The Welsh Government has set an ambitious and innovative path for regional development and public investment. It focuses on generating growth and increasing productivity, as well as on reducing territorial disparities and ensuring the well-being of citizens, now and in the future. At the same time, the Welsh Government and local authorities are working in a context of uncertainty. Uncertainty arising from Brexit, which can affect multi-level governance systems and regional investment financing. Uncertainty arising from the COVID-19 crisis, which will further strain the Welsh economy, service delivery capacity and its fiscal health.
With uncertainty and crisis also comes opportunity. The Welsh Government has the chance to meet its regional development and investment needs in a manner that is fully reflective of its territorial reality, requirements and priorities. This is also a moment when the Welsh Government can – and is – reconsidering its relationship with regional development stakeholders, including local authorities, the private sector, the third sector, civil society and academia, and how to strengthen these interactions.
Successfully navigating this period of change in a highly complex socio-economic environment will draw on the capacity of all Welsh regional development actors to adjust. The role of government at all levels is changing, and especially in decentralised or devolved contexts. National governments are increasingly called on to take a stronger strategic and policy co‑ordination role, creating space for subnational authorities to implement policy and deliver service in a manner most suited to their local specificities. This means building capacity at and by all levels of government. These new roles put a spotlight on the quality of inter-governmental relationships, which in Wales is also evolving. They have been characterised by mistrust in the past – between the United Kingdom (UK) and the Welsh Government levels as well as between the Welsh Government and the local authority levels. This may be changing, but all parties will need to actively move toward building mutual trust and credibility. The aim is to build a win-win collaboration, including with citizens.
The purpose of this OECD report is to accompany the Welsh Government in building its regional governance and investment capacity. The report starts with an introduction establishing the frameworks for analysis used. Chapter 3 provides an overview of the Welsh context in terms of its territorial and socio‑economic conditions, challenges and opportunities in addressing regional disparities in productivity and growth, and its well-being profile. Chapter 4 takes a careful look at Welsh fiscal and financial frameworks, highlighting some critical challenges and identifying opportunities for ensuring continuity in investment effectiveness, post-Brexit. Chapter 5 examines the Welsh regional development strategic and policy frameworks, and mechanisms to boost policy and investment implementation capacity. Finally, Chapter 6 is a case study focused on establishing economic regions in Mid and South West Wales. It brings together concepts explored in the report, including subnational spending and service delivery capacity as well as governance structures, and compares the opportunities and challenges that would confront a combined region versus two separate ones. Chapters 4, 5 and 6 conclude with recommendations for action. This report was researched and prepared prior to the European Union (EU) Withdrawal Agreement Act 2020 receiving Royal Assent on 23 January 2020, and before the COVID-19 crisis.