|David J. Rowlands AC|
|Hefin David AC|
|Joyce Watson AC|
|Lee Waters AC|
|Mark Isherwood AC|
|Russell George AC||Cadeirydd y Pwyllgor|
|Vikki Howells AC|
|Chris Sutton||Cadeirydd, Ardal Fenter Canol Caerdydd|
|Chair, Cardiff Central Enterprise Zone|
|Julian Verity||Cadeirydd, Ardal Fenter Sain Tathan|
|Chair, St Athan Enterprise Zone|
|Roger Maggs||Cadeirydd, Ardal Fenter Glannau Port Talbot|
|Chair, Port Talbot Enterprise Zone|
|Stan Mcilvenny||Cadeirydd, Ardal Fenter Dyfrffordd y Ddau Gleddau|
|Chair, Haven Waterways Enterprise Zone|
|Robert Lloyd-Williams||Dirprwy Glerc|
|1. Cyflwyniad, ymddiheuriadau, dirprwyon a datgan buddiannau||1. Introductions, apologies, substitutions and declarations of interest|
|2. Cadeiryddion y byrddau Ardaloedd Menter - Ardaloedd Menter||2. Chairs of the Enterprise Zone boards - Enterprise Zones|
|3. Cynnig o dan Reol Sefydlog 17.42 i benderfynu gwahardd y cyhoedd o weddill y cyfarfod||3. Motion under Standing Order 17.42 to resolve to exclude the public from the remainder of the meeting|
Cofnodir y trafodion yn yr iaith y llefarwyd hwy ynddi yn y pwyllgor. Yn ogystal, cynhwysir trawsgrifiad o’r cyfieithu ar y pryd. Lle mae cyfranwyr wedi darparu cywiriadau i’w tystiolaeth, nodir y rheini yn y trawsgrifiad.
The proceedings are reported in the language in which they were spoken in the committee. In addition, a transcription of the simultaneous interpretation is included. Where contributors have supplied corrections to their evidence, these are noted in the transcript.
Dechreuodd y cyfarfod am 09:30.
The meeting began at 09:30.
Bore da. Croeso, bawb, i'r Pwyllgor Economi, Seilwaith a Sgiliau.
Good morning and welcome, everyone, to the Economy, Infrastructure and Skills Committee.
I'd like to welcome members of the committee this morning, and I move to item 1. We have one apology this morning, from Adam Price. Are there any declarations of interest? There are none, so in that case—.
Yr eitem nesaf.
The next item.
This morning, we begin a series of sessions with regard to our scrutiny of enterprise zones in Wales. This is the first session this morning and we have a panel before us. I'd be very grateful if the panel could introduce themselves and which board they represent and chair, just for the record, if I could start from my left.
Yes, good morning. My name is Stan Mcilvenny, I chair the Haven Waterway enterprise zone.
Good morning. My name is Chris Sutton, I chair the advisory board for the Central Cardiff enterprise zone, and my day job is a chartered surveyor, working in Cardiff.
Good morning. I'm Roger Maggs, and I'm chair of the Port Talbot Waterfront enterprise zone.
Good morning. Julian Verity. I'm the chair of Cardiff Airport and St Athan enterprise zone.
Lovely. We're very grateful to you for being with us, and Members have a series of questions this morning. If I could start, the Cabinet Secretary Ken Skates has been having discussions with over 40 organisations with regard to advisory bodies, and he said that he's had discussions with each of the enterprise boards. I wonder if you are able to share any of the discussions that you've had with him to date.
Maybe if I set the scene, the enterprise zones were first established in 2011. I think they were probably wrongly named, in the sense that I think they probably should been enterprise districts or enterprise centres, but so be it. The Chancellor George Osborne actually came to Cardiff and announced enterprise zones for England, and, therefore, Welsh Government had to respond in due course. That was in March 2011, and, therefore, we moved through the Assembly election in May 2011, and we had five enterprise zones then established in September/October 2011. Another two were established shortly thereafter, and then, in response to the steel crisis, a further enterprise zone was created 18 months ago or so.
So, the initial enterprise zones are now coming up to six, seven years in terms of their timespan, and there's been a differential activity in different enterprise zones, so I think they're at different stages of the lifespan. So, I think that's really what we set out, certainly from my side, in terms of advising the Cabinet Secretary: that some enterprise zones were more mature, say Central Cardiff and Deeside; some had achieved specific objectives, for example St Athan with Aston Martin; and some still had a way to go, for example, Anglesey. It's a year or so away from the big decision on the nuclear power station, so they certainly have a way forward. So, I think that's really setting the scene as to how we, collectively as chairs, met with the Cabinet Secretary.
So, if I could ask the panel, the Cabinet Secretary has had discussions with each board and what I'm looking for is: tell us a bit about those discussions.
From the St Athan and Cardiff Airport perspective, we are one of the enterprise zones that are approaching its termination, as it were. It's almost job done for us—
That's the case with all of them, isn't it? That's my understanding.
On paper, yes.
The focus for us has been high-tech, high-end manufacturing and aerospace. We approach a point of job complete as we head towards July 2018 and are winding down. Myself, I took over as chair of this board last July. We were given three refocused aims, those being to maximise on the property portfolio that was within the zone and finalise the master plan; raise the profile of my particular enterprise zone, the boundary, and revisit the strategic plan; and investigate and address the skills shortage. I'm pleased to advise that our refocused aims will all have been achieved by July, although we've actually started to wind down already.
The method that we've adopted, following my appointment, to achieve this—we've put up three working groups. We had a property working group that was, again, concentrating on the master plan. This is apparently going to be published in March—a significant document, I understand. Outside consultants are on the job. The second working group—to raise the profile of the zone; there's a sad lack of, for example, signage, and, to dovetail with the master plan, we needed to raise the profile of the zone.
The third group, which was the skills working group, is probably the biggest achievement to date. We intend launching an aerospace apprenticeship scheme. From my history, having run an aviation business in Wales for 30-odd years, I was never offered, as a small or medium-sized enterprise, apprenticeship schemes that are now, obviously, available and funded by Welsh Government. So, this working group, with the international centre for aviation training in Barry, set out with the aim of supplying SMEs with licensed aircraft engineering qualifications. This is about to be launched. A lot of work's been done in the last six months. We've already got 30 potential places secured, prior to even the launch. It is expected, by the end of the summer, i.e. after the demise of my enterprise zone board, that we're probably going to have 60 apprenticeships within the zone.
We've just got a series of questions, so, do you mind if I just come in? And some Members might come back on some of what you've said. What I was particularly keen to understand from each of you was that the Cabinet Secretary has said he's had discussions with each of you in terms of his review of advisory bodies. Has he had that discussion with each of you?
Yes, he has.
We've met formally on two occasions as a group with the Cabinet Secretary, but, from time to time, we would meet him at functions, for instance, where we have another opportunity to have a conversation with him. So, in answer to your question, we met formally as chairs twice with the Cabinet Secretary.
Once in roughly May last year and once in roughly October last year, and we had round-table discussions with the Cabinet Secretary and with officials.
So, at that point, can you tell us what the key issues were that came out of that meeting with him?
I think there was a review of the effectiveness—a general discussion on how the enterprise zones had gone. There was a recognition that there was a life-cycle, and there was also market influence, and, therefore, perhaps, those enterprise zones with the strongest market presence have perhaps had the most successes, and that reflects the benefits that the enterprise zone package has. We were then asked for our views on the future of the enterprise zones, and, as I inferred earlier on, I think there is a life-cycle; there are some that are more mature and some that, effectively, have done their job, and others that are either awaiting an event—let's say, Anglesey—or, alternatively, awaiting a wider improvement in the business environment. So, we've given our thoughts to the Cabinet Secretary as to how those enterprise zones may evolve. For my side, Central Cardiff, I have said that the advisory board could come to an end in July 2018, when the current term ends.
So, I picked up on Roger's answer to an earlier point, because, as far as I can see, on paper, as you said, Roger, all the enterprise zones will finish this summer.
Yes. Incidentally, the thing we're waiting for in Port Talbot is a miracle. The tenure of all the boards officially ends in July. My conversations, or the board's conversations with the Cabinet Secretary, as we've heard: two formal occasions when we met together, and I met him once informally one-on-one. What my point to him was that we should have an extension at Port Talbot Waterfront. The reason being that we've only really been going for a year, although we were formed in April 2016. The first part of the effort was putting together a team and a bid to buy Tata's UK steel assets. The company was called Excalibur Steel UK and I was involved in that. So, that was a seven-days-a-week job for several months.
