Mark Drakeford has served as the First Minister of Wales since 2018. He has been a Member of the Senedd since 2011. He was Professor of Social Policy and Applied Social Sciences at Cardiff University from 2003 to 2013 and worked as an advisor to Rhodri Morgan as First Minister.
This interview was conducted on 13 January 2022.
Q: Could you tell us about your role in growth, regional policy and devolution over the past few decades?
My own part in it is relatively peripheral in the sense that I was a Special Adviser in the Welsh government from 2000 to 2010 in the office of the then First Minister Rhodri Morgan. And the reason I describe that as peripheral is because this was the part of the activity of the Welsh Government that the then First Minister took the most direct personal interest in. So, while I was more directly engaged in advising the First Minister on social policy matters and indeed the interface between social policy and economic policy, economic policy itself is what the First Minister knew the most about, was most animated about, and he didn’t need a lot of advice.
Q: Did you have any advisory roles before the devolution settlement?
No, not directly. By then I was working in the university here in Cardiff. I’ve been a local authority councillor for quite a while. So I was involved in the political space throughout that period. But in terms of advising in economic policy issues, no.
Q: What’s your overall assessment of policy around decentralisation and devolution in the UK over the past few decades? What do you think has been the main success and what is the main frustration?
I think the establishment of the institutions themselves is probably the biggest success. I’ve been involved in campaigns for devolution in Wales back to the referendum of 1979. At that point, there were many learned articles written saying that devolution in Wales was off the agenda for another half a century and within 20 years that had been reversed. So the establishment of the institution, the fact that in Wales the institution, which got off to such a hesitant start, has since then entrenched its place in Welsh life. I think levels of support for it are of a completely different order, and over the first decade particularly, there was a strengthening of devolution, both in terms of the responsibilities of the Senedd as it now is, but also in a second referendum in 2010, a much bigger, emphatic endorsement for the Senedd becoming a primary law-making institution. In terms of success, I would say it’s the entrenchment of the institution.
We’ve had a very different second decade of devolution. Since 2019, for the first time, we face a majority Conservative government that is explicitly hostile to devolution and spends its time stealing back money, stealing back powers, trying to intrude itself into spaces that constitutionally it has no part to play in. So, the first decade was a decade of working with a government, obviously a Labour government here, a Labour government in Westminster is very different in that way. On the second decade, a significantly different experience as it is in terms of economics. The first decade of devolution is a period in which real spending increases for devolved services happened every year. It was true, even marginally. It was true even in 2009 and 2010. But our budget grew every single year, and in the decade of austerity our budget has shrunk every single year. So a decade on, we have less to spend as a Welsh government than we did in 2011/12. So that’s two very contrasting experiences.
Q: What were the purposes of Welsh devolution?
I think the dominant motive is the democratic deficit. In November, we will mark the centenary of the first general election in November 1922 when Wales voted for a majority of Labour Members of Parliament. That’s the first general election in which more than half MPs returned were Labour and we’ve never had an election since where that was not true. So we’ve had a century of Wales voting Labour. In 1997 we were still in the aftermath of 18 years of consecutive Tory government, a government for which Wales never voted. So that democratic deficit, that sense of devolution allowing people in Wales to take into their own hands, decisions that affect only people in Wales, was the major driver.
Rhodri [Morgan] would always say that the greatest recruiting sergeant for devolution was Mrs Thatcher. She created more votes in favour of devolution than any other single individual. But alongside that is definitely a narrative which is above it, an institution in Wales able to focus on the future of the Welsh economy, to secure Wales’ place in Europe, and to be able to reverse what had by then been nearly two decades of a widening gap between Wales and the rest of the United Kingdom, both in employment levels, economic inactivity levels, levels of available household income and so on. So that strand was by no means invisible, even though I would probably say that it was the second strand rather than the dominant one which is putting right that democratic deficit.
Q: How did you think about the objectives for the Welsh economy?
There are many things that are still real challenges for the Welsh economy. But I also want to then say that I think if you had been sitting around the table in the year 2000 with Rhodri and the people who were involved in the conversation and said, ‘within twenty years, Wales’ unemployment level will be lower than the United Kingdom and the gap between Wales and the rest of the United Kingdom in terms of economic inactivity would not just have stabilised but have been powerfully reversed; if you have said that over the twenty years, the Welsh economy would have grown faster than the UK economy and that the part of the Welsh economy that would have grown fastest of all would have been West Wales and the valleys, then I think people would have said, ‘that is pitting your ambition well beyond what you could expect to have achieved’. And yet all of those things are true.
