From Depression to Devolution: Economy and Government in Wales, 1934-2006

FROM DEPRESSION TO DEVOLUTION

FROM DEPRESSION TO DEVOLUTION

ECONOMY AND GOVERNMENT IN WALES, 1934–2006

LEON GOOBERMAN

© Leon Gooberman, 2017

All rights reserved. No part of this book may be reproduced in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright owner. Applications for the copyright owner’s written permission to reproduce any part of this publication should be addressed to the University of Wales Press, 10 Columbus Walk, Brigantine Place, Cardiff CF10 4UP.

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ISBN 978-1-78316-958-0

eISBN 978-1-78316-960-3

The right of Leon Gooberman to be identified as author of this work has been asserted in accordance with sections 77 and 79 of the Copyright, Designs and Patents Act 1988.

Published with financial support from Cardiff University and the Higher Education Funding Council for Wales.

Cover image: Richard Jack, British Industries – Steel (1924) © National Railway Museum Pictorial Collection/Science and Society Picture Library.

For Mari, Elen and Gwen

CONTENTS

Acknowledgements

List of tables

Abbreviations

INTRODUCTION

IDEPRESSION, WAR AND RECONSTRUCTION, 1934–1951

The economic inheritance

The great depression and the birth of regional policy in the 1930s

Total war and central planning, 1939–1945

The impact of government action

Reconstruction, 1945–1951

Interventions

IITHE AGE OF FACTORIES, 1951–1970

Economic growth and regional policy during the ‘golden age’

Growth and decline within the resource-based industries

Interventions

The administrative emergence of Wales

Conclusion

IIIKEEPING AFLOAT: THE 1970s

The end of the ‘golden age’ and the peak of regional aid

Uncertain times in the resource-based industries

The Welsh Office and job creation

Interventions

Conclusion

IVCRISIS, RESPONSE AND THE IMPACT OF MARGARET THATCHER: 1979–1987

The collapse of manufacturing and the eclipse of regional policy

Redundancies, subsidies and strikes in the resource-based industries

Emergency action from the Welsh Office

Interventions

Conclusion

VA NEW WALES? 1987–1997

Optimism and disappointment

Changing views at the Welsh Office

Controversy within the development agencies

Interventions

Conclusion

VIDEVOLUTION AND ITS DISCONTENTS: 1997–2006

Stability and growth

The last years of the Welsh Office, 1997–1999

Quagmire at the National Assembly for Wales, 1999–2006

The bonfire of the quangos

Interventions

Conclusion

CONCLUSION

APPENDIX 1: DATA

APPENDIX 2: MAPS

APPENDIX 3: ORGANISATIONAL GENEALOGY, 1936–2006

Notes

Bibliography

ACKNOWLEDGEMENTS

PART OF THIS BOOK began as a doctoral thesis at Cardiff University, so thanks are due to my supervisors, Professor Scott Newton of the School of History, Archaeology and Religion, and Professor Derek Matthews of Cardiff Business School, for their advice and support. Thanks are also due to my interviewees, who generously gave of their time, knowledge and experience. I am also grateful to Professor Trevor Boyns at Cardiff Business School, who discussed his unpublished official history of the WDA and reviewed an early draft of this book, although any remaining errors and omissions are mine alone. Most importantly, thanks to Mari for her constant support and encouragement.

LIST OF TABLES

Table 2.1:Financial support to companies in Wales (major schemes), 1960–1 to 1969–70

Table 3.1:Financial support to companies in Wales (major schemes), 1970–1 to 1978–9

Table 4.1:Government support to economic development bodies, 1979–80 to 1986–7

Table 4.2:Financial support to companies in Wales (major schemes), 1979–80 to 1986–7

Table 5.1:Government support to economic development bodies, 1987–8 to 1996–7

Table 5.2:Financial support to companies in Wales (major schemes), 1987–8 to 1996–7