All the emphasis and all the focus initially was on buying Tata, not on a defensive action if it went down. There was then a period of great uncertainty. So, we've only really been effective for a year. My point to the Cabinet Secretary was, 'I think the elephant is still in the room. We must plan for the worst but hope for the best. There's still, I think, a danger that there may be significant job losses at Tata', and asked for an extension. He very sensibly is of the view, 'Yes, well, what's your strategy going to be if I do keep you open?', and we're working on that at the moment. So, we're still in discussion.
Okay. Perhaps at this point I'll bring in Vikki Howells, and that'll perhaps lead on to some further discussion. Vikki.
Thank you, Chair. I'd just like to drill down a little deeper on some of the points that Russell's already made in the introductory series of questions. There seems to be more of a move towards regional economic development now within the Welsh Government, and in July of last year the Cabinet Secretary stated he was reviewing the enterprise zone offer to ensure it will continue to deliver against a more regional approach to economic development. I was just wondering whether the boards were involved in that process and, if so, what the outcomes were.
Don't feel you all have to answer every question. Perhaps if somebody indicates and wants to take a lead.
No, I can't say that I was party to that. In fact, the state of play as regards our enterprise zone, we've actually held the last board meeting that we will have. We held that in January. We were advised that January was to be our last board meeting. So, we're actually in wind-down at the moment. The points I made previously, those are the inertia that is continuing, but, as a board, we have been curtailed now.
I've not been involved in those discussions. I have views, but I've not been part of that process.
We had those two meetings last year, and you can say there's an element that probably would have informed that process, but we have not been asked specifically on that. I think that perhaps we'll come onto the spatial geography of enterprise zones and why they were chosen in the first place in due course. Some have been more successful than others, but perhaps that also reflects the market economics of the different enterprise zones. They are, by definition, geographically specific. So, therefore, they do fit into a regional way of working. I think there needs to be perhaps a discussion as to what the enterprise zones offer Wales in terms of both the benefits and also the focal point for public sector activity, if that makes sense.
It's a similar sort of process at the moment, I guess, to what's happening in the ministerial taskforce of the Valleys and the choosing of strategic hubs. There's some sort of crossover there as well, I think.
Thank you. Yes, that's a point I'll pick up in a moment, actually, but the enterprise zones are not mentioned in the economic action plan either. Is that something that gives you cause for concern, or is it just simply a reflection of the status quo—where we're at now with the enterprise zones winding up, as you've already said?
I think, from my perspective, whilst we didn't respond formally to that process, it's quite clear from the Haven's perspective that it's styled 'the energy enterprise zone' when, in reality, it's probably more about all those other aspects of economic development. It's about agriculture, it's about farming, it's about food processing, it's about tourism. It's about all of that. So, the Cabinet Secretary would be aware of our involvement in those areas of the local economy. So, I'm quite sure—I don't know for certain, but I'm quite sure—that that would have been fed into his thinking regarding the future of the enterprise zones.
I think one was aware that the thinking in head office, as it were, was that the enterprise zones were restricted in their actual geography, and therefore the jam should be available to more. And therefore, winding up the enterprise zone scheme, as such, and making it more scattershot, was a better way of dealing with it. I don't think we were involved in the actual process of that, but we were advised that that is how the regionalisation was taking place.
Is that a view that you all share, or have you got a different view, in a utopian future, about what kind of role enterprise zones could or should play in the future, if you were able to have direct control of that yourselves?
I think, from the Haven perspective, our argue is that if it were possible to have the board continue its work, that would be extraordinarily useful, for all the reasons that I outlined—those sectors of the economy that are, arguably, underdeveloped, that we believe that we can assist. So, our view would be that some sort of continuum for the Haven would be useful, but that's entirely up to the Minister, presumably.
I just wanted to come back to Roger Maggs. You said with regard to a regional approach to economic development that you have views, and then you stopped. And I just wanted to hear what those views were.
Well, maybe I could illustrate with an example. Suppose someone in Wales decided to set up an investment fund to invest in small or new companies involved in financial services technology, you wouldn't do that on an enterprise zone basis, you'd do that on a regional basis. You wouldn't say, 'We're going to put all our effort into Bridgend, or Monmouth', you'd stretch all along the corridor that the motorway makes. So, in a case like that, it would not be efficient to have it done on an enterprise zone basis.
It depends on what you're trying to do. If you're trying to—not ring-fence—but if you're trying to come up with a set of safeguards that could ameliorate or mitigate heavy job losses at Port Talbot, I think you'd do it at Port Talbot, I don't think you'd do it on a regional basis—it'll be down the agenda. I think you do it where the flames are hot.
Just maybe to add to that, I think the enterprise zones are given, if you like, local expertise and local leadership, and also highlighted areas that can be exploited, so exploiting pockets of growth. And you can look at that on a regional level, you can look at it on a local authority level—it is another tool in the toolbox. We can't end up having regions of Wales competing against one another, they have to be complementary, but there must also be a recognition that certain areas of Wales can do a job that others can't.
For example, Central Cardiff enterprise zone actually reaches parts of the economy that other cities and other towns in Wales can't reach, in the same way that London can reach parts of the economy that Cardiff can't reach. So, we mustn't hold back Cardiff; we must promote Central Cardiff in terms of its financial and professional services and allow it to compete on that national and international field. And what the enterprise zone has done is allowed us to find areas and promote that, as, indeed, other enterprise zones can also promote their particular specialities—the sectors and the geographies and the factors that influence those various locations.
Just one specific question for you, Chris. You mentioned earlier the hubs and the Valleys taskforce delivery plan. Do you think that there's some synergy there between the way that enterprise zones have worked in the past that the hubs are planning to emulate, or should be planning to do so?
Okay. So, it's slightly veering away from the point in terms of enterprise zones, but I come back to this: enterprise zones can become a focal point for public sector activity. If you look at the benefits of an enterprise zone—. I wrote an article for the Institute of Welsh Affairs in Lee's day, and I'll leave copies here, on what are the benefits. But for Central Cardiff enterprise zone, the benefits: there is a business rate scheme for SMEs, there's extra funding associated with particular SMEs as well, high-speed broadband, a focus upon training and skills, simplified planning and action to provide buildings and sites. Central Cardiff doesn't have capital allowances. All of the benefits of Central Cardiff we could put anywhere. We could put them in central Pontypridd, Swansea, Bridgend—all of those activities are relatively lightweight in their impact. But what you do do with a red line around Central Cardiff is you create a focal point for public sector activity, and it's an area—. At a time of hard choices, there is a case to intervene in every part of Wales. From Chepstow to Anglesey, there is a case to intervene in every part of Wales, and the enterprise zones allow you to do activity in certain locations to create pockets of growth.
Coming back to the ministerial taskforce for the Valleys, they've created these strategic hubs. There were five, and then there were six and maybe seven or maybe eight. So, we're starting to lose that exclusivity associated with the original shortlist of hubs, because I think we're now up to eight strategic hubs. So, hard choices need to be made where you are going to support and they have to be done on—there's a logic as to how you originally delineate those locations. Are they in terms of the economy, so market demand, are they in terms of weakness in terms of disadvantaged areas, or are they associated with a particular function, whether it's an airport or a university or a tech cluster or whatever it might be? And those enterprise zones originally probably reflected all three of those strands.
I think that's a very important point. I just want to ask Chris two specific questions, one just for the record. It's clear that St Athan feels it's mission accomplished, but Port Talbot and Milford Haven would like more time. Just in terms of the Cardiff Central zone, do you feel that it has run its course, or do you think there's a life beyond?
I don't think you can look at economic development in the centre of Cardiff as being a finite, fixed point, but I think the board has served its purpose, and I think there are now other areas in terms of—. We now see the city deal. We see the focus on metro central. Cardiff council is also, perhaps, coming more into the fold in terms of doing some of that economic development. So, in terms of the advisory board, I think we've served our purpose and done that. But no, the job in Cardiff isn't finished, and I think there's always a follow-on.
I just want to ask specifically in terms of your focus, because you implied it was a short-term focus and chasing opportunities and leveraging growth insofar as you could. Much of your focus has been on financial services for Cardiff central. Now, clearly financial services are particularly vulnerable to automation, so it strikes me as a particular danger that we'll spend a lot of time and effort and money attracting these back-of-office functions to Cardiff that, within five to 10 years, may well disappear. Has that been part of your thinking? Has the long-term worth of what you're doing and the sustainability been part of your thinking, or has it been, 'There's low-hanging fruit here. Let's grab it'?
The enterprise zones originally were aligned to particular sectors, and Central Cardiff is aligned to the financial and professional services sector. Where we've come at it from is that, yes, clearly there are employment opportunities. We must put Cardiff on the map in terms of what we call nearshoring out of London, and Deloitte is a successful version of that. But what we've also looked at is the future in terms of looking at that tech sector and Alert Logic coming in in terms of cyber security—the cluster based around Equiniti, the life sciences hub down in Cardiff Bay. I've deliberately tried to not identify it solely with financial and professional services, because you will have a growth in life sciences or Fintech through Chris Nott on the financial board. We have sponsored a study looking at legal tech in terms of how they're doing that.