Q: What were the other places you looked to learn from?
I think the place that we looked most was to Europe. Don’t forget that Rhodri, before becoming an MP, had been head of the European Office here in Wales. He spoke French and spoke German. He was an absolutely comfortable European and his efforts were put into making sure that Wales was, for example, a member of the motor regions of Europe. We have very close links with Baden-Wurttemberg, with Lombardy, Emilia-Romagna and regional governments elsewhere in Europe, which we could look to find some ideas and some lessons and some alliances as well.
Q: What are the things you saw?
There are three things, and I don’t think they are unique to those places: the importance of skills, the importance of infrastructure and then the issue of agglomeration. Wales was not hugely differently to a number of English regions, a place with too few high skills and too many people without the skills they would need in the economy. With our geographical position on the western fringe of the European Union, infrastructure was critical if we were to be able to combat, as I think we saw it then, some of the disadvantages of long supply chains, long distances. And then could you think in economic terms not as Cardiff, or Newport or the Valleys, but as an economic region in itself, with a population of a million people and more, and use that agglomeration factor to improve things. Those three lessons we took from those contacts, because all of them have responsibilities that lie with the Welsh government – you can do things about them yourselves, rather than relying on what other people have to do.
Q: How is making economic policy different to how it would have been before devolution?
I’ll tell you two things. One is that successive Welsh governments have been much more inclined to active labour market policies, to intervene in the economy. I remember quite vividly a conversation between Rhodri and Peter Mandelson who was Secretary of State at that time, and Rhodri was trying to persuade him about our programmes – they were called ReAct and ProAct. They were programmes that we introduced around 2008, 2009 based on the banking crisis. They were active labour market policies designed to make sure that, for people who find themselves displaced from the jobs that they would have done before, there is money available to support those people in the transition to a new set of skills, to support employers in keeping jobs alive during a period of difficulty so you could see a future prospect for them. Peter, in the end, that was too much for him. That was too intervention for him.
I think instinctively the Welsh Labour government was more willing to intervene and not frightened to use the power of government to support a part of the economy. This is more familiar territory to me, so bear that in mind when I say that I think that one of the big distinctive themes of 20 years of Labour government here has been our investments in the social way. If you think of incomes that families have in their pockets to spend, the gap between Wales and other parts of the United Kingdom and Europe is much smaller than is sometimes stereotypically thought of.
Back in 2016, our Chief Economist Jonathan Price looked at some household income per head data from the EU and found that families in Wales operated on 96 per cent of the EU average household income, which put us in the same place as Ireland and ahead of Denmark and parts of Holland. Successive Welsh governments have provided services which are cash equivalent services. For over 20 years, we’ve had free prescriptions in Wales. So in England, you will be paying £9.35 for every item. It’s quite standard for somebody working in a low paid job in Wales with a difficult health history to routinely require free prescriptions weekly, to manage their health conditions. Well that’s £30 a week that you keep in your pocket in Wales, that you have to spend out of what may be a higher initial income in England, that’s £30 taken away from you that you still have in Wales.
When we introduced free breakfasts in primary schools in Wales, Rhodri was sold on the educational benefit. That children don’t learn if they’re hungry. But he was also very interested in the problem that families face of childcare for that hour in the morning before school starts, when you’ve got to set off for work. Lots of our social wage interventions, which some quite sober analysts say is worth between £2,000 and £2,500 for a family in Wales, are also there because of the way that they support people making the transition out of not being in work and into the workplace. Whereas in other parts of the UK that step is much more difficult because you lose so many things as you leave the part of the system where those things are free and enter work when you have to pay for them.
Q: Did you look at what was happening to economic policy in Ireland or Scotland, and what conclusions did you draw?
There’s a lot of interest in Wales in what happens in Ireland. It’s our nearest neighbour. We have always had, and have to this day, very close relationships of all sorts, cultural, sporting, but economic as well, with the Republic. We were always interested in what was happening there, although broadly unconvinced by the Celtic Tiger stuff.
