Building the economy: Is the Welsh Government delivering on fair work, sustainability and the economy of the future?

This is the third article of our ten-part series looking at the Welsh Government’s progress in delivering its Programme for Government (PfG). Here we explore the well-being objective to “Build an economy based on the principles of fair work, sustainability and the industries and services of the future”.

There are 10 specific commitments beneath this broad Cabinet-wide objective, which the Welsh Government has given an update on in its PfG annual report. There are also relevant Ministerial commitments.

Browse our full #ProgrammeforGovernment series, published to date.

With the UK midway through a predicted record fall in living standards, and a challenging economic outlook, much has changed since the Programme for Government (PfG) was published two years ago. How has the Welsh Government been able to progress towards its objective to build an economy based on the industries and services of the future, fair work, and sustainability? In this article we look at what's been delivered so far.

Building the industries of the future

The Welsh Government’s Economic Action Plan sets out its intention to “supercharge our industries of the future”. The semiconductor cluster around Newport has been a key area of focus, with the Welsh Government supporting businesses in the sector to expand. The Minister for Economy said “this is an area where both [Welsh and UK] Governments could do more by having a more fruitful and constructive relationship with each other”. The Minister has also suggested the UK Government’s semiconductor strategy is “a little underwhelming”.

The Welsh Government has also committed to investing £100m over 10 years in the Tech Valleys programme. Key programme investments to date include the National Digital Exploitation Centre and the sustainable technology campus in Blaenau Gwent. There are questions about the number of jobs created so far through the investment. The Minister has said there is potential for more jobs to be created once projects are completed.

The Welsh Government aims to create a low-carbon society and is investing in “low-carbon infrastructure, renewable energy projects and sustainable homes”. It intends to support the green economy by investing in ‘magnet projects’ to drive wider investment. Areas of focus include floating offshore wind and tidal energy, as well as emerging sectors such as hydrogen. One example is the Tidal Lagoon Challenge fund, which opened in June. The Fund is accepting applications for research to reduce or remove barriers to developing tidal lagoons, ahead of funding being awarded in spring 2024.

The two freeports currently being developed in south-west Wales and on Ynys Môn also focus on renewable energy and low-carbon technology. They aim to create 20,000 jobs and secure almost £5bn of investment. The Institute for Fiscal Studies has said that, while UK freeports will attract extra jobs and investment, part of this will be displaced from other areas or will be ‘deadweight’ investment that would have happened anyway. The extent to which this happens will be an important determinant of the success of the policy. Other key issues to consider include governance, and the impact on workers’ rights and environmental standards.

Developing a skilled workforce

The Minister for Economy has said skills “will be a key enabler as we transition to a net zero economy”. However, the Wales Centre for Public Policy has found “the education and skills system currently lacks the capacity to reskill existing workers and help develop the workforce for the future”.

The Welsh Government’s Net Zero Skills Action Plan: ‘Stronger, Fairer, Greener Wales’ sets out how it will deliver in this area. It focusses on seven priority areas, including: understanding the current skills position across sectors; growing a skilled net zero workforce; and strengthening the skills system.

The independent Climate Change Committee, which advises the UK and devolved governments on preparing for climate change, has given a mixed appraisal of the plan. It says it “is encouraging, and better than what is happening at the UK level, but the Welsh Government need to move to firm and more specific actions in this area”.

The Welsh Government has also invested in Green Personal Learning Accounts, which will “support new and emerging net zero skills in targeted sectors”. These allow those over the age of 19 to study part-time to obtain the qualifications needed to change career or up-skill in their current career.

At the start of the Sixth Senedd, there were concerns the pandemic would lead to a “lost generation” of young people scarred by unemployment. In response to this, the Welsh Government launched the Young Person’s Guarantee (YPG) in November 2021. This is an umbrella of programmes which provides everyone under the age of 25 with the offer of work, education, training or self-employment. Since its launch, the YPG has “supported more than 20,000 young people; 11,000 [of which] have started on employability programmes”.

A key Welsh Government commitment under the PfG is to create 125,000 all-age apprenticeships this Senedd term. In July, the Welsh Government said that it has “delivered more than 28,000 all-age apprenticeship starts since May 2021”.

However, the Minister for Economy said earlier this year that the target will not be met by the end of the Sixth Senedd, and will take six years to deliver instead of five.

Supporting local economies

Many of us worked at home regularly for the first time during the pandemic. Building on this, the Welsh Government has set a target of 30% of people working at home or close to home on a regular basis. Data published by the Welsh Government and Office for National Statistics suggests that between 25% and 40% of workers in Wales work away from their workplace at least some of the time.

The Welsh Government has set out a range of ‘town centre first’ policies to create more agile town centres. Its Transforming Towns programme will provide £100m to local authorities and their partners between 2022 and 2025, to redevelop and improve town centres. However, Audit Wales note that, while “large sums” have been invested, “it is questionable if this funding is helping to create sustainable town centres”.

In recent years, we’ve also seen an increase in bank closures across town centres and beyond. The Welsh Government supports the creation of a Community Bank for Wales to address this and had been working with Monmouthshire Building Society. However, the building society decided in July to stop working on its plans for the community bank, referring to the “current unpredictability and ongoing challenges facing the UK economy”. It’s unclear where this leaves the government’s ambitions although the Minister for Economy has committed to exploring “all options toward creating a community bank in Wales”.

Four in ten Welsh jobs are in foundational economy sectors, which provide everyday goods and services such as health and care, retail and tourism. The Welsh Government has created a Backing Local Firms Fund to support businesses in these sectors to “create more and better jobs closer to home”. The fund aims to address challenges such as “widespread” low pay and insecure work, along with other PfG commitments such as paying care workers the Real Living Wage.

Delivering fair work

The Fair Work Commission established by the Welsh Government reported in 2019, making 48 recommendations. All 6 of the Commission’s priority recommendations have been delivered, as have some others. Ministers have committed to taking the remaining recommendations forward during the Sixth Senedd, although in some cases the approach taken may differ to that recommended.

One of the Commission’s priority recommendations was that its observations inform the development of legislation to put social partnership on a statutory basis. The Social Partnership and Public Procurement (Wales) Act received Royal Assent in May 2023, delivering the PfG commitment to “put social partnership on a statutory footing”.

Attention now shifts to implementation of the Act. The Senedd’s Equality and Social Justice Committee has said, in order to deliver on its potential, the Welsh Government needs to be clearer about what it wants to achieve from the legislation. As the Welsh Government implements the legislation, we’ll see the extent to which these concerns have been addressed.

The Economic Contract asks businesses to commit to four principles in order to be eligible for Welsh Government funding:

• economic strength and adaptability;
• fair work;
• promoting wellbeing;
• and low carbon and climate resilience.

The PfG commits to strengthening the contract, which will be informed by the evaluation currently taking place. The Senedd’s Economy, Trade and Rural Affairs Committee heard last year that the contract is poorly understood, and needs better monitoring and enforcement to deliver greater impact. The Welsh Government acknowledges there is “more to do” to explain and promote the contract, and is monitoring its implementation to identify opportunities to strengthen it.

Long-term challenges

While many of the challenges facing the Welsh economy are long-term and structural, much has changed since the PfG was published in 2021. People are experiencing what is expected to be the largest fall in living standards on record, households and businesses are paying much more for energy than anticipated, and interest rates are at a 15 year high.

It remains to be seen how the Welsh Government will respond to these challenges, and how they will affect delivery of the PfG over the Sixth Senedd.

Explore the Programme for Government, its objectives and commitments

Article by Gareth Thomas and Lucy Morgan, Senedd Research, Welsh Parliament