But I wouldn't say it's short-term chasing of jobs. It is about improving the business environment and looking at resilience. So, for example, we commissioned a report very much in the background from Arup looking at utilities in Cardiff Bay. Is it time for the next substation? It's pretty boring, but that's the sort of stuff that we need to be looking at. We're linking in with skills. So, we've two members on the board. One is on LSkIP and then the other one is the chief executive of Cardiff and Vale College. So, it's getting that direct linkage. Very much, as your important work has shown on automation, the way to tackle that is to uplift the skills in order that we can take advantage of the productivity gains that automation would give us.
In a moment we're going to move on to some questions around the achievements of enterprise zones. I know Joyce has some questions around that. But can I just ask in terms of—? What I do want to understand is where is the future of enterprise zones following the end of the current contract, if you like, at the end of July. What, beyond that—what support would you expect from Welsh Government after that? Are all your enterprise zones continuing after July? That's what I'm not clear on.
Aren't there two issues here? If you're you asking the question, 'Is there life after this for the enterprise zone board?', in my particular case, no, we've served our purpose, but as far as the zone is concerned, we go from a planning stage now to a delivery stage. For the delivery stage, we're obviously going to be highly reliant on professional civil servants to deliver.
And what about the future of the boards for the other three panelists?
I've actually requested to keep going until 2021. If we haven't made a difference by then, I don't think we will make a difference, so that's the kind of time limit. What we leave behind us—
If I just stay on that point for a moment, you've made that request, so you're requesting Government support beyond July of this year up until 2021.
Yes. And that's still under discussion.
The advisory board for Central Cardiff will come to an end in July 2018. In terms of the actual red line delineation, I also would have no issue if the enterprise zone ceased then in Central Cardiff. However, there are issues going forward in terms of leadership and promotion of Cardiff. So, there are legacy issues, which is what we're reporting on at the moment.
The Haven advisory board have asked the Minister to extend the time period of the board. Chris mentioned at the very beginning that he thought that perhaps the enterprise zone boards were misnamed slightly. Its princial function was to create jobs, but in the Haven Waterway enterprise zone our principal function has been to sustain jobs. I took over the chair in 2015 when Murco—in fact, the day after Murco closed its doors with the loss of 450 jobs. Now, you can imagine the impact on the legion of small and medium enterprises around the zone who supplied services to Murco. So, our principal function has been to underpin and sustain the existing small and medium enterprises. We do this in lots of ways that we can perhaps talk about later. So, there's still a job of work to do. There are six refineries in the United Kingdom, or maybe five and a half—
We'll come on in a moment, perhaps, to some of those questions. You've asked the Government formally to have an extension. Up until what date?
That's in the gift of the department and the Minister.
I presume, if they're coterminous, then 2021.
Right, okay. And have you asked for specifics in terms of what you want, or is that under discussion?
That discussion we haven't had yet, but the Minister is aware of our objectives.
Right, okay. Lovely, thank you. I'll come on to ask Joyce Watson to ask a set of questions, and then perhaps some discussion will go on from there. Roger, did you want to come in quickly?
Would you mind if I had just one quick go at regionalisation alongside the enterprise zone—one more crack at that?
Every zone has a different product to offer. What does a product do? A product attracts employment. It attracts businesses into the zone. If you look at the zones, they're all basically the same when it comes to financial incentives. We identified at Port Talbot 15 elements of our product, and each enterprise zone is a product. The reason people go to Cardiff or Port Talbot or Anglesey is not because of things like financial incentives; it's because what they have in that zone that is different. And that's normally skills, access to markets, infrastructure, alliances, stuff like that. And every product is different. If you say, 'We've only got one product', that's a danger.
Okay, thank you. Members might come back on that. Lee, did you want to come in? Go on, Lee.
You say the financial incentives don't make much of a difference—it's the general economic ecosystem that is really the offer. Then, is there much value to the enterprise zones as a project? Should there be other interventions that the Government should be doing to help nurture the value of those sectors?
There are. If you look at what has been spent, for example, in my zone in the last year, an awful lot of it was on transport infrastructure, and that does make a difference. The financial incentives have a role. It shows that the zone is serious. It shows that the Welsh Government is serious. If you said that there are no financial incentives, I think it would be negative. But the decisions that people make are not primarily, in my view—I don't know what my colleagues would say—about rate rebates. They're about the skills and they're about markets. They're about things like, 'Is there a cluster? Is there a sector excellence?' Those are the things that attract specific businesses.
To add to that, I think there's a profile and a marketing angle to enterprise zones. They put places on the map. There is activity there. There's a recognition—the local stakeholders see that there's a focus upon that particular area for whatever reason, due to steel or a nuclear power station or whatever. In terms of Cardiff, the financial services, the growth, the legal services—Cardiff needs to be put on the map. We are not the size of Manchester or indeed Bristol. We need to be fighting on that sort of national stage, and an enterprise zone allows you, and has allowed us—. If you look at that growth over the past five years, you look at the—. Since the enterprise zone in Cardiff was established, the city centre has turned around. It is not down to the advisory board, it's an all-round effort. But it is the strength of the market—you look at Central Square, Capital Quarter, relocations into the city centre. Central Cardiff has been very successful, but that is also reflecting the growth of cities. But it has given a particular tag at a moment in time in terms of marketing the city to certain occupiers.
Good morning, all. I'd like to ask about the achievements of each enterprise zone. Some of you have touched on it and others will probably have more to add. And at the same time, I also want to inform you, if you don't know, that I actually live in Pembrokeshire, so I think that would be a good place to start.
Okay. I think my colleagues may have alluded to this in the past, but each enterprise zone faces distinctive opportunities and challenges that affect the economic, geographical and demographic circumstances of each location. The Haven Waterway enterprise zone contains a number of sites, which you're aware of, within Pembrokeshire. Around 20 per cent of the UK's energy supplies are received via Pembrokeshire, and the core Haven area reflects the importance of this sector. It is also an area of outstanding natural beauty, with an agricultural hinterland, and these factors present opportunities in tourism and food processing, which, along with energy, are key priorities for the Haven Waterway enterprise zone.
The zone is also gaining a maritime energy focus, given its deep-sea port facilities, combined with marine conditions suited to wave and tidal stream technologies, plus the benefit of electricity grid access. A new wave energy demonstration zone has been established 13 miles off the Pembrokeshire coast. The zone managed by Wave Hub Ltd, working in partnership with Marine Energy Pembrokeshire and Pembroke Port, has the potential to support the demonstration of wave arrays with a generating capacity of up to 30 MW for each project.
Some key achievements: the Waterstone site, which is critical to the success of the zone, has been sold to the Egnedol Ltd, which has ambitious plans to develop the site as a centre of renewable energy excellence. Egnedol has submitted a planning application, which is currently going through the process. Planning permission was granted on 7 December 2017 for the proposed Valero combined heat and power plant—the £110 million investment gasworks power plant at a site in the zone. And this will allow Valero to be self-reliant on its future energy costs. This is important because, of the sixth refineries, or perhaps we should say five and a half refineries, left in the United Kingdom, four of them are petrochemical. Valero is not—Valero is a pure refinery. Taking control of its energy costs and the sustainability of energy for that system may just allow them to think again about upgrading the refinery process into something else.
As an important employer in the area, Valero is one of the last of the six remaining refinery businesses in the UK. The two-year construction project represents a large inward investment for Wales in the energy sector, safeguarding hundreds of jobs in the zone. Valero are committed to employing as many people from the local manufacturing companies as they possibly can in the construction of their new site.
Discussions are ongoing with key partners, including Pembrokeshire County Council about the proposal for a food park in Withybush, Haverfordwest. Pembrokeshire is an area of outstanding natural beauty underpinned by a strong agricultural base. The proposed food park aims to create employment and to retain added value within the region. This is particularly important post Brexit, where no-one is really very sure what’s going to happen with the agricultural sector, which may impact ultimately on the food sector. This food park is designed in such a way as to be self-reliant. It will also have academic input from, hopefully, one of the universities.
If I can—I know Pembrokeshire well, having lived there nearly all my life, and I live in Haverfordwest, so I know where the food park proposal is, but the question for me is this: is it as a consequence of the enterprise zone that these things that you’ve mentioned have grown? For example, let’s take Marine Energy Pembrokeshire and the port, which has probably had the greatest level of success, I think you might agree. Do you think that the enterprise zone has played a significant part in that? In other words, would it have happened anyway?