ABBREVIATIONS

INTRODUCTION

THE ECONOMY OF WALES has seen dramatic shifts in fortune over the past hundred years. By the start of the twentieth century, rich stocks of natural resources had enabled the creation of industries that placed it at the heart of the globalised Victorian economy. Towns and cities sprang up within a few decades to service these industries, with the total population doubling between 1841 and 1901. However, the boom did not last and the twentieth century saw protracted and painful change as the dominance of resource-based activity gave way, first to manufacturing and then to services. This long process was often punctuated by cycles of trauma and subsequent reconstruction including: the Great Depression of the 1930s; wartime central planning; full employment in the post-war era and industrial collapse in the 1980s followed by a partial rebirth. The impact of the end of deep coal mining and the reductions in steel employment are well known, but the rise and partial fall of manufacturing and the growth of the service sector had far-reaching impacts that continue to resonate in contemporary Wales, which remains one of the poorest parts of the UK.

The scale of economic change was dramatic, as was the intensity of attempts to deal with their consequences. In many ways, Wales acted as a laboratory for government policy aimed at increasing employment and economic output, with a vast range of activities taking place. Efforts began during the Great Depression of the 1930s via the Special Areas Act, followed by the use of regulatory instruments to encourage factory relocations after the Second World War, then the efforts of the Welsh Development Agency to attract inward investment from the 1970s onwards, through to the deployment of resources by the National Assembly for Wales. A huge range of other activities took place, ranging from the provision of support to business start-ups through to the clearance of derelict land. Despite much effort, some problems have been a constant presence with, for example, parts of the south Wales valleys having been continually designated as areas in need of the highest degree of government support for over eighty years.

Despite continuing economic problems, the totality of intervention has yet to be studied. This book aims to fill this gap by asking what was done, why was it done and was it effective? It outlines and analyses government efforts to grow employment and economic output, evaluates their overall effectiveness where possible, and explains the economic and political dynamics that caused such efforts to take place. While ever-accelerating economic change means that some of yesterday’s solutions may have little relevance, many of the previous approaches and instruments may hold lessons for those currently working on this most intractable of problems.

A Welsh economy?

Works with an economic focus are largely absent from the published history of twentieth century Wales, with most historians being more interested in the social and political outcomes of economic change than in its causes.¹ Overall, a number of problems combine to challenge the writing of history that focuses on the economy. Chief among them is the extent to which an economy of Wales can be said to have ever existed. The original definition of ‘economy’ derived from a French term relating to household management or organisation, before it was extended to cover geographic entities. This implies some internal cohesion where commercial links between different sub-regions are relatively strong.² However, the regions of Wales have always tended to have greater links with England than with each other. For example, attempts in the late 1960s to create an all-Wales Trades Union Council foundered, in part due to the opposition of the North Wales Committee of the Trade Union Congress, which argued that such a council would be ‘impractical’, given that Wales was ‘just not an economic unit’.³ Economic and geographic realities were also reflected by major transport routes, most of which ran on an east–west basis. Remarkably, the main road linking north and south Wales (the A470) was not designated as a trunk road in its own right until the 1970s, prior to which it was part of twelve separately badged roads. As well as this, Wales had little or no identity as a distinct administrative or political region prior to the later twentieth century, meaning that government decisions on economic issues rarely, if ever, considered it as a unit. Finally, the boundaries of Wales itself were not always clear, with debate over Monmouthshire’s status being reflected by references to ‘Wales and Monmouthshire’ in official publications and some Acts of Parliament. Indeed, Monmouthshire’s legal status had been English since the Acts of Union of the sixteenth century, despite its Welsh heritage. However, this was always contested, and the county was formally and finally recognised as being part of Wales by the 1972 reorganisation of local government.⁴

Despite such debates, all nations, regions and localities possess an economy within their respective boundaries, a difference being the extent to which they are characterised by internal and external linkages. An economy, such as that of Wales (defined as including Monmouthshire), cannot be theorised out of existence, although the degree of integration with England means that there can be no sensible historical discussion of a separate economy. Despite this, the emergence of a Welsh polity throughout the mid to late twentieth century led to a gradual process by which a Welsh economy was declared to exist, being treated in administrative terms as if it did. Some Wales-based planning mechanisms were established during the Second World War and the steady development of national institutions afterwards, culminating in the creation of the National Assembly for Wales after 1997, meant that the economy was being increasingly impacted by political decisions made in Wales.