It’s important to bear in mind that, while we are a strongly devolutionist party in Wales, we are also a party that believes in the United Kingdom and in Wales’ membership of it and the things that we think make membership of the United Kingdom worthwhile from a Welsh point of view, and we argue against fiscal devolution and against the devolution of the tax and benefit system.
I find myself in a slightly unusual position, having been a devo max person over many years. I now find myself with people who would previously have been part of the same journey, to whom I argue I’m opposed to the break-up of the UK tax and benefits system. I think that would fragment the engine of redistribution that I want the United Kingdom to be. I’m not in favour of greater devolution of those aspects of what I think are the glue that keeps the United Kingdom together. Probably the main reason why household incomes in Wales are not as different from other parts of the UK as you might expect is because of the importance of the UK tax and benefits system.
Q: Would you like more flexibility or have you concluded that this is the right fiscal settlement for Wales?
We are rightly vulnerable and sometimes anxious about the ‘pocket money parliament’ accusation: we spend money, but we don’t raise it, and that we should take greater responsibility for the money that we spend. I don’t at all put that argument to one side, because we do have modest fiscal devolution now. About 20 per cent of the money we spend is a consequence of the decisions that we make him in those areas.
These things are all compromises in the end, and are we satisfied? No. Because the Barnett formula is clearly not fit for the job that we ask it to do. It’s hugely difficult and challenging to reform. I understand that. And it’s why it stayed there since 1979, because nobody can find a way of making it better. But from our point of view, it clearly does not reflect the needs of the Welsh population.
So are we satisfied? Do we think everything’s fine? We don’t. Do we think that the solution to all that is further breakup of the components of the settlement that, to my mind, make the United Kingdom a success story for Wales? I’m cautious about it. I’m interested in further devolution of the administration of the benefits system. We would do a better job because we’re just closer to the ground and making the system work. But breaking the system up and making it the responsibility of devolved parliaments, there’s a bigger downside to that than an upside.
Q: If you had the power to raise your own debt for infrastructure, do you think that would lead to different choices?
There are some aspects which could and should be strengthened now and would lead to different choices. If you had to do that in a more wholesale way, then you would also have to have a much more wholesale reform of the relationship between devolved governments and certainly the Treasury.
I was the finance minister here when we negotiated the fiscal framework with the Treasury, the set of arrangements that governed the 20 percent of the income we raise ourselves through taxation decision. David Gauke was the chief secretary to the Treasury, someone very definitely at the reasonable end of the Conservative Party. It was possible to have a negotiation and to come to an agreement, but the whip hand is very firmly with the Treasury. They remain, in terms of the fiscal framework, a party to the rules but they also adjudicate the rules, and if there is ever an appeal against the operation of the rules, they turn out to be the court of appeal as well. If you were to have a more wholesale transfer of responsibilities to the devolved level, you’d have to have a very different set of relationships. You couldn’t have them on the current very, very unlevel playing field.
The specific point about debt is one of the places where I think it is pretty untenable. Community councils in Wales have greater flexibility to raise money through borrowing than the Welsh government. We have a rigid limit. It stays the same year after year, and if we had modest but not hugely expanded powers, if we had had a greater capacity to borrow, we would have and we would have used it for infrastructure investment.
Q: Scotland has made minimal use of tax raising powers. What conclusion do you draw?
They are unusable. When the Silk Commission, which oversaw the plan for fiscal devolution to Wales, was looking at what sort of tax powers should be devolved, I argued against the devolution of tax bearing powers and in favour of the devolution of national insurance powers to Wales instead. I could see that you might be able to use more flexibility in relation to national insurance measures and I never thought you’d be able to use income tax raising-powers very much; in practice, the second part of that – we’ll never know the first part – for the second part it just turns out to be true year after year.
The initiative for the Silk Commission never came from the Welsh Government. It was a Tory government, and very much from a financial discipline perspective. ‘If these people have to make these decisions, they will be less keen to spend the money’ was their philosophy.
Q: What is your experience of different Departments across the UK government?
We have departments that we work with regularly, and therefore you are working with people who are familiar with devolution and know how it works; you don’t always agree, but at least you can have a sensible conversation. DEFRA [the Department for Environment, Food and Rural Affairs] is an example of that for us. It’s a department we have very regular contact with, and even with foreign secretaries of state, you can still have conversations that are well informed.