The answer to your question is that it probably would have happened anyway. Would it have happened as quickly or as easily? I don’t know. Confidentiality prevents me from giving some information about the—. Well, let me put it this way: trying to find planning consent for a new generating facility, as in Valero, is problematic—there are all sorts of issues. I think that collectively, with Valero, ourselves and the Welsh Government, we have produced a template that is more efficient in getting infrastructure projects like this through the process. So, there are two answers to your questions and one is—. Well, I don’t know, is the answer, but I suspect that we have had an influence. The food park we are supporting, and every opportunity that we do get, we talk to the various departments in relation to it and we talk to the Minister for infrastructure. We direct people and we put them in touch with other people. So, I think, yes, we have a part to play in all of this, in connecting all the dots. We don’t provide them with any funds, but we’re certainly champions for all of these projects.
Okay. Julian—I think it was Julian, but it could have been Roger—said that people are only attracted with a few things and skills were particularly high up there as one of the key drivers. We know that the Haven enterprise, particularly, has high levels of skills that have been developed, since the 1960s, in engineering. So, that being the case, and the fact that we have the zone to promote investment, what do you think, if any, might be the barriers to further economic development and the potential in those areas? You've asked for an extension, so if you've asked for an extension, it must be for a reason.
Yes, it is, because we've unfinished business. Let's take skills as an example. We had a board meeting on Monday, where the college did a presentation of some research that was funded by the Welsh Government through the enterprise zone board about the skills gap in the region. You mentioned marine engineering and the offshore sector, and Pembrokeshire College will be developing some of your apprenticeships in relation to that, but also the tourist and hospitality sector—the skills gap study identified some important issues, and another apprenticeship will be created in the new year, in 2019, in relation to the hospitality sector.
So, the Welsh Government, via the enterprise zone, funded that study, which took about nine months to complete. There are quite specific tasks that have arisen out of that study, and Pembrokeshire College on Monday indicated that they would be taking those forward. So, there's another good example of a partnership approach, and with limited funding—and it was limited funding. I can't remember offhand—I think our budget was probably about £50,000 or something. It was a fraction of the £50,000 to complete the study.
Right. But I still haven't quite grasped, from everything you've said—and I will move on to other people—what the function would be under the extension. I suppose that's what I'm struggling with.
Let me give you another example. I think we're probably the only enterprise zone that has breakfast meetings with all the small and medium-sized enterprises. This is as a result of Murco going into receivership. We had all these companies, excellent engineering companies, all of a sudden finding themselves with a depleted order book. So, we had these breakfast meetings to put them in touch with—. When you go further west—and I'm sure they'll forgive me for saying this—businesses can tend to be less sophisticated. They're further away from the big six, the accountancy firms, the international lawyers, the Confederation of British Industry, the Institute of Directors, the Government departments and from Cabinet Secretaries. So, in a sense, we're bringing Government to local businesses. For instance, last week, we had one with Cardiff Airport, which came down with Qatar, because we want to try and encourage small businesses to export via that new link with the middle east. Already, after a board meeting on Monday, some of our board members met with some local people who are looking for opportunities to export food via that new link.
That's practical—[Inaudible.]—all of this.
Joyce, do you mind if I just bring Lee in then come back to you? I think he has a specific point. I'll come back to you. [Interruption.] You're all right. Okay, Joyce, carry on.
Okay, so, that's great. I have focused on you because you've had the least air time, but I have to expand this to Roger. He's partly explained, very well, what your extension would be, but I want to look particularly at the outputs. If we look at the outputs and the indicators, one of the questions from the table that we've got in front of us that comes to my mind is: is everybody collecting the data in the same way and does it compare—can you read across it? Because I don't think that in every case you can. So, if we're going to ask for investment, the one thing that people are really looking for is output so we can justify that investment. So, are you all comparing? Do you have a formula that you all use that we can draw that information from? So, in terms of jobs, if you like, that have been produced, and jobs that have been saved.
I don't know. I have assumed that the Welsh Government civil servants who fill in the forms fill them in the same way and that there's a consistency there. I hadn't thought of the question that you've asked. I'm not certain what I'd do if it wasn't. If it wasn't consistent, what would I do about it? What could I do about it?
Okay. But for the two zones particularly—becuse we know there are two winding down: two have asked for an extension and one has had an answer—are there any barriers preventing zones from achieving their economic potential? Because that's what they're there to deliver. Roger.
Barriers to us achieving more jobs—can I be as broad as that? Far from it. When I surfaced after the Tata thing, the thing that immediately struck me was the co-operation between the main players. The main players are the council and the Welsh civil servants. I am in daily communication with both of them, not so much the council, but certainly the Welsh civil servants. It's a team and I see no friction between them—no turf warfare. When you look at the Welsh civil servants, there are lots of different groups, some of them overlapping, but, again, it's well-oiled and it works very well. So, as far as the people side of the equation is concerned, I don't see any reason why we can't have a crack at the problem. What's the problem? The problem is laying a set of foundation guidelines for the Cabinet Secretary to mitigate serious loss of employment in the future.
Yes, my experience is similar. There are no barriers. It's quite difficult: whenever you have worked as an engineering company in west Wales and you are providing services to one or two multinationals and there's an incident and you no longer have the same opportunity as you had before, if you've been there for a very long time and if you're a family business and your family have grown up and been educated in that part of the world and they've all remained there, it's slightly more difficult for you to look outside the region. So, part of what we're about, I suppose, is trying to break down some parochial barriers to try and get people to think, and it's working, because we have some of our company now working in the north-east of England, some of the ex-employees of Murco who went to Switzerland, who went to the far east and also to other places, are now looking at those companies in the enterprise zones. So, it's all about links as well—trying to create links, sustain links to sustain the business going forward.
Economic development in rural Wales—rural anywhere else—is exactly the same as economic development in the cities. It's about infrastructure, infrastructure and more infrastructure. But, at the end of the day, it's very hard to justify expensive infrastructure in rural Wales, as it is anywhere else that is rural. The only people who have really got this right are the Chinese. They've spent trillions of renminbi and, whatever it is, dollars, not just in China, building roads into the hinterland of China, but they also do it in Africa and other countries and so on. We can't do that; that money isn't there. So, we've got to work with what we've got.
We've got to make sure that all those small and medium enterprises have links to the Welsh Government and to all the agencies in Welsh Government, that they're aware of what's going on and that they're aware of the contracts that are coming up. Mainstay Marine Solutions are now producing some habitual protection vessels for the Welsh Government and that was on the back of a contract that they won some two or three years ago for the Isle of Wight ferry, which highlighted their skills, and they were very successful. So, it's all about linkages. It's all about linkages with the Welsh Government, with civil servants, with the agencies.
Thank you. Can I draw out more about what was said about the joint working? I've just been trying to think, Stan Mcilvenny's description in my mind of the future role for the board is as a regional co-ordinator and cheerleader, and some of the comments the others said about the future role that needs to be performed. So, given that the Welsh Government is now going to be taking a regional focus and are creating regional overlords within the Welsh Government to co-ordinate this, do you think that process will be satisfactory, and do you think the way they've gone about it, by creating these regional co-ordinating figures within the Welsh Government, will be sufficient?
That's a very difficult question to answer.
I'll skirt around it perhaps. One of the things the board does, and is uniquely able to do because of who's on it and what kind of people they are, is that they can make fools of themselves. They can say outrageous things, have outrageous ideas and they can think outside the box, which you can't really do if you're in a council or in the Welsh Government civil service. So, if that role is preserved, that role of being one of the centres of imaginative visionary ability and the courage to do it, as long as that's preserved, I kind of—. So, I'm answering it as a caveat: organise it as you want, but don't lose that.
Yes, but there's no plan to keep that as we currently understand it, is there? There's going to be no challenge board other than the small one at the centre on that regional basis.
Presumably one assumes that the local contact content that exists in all of the seven or eight enterprise zone boards that we have at the moment is going to be retained. If there was a super board, it wouldn't be a centrally run—. Rather, it will be a centrally run unit, but it will presumably retain the advantages of the local input that has been put in for the last five years, otherwise it would all go to waste. One assumes that.
I haven't looked at it that closely. It sounds as if it's going to be a little more difficult to achieve what I'm talking about, but please achieve it. That's what I'm saying.
An 80 per cent efficient solution pursued with 100 per cent energy is better than the alternative. I'm sure you've heard that before, and that's my view of organisation, whether it be government or a commercial entity. As long as we get that little bit of—'flair' is the wrong word. It sounds a bit—
'Don't care what anybody thinks. This sounds stupid, but I'm going to say it anyway. Why don't we—?' Don't lose that.
Following on from all the observations so far, I think the overarching and fundamental question is: have these enterprise zones been successful? For instance, have the zones provided value for money and have they been successful in delivering the Government's stated aim of acting as catalysts for growth? Do you have an answer to that? How do you feel about that?
