Our people deserve so much more, but are our politicians agile enough to get us where we need to be?

Martin Shipton

A think tank report published the other day doesn’t mention Wales once - yet reading it provides important insights into what the Welsh economy needs to make it more successful.

The report, by Oxford Economics, is titled “Lessons from Ireland for Scotland’s Economy”. Yet it might just as well have been “Lessons from Ireland for Wales’ Economy”.

It’s fair to say that we’re used to having our economic performance compared unfavourably with that of other countries and regions. If we weren’t aware that they were usually writing from a compassionate perspective, we could easily draw the conclusion that academics writing about some of our communities’ entrenched poverty were doing so with at least a hint of schadenfreude and sometimes even sadism.

Do we really want to have pointed out to us for the thousandth time how much more prosperous Inner London is than Merthyr Tydfil or Blaenau Gwent? What good does it do us? It’s true now and it was true before we were born. Precious little has changed despite a multitude of reports and promises from politicians over decades.

In the context of the UK, Wales is seen as the poorer Celtic cousin of Scotland. Often such a case is framed in constitutional terms, using the undeniable fact that the Scottish Parliament has more powers than the Senedd. But the weaker economy of Wales usually gets a mention as well.

One thing that’s refreshing about the Oxford Economics report is that Wales, for once, is not portrayed negatively in comparison to somewhere else. (For now, we’ll glide over the fact that this is because Wales isn’t mentioned at all.)

It’s Scotland, as you might have guessed, that’s depicted as the poor relation to Ireland.

Economic success

The report’s opening section compares Ireland’s economic success in recent decades to the markedly less impressive performance of Scotland: “In recent decades Ireland and Scotland have experienced very different economic growth trajectories,” it states. “From independence a century ago until the early 1960s, Ireland’s economy was based largely on farming and food production. It traded its farm output internationally, but only really with its immediate neighbour, the UK.

“But following the publication in 1958 of a seminal report, a clear decision was taken by government to change that pattern, by attracting substantial foreign direct investment into manufacturing, with the aim of exporting much more widely across mainland Europe and beyond.

“The Irish economy prospered, and its increased prosperity fed into a booming property market, and construction sector. Between 1995 and 2007, Ireland’s gross domestic product (GDP) grew by an average 6.9% a year. Meanwhile, Scotland’s growth remained modest, with an average annual rate of 2.5%, tracking very closely the UK total.”

Explaining the success of the Irish economy further, the report states: “Over time, the focus has shifted from low to high value-added activity, and from manufactured products to associated services, such as software development. But a constant thread has been reliance on foreign direct investment (FDI) to make that happen, with a large (and controversial) role being played by the maintenance of a regime of low corporation tax.”

EU membership

Membership of the EU and, from 1993 when it was created, the European single market, was immensely beneficial to Ireland, Between 1973 and 2018, it was the net recipient of over €40bn in EU funds, including capital investment such as roads and other infrastructure, investment in education and research, and support to the agricultural sector through the Common Agricultural Policy.

With this cushion, Ireland was able to develop a new role as a player in global markets, reaching a point where it no longer relies on EU subsidies but is a net contributor to the European Commission’s budget.

Since Brexit, Ireland is the only significant English-speaking nation with full access to the single market. The country is also recognised as one of the most competitive locations for ease of doing business, ranking 11th in the International Institute for Management Development (IMD) World Competition Index and 24th in the World Bank’s Ease of Doing Business index. As a result, Ireland may well be attracting investments from North America and Asia that might otherwise have gone to the UK.

Another important point in Ireland’s favour has been its relatively high birth rate as well as its openness to inward migration.

The report states: “Demographic changes have also played a significant role in driving Ireland’s rising economic prosperity, particularly since the 1990s. In 1981 the fertility rate in Ireland stood at 3.1, compared to 1.8 in the UK. This translated into Ireland growing its workforce substantially. In 1971, 58% of Ireland’s population were of working age. By 1996, this had grown to 65% before peaking at 69% in 2007. It has since fallen away but remains higher than the EU average.

“This growth in Ireland’s population of working age has also been driven by net inward migration, reversing a pattern apparent since the famine of the 1840s. From the mid-1990s Ireland has seen net inflows of people, largely due to the return of many workers who had previously emigrated to the UK and the US. While the inward migration was clearly the result of the growth of employment opportunities in Ireland, it also helped to attract companies to invest in Ireland, in the expectation of finding a young, experienced and cosmopolitan workforce there.”

The situation in the UK is different, in that there hasn’t been a comparable cohort of young people emigrating out of economic necessity who might wish to return. Instead there have been young people from EU countries and further afield who have wanted to migrate here.

Instead of opening our borders to them as a welcome addition to our workforce, the current UK Government has adopted an anti-migrant stance that engenders racism and social division. In Wales the proportion of the population that is of working age was just 61.2% in 2020. We know of the shortages of labour in many industries that are causing problems for our economy.

The Welsh Government has been pilloried by those on the right for its “nation of sanctuary” policy. But maybe it wouldn’t seem such a laughable idea to some if it was promoted not simply as a way of showing compassion to refugees, but as an opportunity to recruit workers for short-staffed industries and to help our economy recover from years of austerity.

Niche industries

A further important lesson from Ireland outlined in the report, which applies just as much to Wales as to Scotland, is the need to pick some niche industries of the future that we can specialise in. That’s something we could certainly pursue more vigorously.

Ireland is an independent country in the EU which has many advantages that the UK has thrown away. At one time Wales had to endure being depicted as a nation of miners wearing pit helmets with soot on their faces singing hymns.

The new stereotype we should all be ashamed of is that of impoverished families relying on foodbanks.

Our people deserve so much more, but are our politicians agile enough to get us where we need to be?