And then there are parts of Whitehall that have never made it down to W in the alphabet, so they have to look up Wales when they hear about us. And those are much, much more difficult territory. We don’t have much contact with them; when we do, they don’t know very much about it. It’s very differentiated. But as I say, from our perspective, the big divide in devolution I think is 2019 rather than 2010.
In the very early days of devolution, there was an understandable nervousness on the part of the UK government at letting go of the apron strings and what we would make of it? Every quarter I used to make a train journey from Cardiff to London to have a conversation with Robert Hill, the political secretary in Number 10. And then I would have to go over the road for a similar conversation with Simon Stevens, who was then working for Alan Milburn. And these were always very courteous meetings, and they never felt anything other than being called into the headmaster’s studies to make sure that your homework was being properly marked. But that didn’t last for long. Within a couple of years, I think, a sense of ‘let them get on with it’, had taken hold.
Let me confess I never was, and never will be at the Blair end of the political spectrum, but one of the ways in which his reputation was wrongly calibrated in Wales was that he intervened all the time, forever on the phone to Rhodri telling him what to do. I can recall directly several conversations where Rhodri would speak to him about something that was happening, a decision, and the conversation would end with Blair saying, ‘Well, I wouldn’t do it like that if it was me, but you are the First Minister of Wales’.
I felt that, during those Labour years, there was quite a mature understanding of the way in which decision making was now distributed. I think there was neglect of Wales during the Cameron years. He just wasn’t interested, but didn’t interfere either, so he let things continue without a great deal of interest. So you might describe it as more benign than malign neglect. We had the closest relations in terms of the Tory years during Mrs May’s premiership. She reinvigorated a lot of the constitutional machinery. The JMC [Joint Ministerial Committee] machinery met very regularly. She attended them herself. She was in desperate trouble. She needed help wherever she could find it. We were very closely engaged in that period. And then the real break comes in 2019, where for the first time, we have a government with a muscular unionism policy that is positivity hostile to devolution.
Q: Did you anticipate in the late 1990s, or through the 2000s,that there would be neglect and then backlash?
No, I don’t think I would have. There’s lots of things that I would not have anticipated. I used to say that I wished in 1999 that I had taken 10 pence down to William Hill and said to him that by 2007, within 10 years, there would be an SNP government in Scotland, that Labour would be in coalition with Plaid Cymru in Wales and that Ian Paisley and Martin McGuinness would be sitting in the same cabinet in Northern Ireland. I wish I’d had a triple bet of that sort in 1997 because I think I would have been quite rich by the end of it.
I think there are many, many ways in which the initial prospectus turned out not to be as it unfolded. I think for the majority of the time however, despite the fact that there was rapid devolution, there was a shared interest coming and going, but the shared interest was in finding ways of making the United Kingdom work better, and doing that in a way that respected the fact that the United Kingdom is a voluntary association of four nations, in which people choose to belong to it, and could choose not to belong to it if the case for belonging to it wasn’t compelling enough to them. I think that has changed more recently, but for most of the time, despite the different ways in which things develop, there was that shared thread that everybody was still interested in making the show work while it could.
Q: In terms of individual Whitehall Departments, are there any differences which have been consistent over the 20 years? Do you have a common view of how the Treasury has been throughout the entire period?
Well, I think the underlying thread is the one I said, that departments in which we need to have regular engagement because there are overlapping responsibilities are the ones that we have the best relations with.
Q: And the Home Office?
The Home Office was at the worst end of that spectrum. And that was true during the Labour government as well as the Conservative government. The Welsh Government is by instinct, more liberal in things. We take a different view on asylum and immigration policy. And we have real difficulties to this day. I put the Home Office in one of the bad boxes and has been all the way through.
As I say, DEFRA. Transport to an extent – we don’t have responsibilities over rail for example. We have responsibilities over road. The Government of Wales Act specifically precludes the Welsh government from having responsibility for hovercraft policy. You’ll be interested to know that the department transport felt strongly enough to make that a specific line in the settlement.
It doesn’t mean that because you don’t have anything to do with the department that relations are bad. We have very little to do, usually, with Education or Health. But when we do need to talk to them, by and large those relationships have not been difficult or bad. So it isn’t a guarantee that things are bad because you don’t have much to do with them.