So, there we are. Who wants to answer that: have enterprise zones been value for money? Chris.
I'd just like to say: what is the role of the enterprise zone? In my view, the role is to improve the business environment, incentivise investment and to create an environment where investment is welcome. You become an attractive location in which to grow your business and retain your business, because sometimes to stand still can be an important thing to retain the business for the next life cycle.
So, what is the business environment? There are a range of different factors and the factors will vary according to the business and the sector that you are within. If you asked, I think, a basket of businesses, they would probably say skills; they would probably say labour supply, which is slightly different to skills; infrastructure certainly would be there; connectivity as well—digital connectivity; the availability of property—I'll declare an interest in my chartered surveying hat; planning—making sure that you've got a simplified and effective planning regime; we need to have the right utilities there, so there are no constraints there; and are we using devolved taxes and financial incentives in the right way to incentivise rather than just to give people money?
So, just looking at Cardiff, here we are—. In terms of the question, 'Has it been achieved and has it been successful?', we have inward investments from Deloitte and Alert Logic. We have relocations into the zone from Admiral, BBC and HMRC. We have investment in skills with a new further education college for Cardiff and Vale. We have an expansion for the University of South Wales with Atrium 2 and 3. We have a proposal from Cardiff Met for a new creative campus and we have Cardiff University putting their school of journalism into there. It's become a super-connected city. The UK Government has created a financial centre of excellence and Harriett Baldwin came down to open that. Electrification will happen to London, unfortunately not to Swansea. There will be metro central, the expansion of central Cardiff and there's an announcement there. We have close to 1 million sq ft of construction taking place there—
Would any of these things have happened without an enterprise zone?
Is that because of it being an enterprise zone? I mean, the electrification to Cardiff certainly isn't about it being an enterprise zone.
No, no. We have a return of national and international investors. Vastint, part of Ikea, has bought all the Dumballs Road properties. It's just worth while looking at this: there are 44 acres of old engineering sheds that survived the lifespan of Cardiff Bay Development Corporation, they then survived the biggest property boom in recent years, and then they went through the financial crisis, and here we are, it's only just a case that those engineering sheds are going to be redeveloped for residential. This is a quarter of a mile from the centre of our capital city. This is how difficult regeneration can sometimes be. It is about creating an environment, and removing the constraints, in which to attract investment. I am absolutely confident that the enterprise zone board has played a fundamental role in influencing policy to achieve that.
So, does the enterprise zone system give value for money? Let's think about what the money is. Money is earmarked for infrastructure by central Government and is put into the zone; business rates are put into the zone; skills training is put into the zone; and the cost of civil servants working with the boards and with the council—that's a cost. We cost £50,000 a year—our budgets are all the same, I think. The board doesn't cost anything else.
This may sound awfully self-defeating, but the fact that it's a zone has got nothing—. You'd do that anyway—you'd certainly do the infrastructure anyway. The fact that it's labelled as going into a zone—. It wouldn't be going into a zone; it would be going into the Port Talbot part of a region. You'd probably do the business rates anyway—it's not a huge amount of money. The civil servants may not be labelled, 'I'm now looking after Port Talbot', but they'd be labelled in some other way.
So, I think my point is that you'd probably end up spending the money anyway, which sort of says, 'No, the zones aren't value for money', in a negative way. It is value for money, because you would be spending it anyway. I don't see any money wasted because it's a zone. Is that a different way of answering it?
Yes, I think that the point is very well made about value for money. A great deal of the money spent on the Haven Waterway enterprise zone has been sustaining the existing business base, which was greatly impacted by Murco. So, is that good value for money, sustaining 1,000 jobs? I think it is. What would be the alternative? Mass unemployment, and all of those skills—the huge engineering skills—would be lost to the region and lost to the national economy. So, I think it is.
I think that my colleague Chris went through a whole raft of stuff, but I would pick up on one thing. There's one thing that the enterprise zones have in common, I suspect, except for Port Talbot, and that is that we have the fastest broadband in Europe—not my words, but the words of an article in the Financial Times a year ago, talking about, specifically, the enterprise zones.
So, we have that huge investment by the Welsh Government—tens of millions, or hundreds of millions, of pounds have gone into enterprise zones. How do you exploit that? It's easily exploited in the metropolitan cities—relatively easy. But, how do you exploit that in rural Wales and who would do that? What I'm suggesting is that the links between the enterprise zones, between the people in the zones, are best placed to exploit that for the benefit of the national economy.
The majority of the money sunk into our particular zone has really gone into capital assets. The situation was, in 2012, that St Athan didn't have a purpose. If the Welsh Government hadn't stepped in then and actually exercised a negotiated compulsory purchase of it—. The money is there to be resold, to be regained, if necessary. Cardiff Airport is the same: it is an asset that can be sold and recovered. So, I don't think in our particular case that it could be said that it's not value for money.
Okay, obviously, in order to try to evaluate whether the zones have worked, you've used information, or I would imagine you've collated certain information to see how your zones are going, how they're performing, et cetera. Do you think that's been more in depth than that provided by the Welsh Government? Because, quite frankly, we've just been given some information here—figures here—from the Welsh Government and they're hardly expansive, to be quite honest with you, with regard to the costs of jobs created in each of the zones, ranging, obviously, from something like £62,000 per job down to something like £8,000.
Now, we know that there must be some other aspects about that that changes those figures and makes the discrepancy between one zone and another so particularly obvious. So, what sort of—? Where do you gather your information with regard to how zones are doing?
We don't. Your question is probably best directed at the people who compile the information and how that's computed.
I think you've confirmed earlier, haven't you, that it's not you that produces these figures. These figures are for Welsh Government, so—. But, of course, the figures are here, so I suppose David is asking in terms of value for money against the jobs created.
I'll have a crack at answering that, if I may. There is a six-monthly update under the Welsh Government. It's all on the web—quite an extensive amount of information. The problem is this: if you're scrambling to create a job, it's going to be difficult to say, 'That one's a bit too expensive.' We're desperate to create jobs. Why are some jobs more expensive than others? It's because, if it's in capital equipment, it's a different kind of job. So, maybe the Welsh Government is giving more to the more capital-intensive one. But it's pretty—. In my mind, I don't have a brake that says, 'Oh, don't invest in anything over £100,000 per job—don't. Don't do that.' I'm so desperate to create jobs, I frankly don't want—. I have to admit, I don't worry too much about that.
Just outside that, obviously, by creating a geographical area that you call 'the enterprise zone', we've heard instances of companies trying to jump the fence and come into that zone, quite frankly, because they are quite aggrieved about what the people inside that zone are getting compared to themselves. Do you see that as a problem with creating these enterprise zones?
I'll step in here. Displacement, and the big criticism of the Thatcherite enterprise zones was displacement. But that, I think, was a different matter, because the Thatcherite enterprise zones were fundamentally—had a lot more money thrown at them. So, for example, you had 10 years rates free, and so what you'd find is people would drift into, say, Swansea enterprise zone as opposed to Fforestfach, and they would pick up that benefit. The enterprise zone benefits now are much more lightweight, and I don't see that you're seeing the same level of displacement whatsoever. However, let's look at it in the round. We must also work hard to keep the businesses we have. Businesses, whether they are home grown or inward investors, they work on an investment life cycle, and that investment life cycle is determined by a range of factors: the product, the people, the factory, the plant and machinery, whatever else it might be. And, when you come to the end of that life cycle, there is a problem, because the finance director's got a choice: 'Do I re-roof my building, or do we move and consolidate in another plant?' I work in professional services. We say it's six times easier to win business from the existing client than it is to win business from a new client, and it's the same for Wales. So, when we have, let's say, a company in a 1970s shed in Rassau industrial estate with an asbestos roof that's leaking, it's much, much easier to influence them to stay for the next investment life cycle than potentially lose them. And that's the same—. If you look at Cardiff, I fully recognise that we've got relocations into Cardiff, but it's entirely right that we as a country fight hard to retain 4,000 jobs for HMRC, or the question mark over the BBC that was going back three or five years ago when would it be the scale that it was there, because they, really, probably—. We have worked hard to keep those businesses for the next investment life cycle. We were always going to keep Hugh James—local lawyer, grown up on local clients—but, some of these businesses, we have no automatic right to retain them.
I think that, as I understand it, it's possible to expand and contract an enterprise zone. If some people do feel aggrieved, if there's a merit in the argument, you can make an application and there may be some minor adjustments that could take place within an enterprise zone, as I understand it.
I haven't seen any examples of it. That might be because we are lucky in that our enterprise zone is inside a district council, Neath Port Talbot, so they wouldn't allow that kind of thing, I'd have thought, because, jumping the fence, they'd be jumping from their constituency into their constituency, as it were. In general, I don't—. I think I might pick up on something Chris said. I think the cost of moving a business—disruption to production or service, new premises, moving equipment, files, whatever, whatever—would far outweigh the financial benefits of, say, the rates rebate. So, maybe that's—. I haven't seen much of it.