Government reaction

Historic relationships between governments and the economy of Wales are complex, with expenditure and activity falling into one or more of at least four overlapping categories in terms of their economic impact. First, a vast range of general activities carried out by government, ranging from building roads and providing education through to procuring goods and services, will inevitably have had some impact, although such activity was often not carried out with the specific aim of developing the economy. Second, central governments controlled the operation of nationalised industries for decades after the Second World War. Third, they carried out actions specifically aimed at increasing employment and economic activity within defined portions of the UK. Such activities began during the 1930s, but their heyday was between the late 1940s and 1970s, when they were known collectively as ‘regional policy’. This focused on the use of regulatory controls, based in part on methods successfully used in wartime to encourage industry to locate in a particular area, the construction of factories and the provision of financial support to businesses. Finally, the creation of the administratively devolved Welsh Office in 1964 subsequently led to new methods of intervention, such as the Welsh Development Agency and the Development Board for Rural Wales, as did the ability to access European funding after the UK’s accession to the European Economic Community (EEC). Such Welsh Office-led activity is referred to within this book as ‘economic development’.

This monograph focuses on the final two categories of ‘regional policy’ and ‘economic development’, as it aims to analyse activities specifically designed to expand the economy of, and employment in, Wales. It also examines their political economy, with the aim of explaining why governments and their agencies acted in the way that they did. Topics covered include the rise and fall of regional policy, the increasing importance of the Secretaries of State for Wales (Cabinet ministers with responsibility over the Welsh Office) and their varying approaches to economic development, as well as the impact of political turbulence within the National Assembly for Wales. Finally, given the importance of the great resource-based industries of steel, mining and agriculture, it contains brief comment and detail on central government activity in these sectors, two of which (coal mining and steel) were state owned for much of the period after the Second World War, while agriculture became largely dependent on state support.

If defining government reaction to economic change is complex, untangling its governance is even more so. Before the 1960s, central government managed regional policy, but during the 1970s and 1980s, important elements were downgraded, transferred to the Welsh Office or discontinued. Throughout these decades, the Welsh Office accrued responsibilities and created its own economic development institutions, before administrative devolution progressed to political devolution with the first elections to the National Assembly for Wales in 1999. In political terms, control gradually shifted from central government departments to the Welsh Office, with its ministerial leadership appointed by the UK prime minister, and then to an elected National Assembly for Wales, although areas such as nationalised industries remained centralised.

Overall, delivery was characterised by change and complexity after the 1960s, with an increasing number of state or state-sponsored organisations operating at Europe, UK, Wales and local levels by the 1990s. For example, a study in this decade identified at least eleven interlocking organisations active within Gwynedd alone,⁵ while fifty-one committees administered European funding for a short period after 2000. While other organisations, most notably within local government, often played an important role, this book is not an exhaustive account of all activity carried out by all such bodies, although some references are made to local government. It is doubtful that such a study could be written in one volume, given the scale and complexity involved. The book instead focuses on, first, central government and regional policy, and, second, the Welsh Office and economic development, although the two occasionally overlap. In essence, it seeks to combine economic history with elements of historical political economy, so enabling an overview and analysis of the complex political and economic relationships and trends that characterised the entire period.

