the Welsh workforce is employed by the state or in state-owned industries and there is little move by the dominant Labour party to reduce the tax burden, to increase property or share ownership and get Wales back on the rise.
What is positive though is that people are once again on the move. Wales’ productivity now relies on city growth and places like Cardiff, Swansea and Wrexham are making overtures towards building homes and reducing prices to make it profitable to set up or move businesses to them. Cardiff aims to get 11,000 new homes in the city by 2022, with 41,000 new dwellings built by 2026. It will need them, with population growth of 1.2% per annum. What it needs is proactive planners and a national framework that reduces costs. Sadly, ever increasing burdensome regulation is something that the Welsh devolved government is good at.
Welsh housebuilder Redrow found that the average cost of building a home in Wales as opposed to England (once land costs were removed) was over £4000 more due to increased regulation. Rather than avoiding Help to Buy’s subsidy effect on demand, the Welsh government copied Westminster. Sam Bowman, said of the scheme at the English level that it was like “throwing petrol onto a bonfire” and that “supply is so tightly constrained by planning rules, and adding more demand without improving the supply of houses just raises house prices and makes homes more unaffordable for people who don't qualify for the Help to Buy subsidy.”
Wales’ proposed vacant land tax for properties with permission will just mean fewer applications for permission. As my colleague Sam Dumitriu has argued before permissions are mostly underused because of the way that delays or political risk mean chances of getting future approvals are unpredictable.
What Cardiff should be aiming for is a reduction in tax (income and business rates), a simplification of the planning system, and a promotion of inward migration. Wales could benefit from greater agglomeration. Cardiff certainly has the ambition to build homes, attract new businesses, and support the growth of connected urban public transportation. What it now needs is joined up thinking in the Senedd to match it.
Dydd Gŵyl Dewi Sant hapus i bawb!
A Happy St David’s Day to you all!