Now, displacing companies from London—. We're very excited at the moment in Port Talbot that we may be on the cusp of signing something. It's because Port Talbot just fits with what they want to do and London's very expensive. They're not coming for the rent rebate, they're coming because it's a cheaper place to do business, because of its excellent infrastructure, with the new station, and because of Swansea University, because a couple of their courses have exactly the kind of young people they want to look for. What a success story. So, I think it's fair to poach from London, but we wouldn't really want it in our backyard.
Hard cash is not central, from our experience, in attracting people into our zone. They're coming there because of the unique facilities, the available airfield accommodation and, I'm bound to say, the proactive Welsh Government aviation team that we've got. They get a warm feeling that they're dealing with people who know, in this case, about aviation, and therefore that is a cocktail that attracts them. I don't think it's hard cash—well, there isn't any hard cash; it's put into roads and—.
Julian, if I look at the figures that Welsh Government has provided to the committee in terms of the enterprise zone in your area, they've given us the figure of £13.8 million as a total expenditure, and jobs created, safeguarded or assisted is 222 jobs. So, the cost per job created, safeguarded or assisted is just over £62,000. So, what would your response be to anyone who would say, 'Well, on paper, that doesn't look good value for money.'
All right. You're referring to appendix 1, aren't you, in the written evidence paper, which does say 222 jobs. I'm bound to say that that was the number of jobs as of September last year, because that's the last six-monthly period. Since then, if you were to say to me today, 'What are the full-time jobs that you've created and will create in 2018?', it's the 222 jobs that you see there in appendix 1—. The Picketson site, which is a small spin-off of the airfield, the north side of the airfield there—there's been a significant take-up of businesses there, and they are saying that they are going to produce, once they've settled in, because this is new stuff, 150 jobs within 2018. And there are the further 706 Aston Martin jobs. Forty-five we've already included in those 222 jobs, of the Aston Martin, so there are a further 706 Aston Martin jobs. So, at the end of 2018, I'd prefer to say, in defence, that we're going to have 1,100 jobs for that investment.
You may chastise me that that still doesn't excite the committee, but I feel that's a much better picture than the 222 jobs.
I suppose the Welsh Government—. The enterprise zones have formally come to a close, I suppose, in terms of their involvement. So, I suppose, from a value-for-money point of view, anyone looking at the evidence that the enterprise zone was set up in 2012, and now we're—in July, this is coming to completion and they look at the hard figures, that doesn't look like good value for money, some would say.
All right. We're—
I think what you're saying is that, well, there's a longer term picture.
I think one has to look at the 10-year picture, as it were. We're sort of going halfway through. The Aston Martin situation was almost a double-edged sword. A lot of the plans that we've put in place now, and are now being triggered, are as a result of the major building block hitting the deck with Aston Martin. Up until that happened, to a degree, it was rabbits caught in the headlights, as it were. We couldn't make a move. Now that Aston Martin is in place, other things are triggered. We're approaching halfway through. We should have 2,500 jobs secured. We're a quarter of that.
The Government has provided us with these figures, but I think all of you have confirmed that these aren't your figures, these are the Government's figures. Is that correct? Yes. Have you seen the figures? I'm not sure—
Do you accept those figures to be accurate and correct in your view?
Well, I believe so. There's no reason to say 'no'. I did see one of the press articles before Christmas talking about some of the costs included and, for example, Ebbw Vale included the Heads of the Valleys road, which seems odd. Yes, it's public sector activity, but that comes back to—. There are infrastructure projects. The Heads of the Valleys road was created in the early 1990s—mid-1990s—so, I'm not sure that necessarily all of these costs are directly relevant to the decisions of the board.
As a result of today I'm going to take a little more interest in this and ask some questions, particularly about how these things are amortised. Because, in Port Talbot, we've just spent £1.1 million so far on a new transport hub. That's got to to be amortised over 20 years, not stuck in—. If it's just stuck in the figures and divided by the number of jobs, it's wrong. So, I'm going to ask some more questions.
I take Chris's point, though, that a lot of these capital projects that have had our figures would have been put in place anyway. The money would have been spent on those infrastructure projects. It seems slightly unfair that it could be put down entirely to us.
It's not unfair. It just needs to be recognised that there are different costs in different pots, in some ways. So, there are long-term projects that are reflected in those figures.
My answer to Julian, as I said earlier: this money would have been spent anyway, I hope, whether it would have been a zone or an area or a region or whatever. The same kind of money would have been spent on creating jobs because that's the target. That's the tiger.
I wonder if it might be useful—because this is a gross figure, of course. I wonder if it would be useful to have a look at the direct and indirect impacts of creating those jobs and retaining jobs so that there would be a net figure after all of this, which might be more reflective of what the true cost is. By that I mean in terms of the people who are in jobs, jobs retained and taxes paid, and national insurance, and also the impact of that on the community and their spend and so on. It might be useful just to see it slightly more in the round if we had that.
No, I couldn't provide you with that. I have absolutely no idea. I don't think—
I don't think officials could either, but an economist within the department could take a bloody good stab at it.
Actually, Stan, I was thinking that you would have said these figures are absolutely accurate, looking at the figures here for the Haven Waterway, at £8,000 per job.
Well, I've got to take officials'—. I presume that they are accurate, but what I would like to see, I think, is the net figure, after taking into consideration the direct and indirect impact of creating those jobs and sustaining jobs.
So, I guess the bigger question is: has this initiative provided added value? I think Chris Sutton, at the beginning, gave the narrative of how it came about. It was announced in England, the Welsh Government bounced into doing something because there are all sorts of developments that are 'We must have them too'. Looking at the evidence from the 1980s, when there wasn't a huge amount of added value—and, as you've said, there was more money on the table then—is this the best way to spend the money, given that Roger Maggs and others have said that a lot of this money would have been spent anyway? Is this activity that's generated additional value, and is it therefore worth continuing, or would we better off achieving similar outcomes in different ways?
Personal view: I think we've probably had one or two too many. In England there are 48 enterprise zones with, say, 50 million or 55 million people—roughly one per 1 million people. We've got eight. So, we do have a lot. I come back to the point I made at the ministerial taskforce for the strategic hubs: there are some very, very strong reasons. To me, Anglesey, for example, is an exceptional reason to have an enterprise zone in terms of preparing the space ready for the largest capital project that probably ever will happen in Wales. So, that needs that sort of thought process, and if the private sector can come in and advise on that, then great. I think that Cardiff and Deeside have probably done their job. That's up to Deeside; David Jones will advise you on his own thoughts. But that is where they were in the state of the market. There will be other initiatives in the future, but we must present the best we have and exploit pockets of growth—that's the phrase I'd use. The enterprise zone experience has shown that perhaps they have been more effective where you are pushing at the open door of the market than when the door is firmly locked. There's been more success, perhaps, where you've had that, where you are nudging the market, because of the lightweight benefits that go with it.
The final point, sorry—but regional growth is a wider issue. We've had talks about local government reorganisation, the establishment of city regions, not combined authorities, not elected mayors. You've got city deals for certain parts, or growth deals, and then you have the ministerial taskforce. Strategic direction and leadership is important, whichever guise that comes from.
It's a judgement call, isn't it? Because from you four zones, we spent something like £90 million, which you described there as a short-term gaming of the market, to try and get some marginal advantage, and that's what we've done for a long time. I guess the bigger question is: if you've got £90 million to play with, to try and interrupt the normal economic cycles that we've gone around for as long as you can remember—is this the right approach, or should we be taking a different approach to economic development?
I would disagree with the assessment. I think we've been improving the business environment. We've done studies on whether we need a new data centre or a new substation in Cardiff. This is not about short-term gains, this is about looking at the long term. This is about linking to skills and LSkIP and the universities; it's about improving the business environment. Yes, there will be some short-term actions we can take in terms of developing some floor space or building a bridge over a railway line or whatever, but it's also about just improving the business environment for the medium to long term, because that's what will drive investment.
Can I ask a different question, then? In terms of the benefits being offered to enterprise zones, one of them was business support. Can I ask for your reflections on how useful that has been, how well that is done, and whether or not that is something that we should be looking at in a different way?
You may recall—. Could I just say that Roger Maggs didn't say that money would've been spent anyway? Roger Maggs said, 'I hope that money would've been spent anyway.' I'm assuming that the fact it was an enterprise zone—that that kind of effort would have been made with or without the enterprise zone, I hope.