The impact of regional policy and economic development

Within regional policy and economic development, the identification of the ‘additional’ impact of their activities, defined as those that existed only due to such actions, has long been a vexed issue. It can be proposed that successful activities would enable the Welsh economy to converge with that of the UK, with divergence indicating failure. However, such convergence may be due to other reasons, such as the presence of natural resources or an existing concentration in growth sectors. Conversely, if a region is diverging, it can be argued that such trends would have been worse without regional policy or economic development activity. Since the 1990s, attempts have been made to solve this puzzle through survey-based approaches to evaluation. However, methodological differences and lack of coverage mean that the overall picture remains unclear, even for this relatively recent period. The situation prior to this decade is far worse, given what a history of UK industrial subsidies called the ‘remarkable’ lack of evaluation.⁶ Difficulties in Wales were summarised by the government’s National Audit Office in 1991, when it noted that the Welsh Office and its agencies had

spent substantial sums on initiatives which have job creation and safeguarding as a primary aim. These have resulted in substantial numbers of new jobs being created. However, the bodies have said they cannot assess the extent to which these initiatives have influenced the overall trends in the labour market. Nor can they assess the economic position Wales would have reached without those initiatives. This is because the Welsh economy […] has been subject to many influences outside their responsibility. It is therefore very difficult to evaluate the full success of these initiatives.⁷

For example, the attraction of overseas investment was high-profile and successful throughout the 1980s and beyond, with substantial sums being spent on preparing sites, building factories, providing grants to investors and overseas marketing. These activities helped to attract investment but it is not possible to determine the exact relationship between them, the decision to locate in Wales or the levels of investment that actually took place. An element of this was noted in 1980, with the Welsh Office stating that ‘it is virtually impossible to quantify the overall results of promotional activity’.⁸ At the same time, attempts to identify the economic impact of European funding were almost entirely absent prior to the 1990s, while those that took place subsequently struggled to produce reliable estimates. Overall, it is impossible to carry out survey-based analyses on expenditure made many decades ago, and no such effort has been made in this book. However, some activities and output can be identified, as can the motivations behind, and influence of, regional policy and economic development.

North, south, east and west

The fragmented nature of the historical economy of Wales presents further challenges. Any attempt to base an analytical approach on the sole usage of aggregate statistics for the country as a whole will lead to an overwhelming focus on the two southern counties of Glamorgan and Monmouthshire, especially on the south Wales coalfield, which employed more than eight times the combined north Wales total for slate and coal in 1950. However, this book views the economy of Wales as a unit for consideration, recognising the need for a broad geographic scope. Despite this intention, there are two reasons why a certain lack of balance is sometimes apparent. First, the sheer scale of population and economic activity in the south means that some prioritisation is inevitable. Second, this book is a history of government reaction to economic change, and for much of the period, such reaction was heavily concentrated on the industrialised south. The Special Areas Acts of the 1930s, which gave birth to regional policy, applied to parts of south Wales only, although wartime activity impacted all parts of Wales. After the war, regional policy again focused mostly on south Wales, but the 1960s saw a gradual spread to an all-Wales coverage, while all parts were covered by powerful development agencies from the mid 1970s. The maps in Appendix 2, showing governments’ priority areas over time, provide the clearest illustration of this trend. While this book considers the reasons behind this relative neglect of much of Wales, its geographic focus reflects the gradual spread of governmental activity, so while earlier sections generally focus on the south, broader coverage gradually becomes apparent as the book progresses.

Structure

Chapter 1 deals with the birth of regional policy during the Great Depression. It then details how the Second World War transformed the economy throughout Wales, as well as central government’s approaches to ‘regional’ economic planning. While wartime activities sit outside regional policy, as they were motivated by the need to win the war as opposed to any desire to revitalise regional economies, their impact merits their inclusion. The chapter concludes with an account of post-war reconstruction, a phase that featured the implementation of an assertive regional policy. The second chapter covers the ‘golden age’ between 1951 and 1970, when a period of full employment and steady economic growth was achieved with the help of comprehensive regional policy, based on the use of regulatory instruments to attract manufacturing investment to much of Wales. However, as the book moves into the 1960s and beyond, its focus on central government’s regional policy gradually decreases. Conversely, the focus on Wales-based bodies, such as the Welsh Office, grows. Chapter 3 covers the end of the ‘golden age’ in the 1970s and central government’s retreat from regional policy, creating a vacuum that was partly filled by the Welsh Office and its newly created economic development agencies.

Chapter 4 focuses on Prime Minister Margaret Thatcher’s first two terms, characterised by economic turbulence, a rapid decline in central government’s commitment to regional policy and large-scale Welsh Office activity. Chapter 5 examines the years between 1987 and 1997. It largely focuses on Welsh Office activity, covering themes including declining overseas investment as well as how battles over the governance of economic development organisations reflected the increasing politicisation of their activities within a Wales-based context. The sixth and final chapter focuses on the chequered first years of the National Assembly and its struggle to manage economic development, with the process by which control over such activities was transferred to Wales reaching its conclusion. Writing history requires perspective that only time can give, so becomes increasingly difficult as we get closer to the present day. The book thus ends in 2006 with the ‘bonfire of the quangos’, the controversial merger of the Welsh Development Agency and other organisations with the Welsh Assembly Government. The conclusion assesses the vast range of activity and motivating factors, before identifying some lessons that could be learned from the past when examining the political economy of contemporary Wales.

Each chapter has a broadly similar structure, first focusing on the political economy of the UK as a whole and central government’s approach to regional policy. While this is a work of Welsh history, mention of such developments is needed, due to the extent to which the economy and politics of Wales was integrated with the rest of the UK, with decisions on regional policy in Wales being made in London for much of the period. Each chapter then focuses on the economy of Wales, including an overview of the hugely important resource-based industries of mining and quarrying, steel and agriculture. The next focus is the political economy of economic development within Wales, once some responsibilities were devolved to the Welsh Office from the 1960s. Remaining sections examine activities carried out in Wales under regional policy and economic development, and their impact. Overall, while earlier chapters have a heavy focus on policy developments decided upon at a UK level, this gradually changes and by the end of the book, the chapter dealing with the National Assembly for Wales focuses almost exclusively on policy and activities decided upon in Wales.

I

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DEPRESSION, WAR AND RECONSTRUCTION, 1934–1951

The economic inheritance

WALES WAS ALMOST entirely pastoral prior to the Industrial Revolution, although its rich stocks of natural resources meant that some pockets of mineral workings and proto-industrialisation existed, but were relatively small in scale. However, its resources led to an eruption of economic activity during the eighteenth and nineteenth centuries. By the late eighteenth century, the presence of coal and iron ore had facilitated large-scale iron industries along the heads of the south Wales valleys and parts of north-east Wales, copper deposits in Anglesey were being mined, while Swansea had emerged as a major copper producer. Slate emerged as a major industry, while zinc, manganese and lead mines were also active. However, while industrialisation in the rest of the UK created demand for raw materials, it was often a double-edged sword, in that the creation of national and international markets enabled greater competition, sometimes at the expense of activities based in Wales. For example, copper mining was in decline by the early nineteenth century, with smelting plants in Swansea increasingly sourcing ore from overseas, while the mid Wales wool industry failed to make the transition to large-scale production. ¹

However, the mid nineteenth century saw an intensification of resource-based growth within some sectors. The slate industry, concentrated in northwest Wales, grew rapidly between 1830 and 1880 as new markets opened up in the UK and beyond. By the final decade of the century, it employed over 20,000 men, almost half of whom worked in the giant quarries of Penrhyn, Dinorwic and Oakeley.² Meanwhile, the relatively small Flintshire and Denbighshire coalfield, employing some 10,000 men by 1880, also coexisted with a range of other industries, such as lead smelting and brick-making. However, the greatest upsurge in activity occurred in south Wales, where the hugely successful iron industry, which produced up to a third of the UK’s entire output by the 1830s, gradually lost its status as a leading sector to the coal industry. Geology and geography played important roles within the iron and coal industries. As steel gradually replaced iron in the later nineteenth century, exhaustion of limited ore resources, combined with the need for large sites closer to ports, saw the industry gradually shift to coastal locations. Tinplate manufacturing developed between Port Talbot and Llanelli as well as in adjacent inland areas, while lead, copper and zinc were also produced. Within coal, the vast reserves of the south Wales coal-field combined with the railway boom to provide both the raw materials and the market access necessary for it to thrive. By the late nineteenth century, a large-scale mining industry and transport infrastructure was established throughout the south Wales valleys, with 449 collieries by 1878, while south Wales possessed one of the world’s most densely developed rail networks. Urban centres sprang up to service these industries with, for example, the population of the coal-exporting port of Cardiff rising from some 10,000 in 1841 to 182,000 in 1911.³