I mentioned earlier 15 elements on our product at Port Talbot—one of them is business support. I've not looked at it in depth, but there are Welsh civil servants doing that, and I've met them. I think we score well on that one. We score everything out of five once every six months to see how we're getting along. That's one that scores well.
How do I evaluate—?
At the board level.
It's very subjective indeed. If you've just got off the train, as I normally do, then you'll score transport infrastructure a five—that's the highest score. It's marvellous. Broadband, you'd score a five. Sorry, when you were talking about broadband—I'm straying—what percentage of small and medium enterprises use broadband for sales and marketing of their products? Twenty per cent. Put another way, 80 per cent don't. That's something that we've been trying to do, with the help of Google, and so have Cardiff. I think you've had them as well. We've had sessions with small businesses and Google, and they've been very successful, and they're free. Eighty per cent of small business enterprises don't use the web for their product marketing.
It's staggering, and we got that from Google. Maybe they made it up. But as I said, it is a free course.
On the business support thing, I met the people; I was impressed with them. I haven't spoken to any of the recipients, but I have asked questions about it and what kind of things are you asked to do and blah, blah, blah.
Okay. Do any of the others on the panel have any feelings on business support and whether that's something we do well or not?
I think it's been well received in the Haven, especially since—I hate to bang on about this—but Murco. When your business is threatened, when you all of a sudden find that your major customer is no longer there, then any support is welcome. So, business support has been a useful tool in Pembrokeshire.
When you say 'business support', what do you actually mean? Are you talking about hard cash?
Well, it's listed as one of the benefits that's being—. You define it. What business support have you had?
The ability, if your landlord is Welsh Government and you're a sizeable airline operator, shall we say—the flexibility that exists in Welsh Government to assist that particular sizeable business by renegotiating the rent, or whatever it is, is an incentive to come into the zone, which the private sector can't offer. If you're doing a deal with Welsh Government, I would imagine, as a potential big employer of people, you get a nice warm feeling that, if things don't go right, there are ways, and the man on the other side of the table wants to help you, rather than—if he was a private sector landlord across the table, you wouldn't get the same response. Therefore, I think that is a—. It's not hard cash. Well, yes, I suppose it is hard cash, but it wasn't offered to you as hard cash initially. Those sort of advantages, I would've thought, are key—certainly, key in our world.
I've taken it slightly differently. I mean, it's people offering support.
There is the business support team in the Welsh Government, and, I would add, the skills teams and the local authority—a couple of people in there as well. The skills one is easier to talk about. In Port Talbot, we had a session—we've got 138 businesses and we got 25 of them in the same room with the skills people and analysed, in quite a clever way, their needs as a group, specifically. And that led to 300 days of training, half paid for by the Welsh Government and half paid for by the companies themselves. That's excellent support and that's an annual thing that we're going to keep doing. And that would've happened, I have to say, with or without the board of the enterprise zone, because of Welsh Government doing its job, or civil servants.
Can I just briefly ask Chris about his impressions on the quality of business support?
I think it's part of a package. It shouldn't be the be-all and end-all and it certainly shouldn't be the way that we incentivise businesses to come to here just purely through grant and other support. However, I think it's invaluable, where you can look at training support or—. Support in the round, I think, is a really useful tool in the toolbox. I think it was a mistake in 2009 to ditch it in terms of moving away from that grant culture at that point in time. It is part of a balanced portfolio of different policy levers.
I don't think a company or business considering coming into a zone would score the local support very highly. I don't think it would be influential on the decision. They may raise an eyebrow if there's nothing there, but they're unlikely to test it, I would've thought, in practice. They're coming for other reasons.
I visited AerFin in Bedwas, which is, according to The Sunday Times, the UK's fastest growing privately owned company. They service aircraft engines. I asked them why they located in Bedwas and they said, 'Well, it's because the facilities were here'. Therefore, you'd think the planning process plays a role in this. To what extent have you used the planning process to achieve that kind of buy-in from companies?
Just to declare an interest, we let the building to AerFin. There are two points here. One is the provision of property and the other one is planning—subtly different. On property—and I have banged on about this for a long time—I simply don't think that we have sufficient modern stock out there to attract businesses. It is part of the Wales offer, but it is also something that is very defined in terms of if you look at a building, you can be in there. You can be in there next month, in six months' time when it's fitted out, or whatever. And it's not a case of looking at a field and saying, 'Trust me, in two years' time, there'll be something there', because business doesn't work in those lifecycles, and—
Just to stop you there, one of the things AerFin said was, 'Look, if you'd had the facilities in Bargoed, we would've located in Bargoed'.
Yes, I agree. There is a lack of modern floor space across Wales and there is a case to do that. On Anglesey, to go back to this, there is nothing available. Now, the problem is that the rents do not support speculative development by the private sector. However, what we have done—I know this wearing my property hat—is that we have introduced a property development grant scheme to incentivise private sector developers to build floor space, and a limited amount has been built in Anglesey, a limited amount has been built in Deeside. But if you look across the whole of Wales there are perhaps only two or three vacant industrial buildings, and apart from 1 square mile of our capital city, there is no speculative development to note anywhere.
The fundamental issue on how you achieve that floor space is actually viability, and rents are too low. It's not helped by the recent move on stamp duty, where we're going to put 1 per cent on stamp duty for non-residential buildings over £1 million. I've made my thoughts known to Mr Drakeford. However, planning needs to be more responsive in the round. I think that Mrs Hart missed a trick back in 2011 when she handed out the enterprise zones, or allocated them, because I think the sensible thing then would have been to say, 'We are going to create some enterprise zones. I invite nominations for where they should be located. The only prerequisite is that you must have a valid local development plan'. That would have helped force through local development plans. For example, Cardiff was given one, and it didn't have a valid LDP until 2015. So, it could have nudged and influenced behaviour to deliver those LDPs. One of the key asks was simplified planning zones—
So, simplified planning zones, local development orders—I'm not aware that there is one in any of the enterprise zones. To be fair to Cardiff—I can only speak from Cardiff's side—Cardiff planning department are pretty responsive, but we haven't delivered the LDO element of our enterprise zones—
No, it's because the policy—the councils haven't implemented it. Rhondda Cynon Taf, for example, has just implemented it for Treforest. They've put a red line. I think there is one now in Newport. Very few LDOs have actually been implemented.
The other point is the strategic development plans from 2015. Nearly three years later, and there's no sign of these on the horizon. I know there was a statement just before Christmas. So, we need to see that delivered because it gives a more strategic overview. Crucial to your regional growth point are the SDPs there.
Well, there's talk of this now with the Cardiff capital region having a strategic development plan for that region.
But it's not talk. It was in the 2015 Act, so it should be done now, and that was pretty much the recommendation from 2012 or 2013.
It's in the planning Act, I know. I'm aware of it. I've lived and breathed this, believe me. So, can we get it back to the enterprise zones specifically? Local development orders are not being used, certainly in your—
I have not seen those.
This came up when we had the Cab Sec meeting last September. He mentioned this. It was something that I knew nothing about, not being a property man. I asked Vale of Glamorgan and they immediately said, 'No, we don't need to go down that route. We are highly flexible and if somebody walks through the door and wants to speed-track something, we'll do it'.
That's what they said to me. They said that they were quite—I wouldn't say 'taken aback'; they said, 'We consider ourselves speedy. If somebody comes through the door and wants us to speedily move on planning, we'll do it'.
That is correct.
Can I just go back to broadband, and the fastest broadband in Europe bit for a minute, which is very important? With that extraordinarily useful initiative, and all the money spent by Welsh Government and the European Union putting in all the superfast broadband, we completed an audit recently of available office space in the Haven Waterway enterprise zone, and there were hundreds of buildings, most of them about the size of your garage. So, my view would have been that, whenever all this money's being spent on broadband, there might have been a similar policy regarding, 'How do we exploit it?' For instance, we would like another 10,000 sq ft of business innovation centre beside the current one. There's land around there to do it. But there's none of that. So, anyone wanting to relocate—. If the New York Stock Exchange wanted to relocate some of its back-office stuff to Europe, and to Wales, we don't have a building.
So, the issue is less about the fact that the planning process is difficult, because councils will expedite where necessary; it's the fact that the properties that are suitable are not there.
That's correct, yes. And the private sector, while they have some incentive to do something, are reluctant to pick up the cudgel.
I would say you need both.
Chris, you're the expert—the gap is 40 per cent in Port Talbot.
In terms of the viability of capital build, the rents there—. Fundamentally, we do not have the values that are sufficient to encourage private sector speculative development. Now, if you go back to— . Well, the last significant Welsh Development Agency build programme was in 1992, although there were selected programmes through to about 2002, 2003. And, at that point, the private sector said, 'Hang on a minute, get off our turf, we want to build', and then the financial crisis happened, and it hasn't happened since then. So, 10 years on, you have large swathes of the country, i.e. outside 1 square mile of our capital city, where there is no speculative development, and there needs to be nudging in order to achieve that.