Despite this rush of activity, the fortunes of some resource-based industries fluctuated. Steam-powered ships enabled the greater importation of agricultural produce and the tinplate industry was affected by the imposition of tariffs by the United States from 1891, while expansion within the slate industry was curtailed from the 1880s by stagnation within domestic construction and from the 1890s by overseas tariffs.⁴ However, ‘King Coal’ powered onwards. It had enabled the steam-powered industrialisation that allowed the UK to emerge as the ‘workshop of the world’, and then as its trading fulcrum. Its rise seemed unstoppable, with employment in the northern and southern coalfields rising from 80,000 in the 1880s to 242,000 after 1910.⁵ By the end of the nineteenth century, more than half of the coal produced in Wales was exported. Historian John Davies estimated that a quarter of the global trade in the sources of light and energy originated from south Wales, comparing the role played by the Bristol Channel to that of the Persian Gulf in the 1980s,⁶ while the late-nineteenth-century Amman Valley, in the coalfield’s far west, was remembered later as a ‘regular little Klondike’.⁷

By 1901, the Western Mail could point to how natural resources had cemented the place of Wales as ‘one of the brightest and most truly civilised spots in the queen’s dominions’, featuring ‘a tale of growth in material and industrial prosperity’,⁸ but resource-led development had created an economy that was remarkably concentrated, both sectorally and spatially. In that year, over 60 per cent of the occupied male workforce was active within a narrow band of occupations generally dependent on resource extraction: mines and quarries; metals and engineering; transport and agriculture.⁹ Many of the remaining workers were similarly dependent, whether working within the great commercial centres that sprang up to service the coal-export trade, or within the retail or service activities dependent on wages generated by resource extraction. While women were by no means absent from the paid labour market, they were at a disadvantage in such an industrialised economy, tending to concentrate within domestic service. By 1921, almost one out of every three occupied men in Wales worked in mines or quarries, with most of these working in the coal industry, within which employment stood at a remarkable 278,000.¹⁰ This inevitably concentrated population where the most valuable natural resources were found, meaning that sectoral specialisation ran parallel to population concentration. By 1921, some 65 per cent of the population of Wales lived in the two southern counties of Glamorgan and Monmouthshire, although these accounted for less than 20 per cent of its total land area. Other, smaller, concentrations of population were found around the north-east Wales coalfield and the slate workings of the north-west. While pockets of mineral workings existed elsewhere, population density remained low throughout the rest of Wales, with many areas impacted by large migration flows to the newly industrialised areas.

Sectoral and spatial concentration led to fragmentation within Wales, and integration without. While the relationship between the south Wales coalfield and its coastal hinterland did create an integrated regional economy, the economy of Wales as a whole faced outwards, through its role as a resource base for the UK and beyond. Linkages between concentrations of activity were conspicuous by their absence, while Wales had little or no status as a unit of governance. At the same time, while resource-led activity had created an urban Wales, it was also to prove a fatal weakness. Wales was so obviously suited to primary production, demand for whose outputs seemed insatiable, that virtually no diversification occurred, while the sheer scale of primary industries meant that other activities were often crowded out. For example, Cardiff never developed as a shipbuilding centre, despite its status as a major shipping centre and the availability of raw materials. Contemporary debate raged as to the reasons why, but a likely explanation is that by the late nineteenth century, shipyards required a range of sub-contracting industries, most of which were absent from the city and the surrounding area.¹¹ More broadly, Wales had little presence in the second industrial revolution, of the later nineteenth century, while areas such as the English Midlands developed