There's been much criticism of that 'build it and they will come' approach, yet we are looking at a shortage of available properties for the purposes of the kind of the AerFin example I gave you.
There's market failure outside the capital.
A brief question, David, before I come to Mark, because Mark has got his question as well. A very brief question.
Just a brief one. This dearth of industrial units, are we talking about across size, of all sizes, or are you talking about maybe the very larger units? You mentioned the WDA. They built on a speculation basis. Should the Welsh Government come in and start building on that basis?
Outside of this—so, away from Central Cardiff—absolutely, but I do wear an industrial agency hat. I think there is a shortage of units across the board, and in particular the SME market, those small units. If you look at them, they're quite expensive to build. You've got more doors, more toilets, more services. So, per square foot, small starter units are more expensive to build. If you look at the Valleys, they are all at 95 per cent to 98 per cent occupancy, those schemes. They are, and you'll often find a terrace where you've got the same tenant in all of them because there's no follow-on space. I honestly think—this is not enterprise zone, necessarily—you could build 500, 600 starter units across south-east Wales or south Wales generally, and the market wouldn't blink.
Now, it's not necessarily Welsh Government; it's probably more local authorities, and, to be fair to Rhondda Cynon Taf County Borough Council, they're doing a job at the moment in Aberdare and they're looking at a scheme. So, maybe that's the answer, and also supporting people like Venture Wales, British Steel, Business in Focus—those sorts of people who also deliver.
A change of topic again. A 100 per cent enhanced capital allowance against corporation tax is available during the year of expenditure prior to March 2020 in Deeside, Ebbw Vale, Haven Waterway and Port Talbot Waterfront enterprise zones. What specific use have the latter two made of those?
Port Talbot, none. We've got three areas inside the zone where enhanced capital could apply, but we have not brought in or not had any queries from people with the kind of scale of requirement for capital equipment that would benefit from it—no market for it. And it runs out in 2020, so it's difficult to imagine a company knocking on our door today and saying, 'We're coming because of that, because we're going to have £10 million-worth of equipment', because they wouldn't be in by 2020 for some of the reasons that we've already been talking about: we have to find the property, get it ready, move the people, recruit the people. I'm afraid that it has not been—. We list it as one of our achievements—in fact, we got it from Whitehall—but it's not proved a piece on the board.
In the same way as we would—it's on the website. Nobody approaches the enterprise zone board. I had one company approach me in two years. They approach the local authority or Welsh Government, and sometimes the UK Government, and the packages of information has it in there that are handed out. Marketing directly is specifically done by Welsh Government civil servants, and they would go to specific conventions or corporation meetings and gatherings where they know there might be interest, and, again, it's in the literature there.
Yes, they do. How efficient that is, I don't know.
As my colleague has stated there, it's in place until 2020. ECAs are available at designated sites within Wales: Deeside, Ebbw Vale, Haven Waterway, Port Talbot. It's an either/or tax break. It's either a tax break from ECAs, or the Government support; it cannot be both. And many companies prefer direct support, we have found. This is more relevant in Wales than in England, I believe, where they generally can't offer the same levels of Government support, so ECAs are more attractive there.
I can't comment on the numbers of businesses that have taken up ECAs because that's between them and the Treasury. But they do have a part to play. I think, Chris, you're—
So, Cardiff doesn't have one. They were aimed at those locations where you would potentially get a capital investment. I think Welsh Government could arguably be lobbying HM Treasury to extend the time limit, because why not? It hasn't cost the Treasury anything. We don't know where EU support will be going forward, so it's nice to have a bit of consistency and stability. Stan says there's an either/or. Well, there might not be an 'either' because we don't know where that goes. I think, also, this builds on that sort of wider thing in terms of looking at other policy levers, for example free ports. We've got two ports here. Look at UK Government—is there some other way of looking at this as well?
My suspicion is, in the practical world, what happens is a large engineering company wants to relocate to an enterprise zone with the enhanced capital allowance, and the reason it comes isn't because of the enhanced capital allowance; it's because of other reasons, as we alluded to earlier. Two big ones are skills and property—access to markets, infrastructure. They make up their minds on that. They will then start negotiating what goodies they're going to get and whether advanced enhanced capital allowances are on the table or not. They'll go looking for them and they'll negotiate with Whitehall. I suspect that's how it would happen if they were big enough.
And Haven Waterway, without divulging commercial confidentiality, have you made specific use of ECAs?
The people who have taken these up, I don't know who they are. That's between them and HM Treasury.
Do you know whether your board, your zone, has made specific use, promoted them, incentivised people with them, made people aware of them?
People within the zone are perfectly well aware of the capital allowances, but whether they take them up or not, I don't know.
Okay, thank you. Finally, Deeside put its proposals to Welsh Government for a zone before the Welsh Government had even announced it was going to have zones because of concern at the risk of commercial core competitive advantage across the border—very close across the border—in north-west England. To what extent have your boards benchmarked the performance of your zones against any of the English zones, or do the points you made earlier about disparity in size negate that?
'We haven't' is the answer. They're completely different beasts, as I understand it. They have access to significant funding directly, which we don't. So, we know we haven't benchmarked ourselves against English enterprise zones.
Well, there has been an element where we have been looking at them in the round. The enterprise zones in England, perhaps there are fewer of them per head of population. They're very specific, some of the England enterprise zones. Some of them are quite wide-ranging—for example, Cornwall marine hub enterprise zone. There is Daresbury with its farmer side of things up in the north-west. Cardiff has been looking at what Bristol's doing, and Bristol has an enterprise zone. That is very much aimed at creative, digital and high-tech, whereas Cardiff has perhaps been more financial and professional services. So, they have been complementary.
In the early days, the enterprise zones in England benefited from a bit of money swilling around the system from the abolition of regional development agencies, and, therefore, they had that additional funding. That was ring-fenced within England because it was the English RDAs that were abolished. So, they have had a slightly different model. One benefit in England that we haven't seen in Wales is business rates retention within an enterprise zone. It doesn't necessarily apply to all the English enterprise zones, but we are seeing those devolved taxes being devolved—business rates devolved in 2015. Should we be looking at local government retention of business rates within a ring-fence, whether it's an enterprise zone, a city region, a taskforce for the Valleys or whatever it might be?
There is a link—you mentioned the Cornwall offshore enterprise zone, and there is a link now between that body and the body in west Wales, and there's co-operation between the two to exploit offshore technology.
Of course, there are cross-border proposals in north-east Wales as well.
Thank you. We've just about come to the end, but could I perhaps ask you one final question, and if you could provide me with a succinct answer on this, and I'm asking you in the round as well: has the Welsh Government achieved its stated objectives with regard to enterprise zones?
I think, yes. I can only speak from the perspective of the Haven Waterway enterprise zone—
In the round, judging from my colleagues' experience and knowing that, going forward, some are going to expire, I think, yes, there has been an interesting and an important role for them to play. I think, for the most part, they have assisted local business in the regions. I think, and if I can just go off the round for a bit and make it personal to—
The businesses in that part of the world are now more sophisticated. They now know where to access both funds and information where they didn't before, and that's helped very much, as I suspect we all have, to sustain local business as well as grow new business.
Very briefly, I think they have achieved a purpose. There have been variable outputs from them, but that is what you get from a balanced portfolio of different geographies and different sectors. It is therefore unfair to pick on one and say that nothing's happened there if two or three have overperformed, because, in the round, you need to look at the averages of that.
It's an impossible question, Mr Chairman. The answer is: curate's egg—good in parts. In the round, what am I comparing it with—if they haven't had zones or if they've had something else?
They had stated objectives, didn't they, of what they wanted to achieve? So, have they achieved those stated objectives?
In the round, yes. In my zone, not yet.
Yes, and they don't want to take their foot off the accelerator now. We had a question on whether it's been good value for money up until now. It's too early to say, but we certainly don't want to change.
Okay, that's interesting. Can I thank you ever so much for your time this morning? There will be a transcript of proceedings made available to you, so please feel free to review that and come back to us if you have any additional comments. We're very grateful for your time this morning.
bod y pwyllgor yn penderfynu gwahardd y cyhoedd o weddill y cyfarfod yn unol â Rheol Sefydlog 17.42(vi).
that the committee resolves to exclude the public from the remainder of the meeting in accordance with Standing Order 17.42(vi).
Cynigiwyd y cynnig.
We now move to item 3 and, under Standing Order 17.42, I resolve to exclude members of the public from the remainder of the meeting. Thank you.
Derbyniwyd y cynnig.
Daeth rhan gyhoeddus y cyfarfod i ben am 11:13.
The public part of the meeting ended at 11:13.