I think the Treasury genuinely is a story of two halves. During the first decade, our relationship with the Treasury was probably that if there was a 50/50 ball in relation to a funding decision or the operation of the Barnett formula, generally the Treasury played that ball in Wales’ favour. I think the next 10 years, the opposite really. I think if the argument is 75% in favour of Wales, the ball still gets kicked in the opposite direction. And I would say that our relations with the Treasury are probably, along with the Home Office, now the worst that we have in Whitehall and that the Treasury acts as a Treasury for England, not a Treasury for the United Kingdom.
Q: Did devolution allow you to deal differently with the EU and the use of EU resources? How does that change now?
The campaign for devolution in Wales was nothing like the campaign in Scotland, which had a much more unified, community-based, inclusive campaign. The campaign in Wales had very few things that united people. But one of the themes that everybody was happy to sign up to and to promote, whether that was the trade union movement or the CBI [Confederation of British Industry] or the political parties, was a stronger voice for Wales in Europe. So I think yes, definitely, the fact that European Union funds were available to us and we were able to make decisions. That is the reason I identified West Wales and the Valleys as having made the most economic progress. Because West Wales and the Valleys had a European definition. That is the area for which we receive structural funds. And that is the area which closed the gap the most inside Wales.
Those are the poorest parts of Wales. European funds allowed us to invest in a way to close the economic gap in that part of Wales and the rest of Wales. But even faster than the gap closed between Wales and the UK. During the days when David Lidington was the minister that led on these things at the UK Government, there was a fighting chance that we could have had an agreement on post-EU structural funds, which would have put the UK government in a position similar to the Commission: the high level, overarching purposes for those funds, where the deployment of those funds would remain, where the devolution settlements said they should remain, in the hands of the Welsh Parliament or the Scottish Parliament. That has not happened. All of those things are now back in Whitehall, and it is Whitehall that makes decisions on how we spend the paltry level – because we have lost millions and millions of pounds as a result of leaving the European Union – the paltry level of substitute funding is not decided in Wales at all. It is decided entirely in Whitehall.
Q: There’s a view in Scotland that devolution has led to more centralisation within Scotland, rather than devolution. Are the same accusations made at you?
Yes, always. I have heard people in the north of Cardiff refer to ‘Down there in the Bay’, as though it was somewhere near Rio de Janeiro. I think it is very easy to persuade people that decisions made in Cardiff neglect whichever part of Wales you happen to be in. And actually the distance between North Wales and South Wales – geographically, in transport – is a long way. And I think it feels a long way, to people.
In economic terms, we have probably done more with the City Deal idea than we probably would have done if left to our own instincts. We have a North Wales growth team, and we have recently reformed local governments in Wales to allow six local authorities in North Wales to form a single cabinet for economic development and land use planning and transport purposes. There may be more purposes in the future, but those are the three that they will have from the beginning, and the same is true of the Swansea City Deal which encompasses the Swansea to the Pembrokeshire coast. So there are three big deals, North Wales, Swansea or Southwest and the Cardiff Capital City deal for the South Eastern of Wales. That is an attempt to try and locate more capacity decision making at the sub-Wales level for those core economic purposes.
Q: What is the most important lesson for us to take away from the past few decades?
Well the huge challenge is leaving the European Union. We have a higher proportion of our economy in manufacturing than any other part of the United Kingdom. Higher proportion of our economy in agrifoods, other parts of the economy. And all those are very, very badly affected by new barriers to trade and the threat of the opening up the UK market to places like Australia and New Zealand. So that is a huge challenge.
If I was picking one challenge though, it would be productivity. The productivity gap within Wales has narrowed since devolution. There is a Resolution Foundation report from 2020 which said that that was one of the more defining characteristics of the devolution experience. We’re the only part of the United Kingdom to narrow productivity gaps. The productivity gap between Wales and the UK is very static. We’ve not made any progress there. And our inability to drive wealth creation through productivity gains is I think probably the single biggest challenge that we face; not a Welsh challenge alone. So if there’s anything that worries me most of all, it will be the fact that for 20 years, while we made progress on unemployment and economic activity and household incomes and you know a number of other things I could point to, productivity has been a stubbornly difficult issue to make any progress on, and it underpins many of our ambitions in terms of equality.
Q: Is there an aspect of the devolution settlement which you think has hampered your ability to address that?
I don’t think it is powers or the devolution settlement which is fundamental to the productivity challenge. I don’t think it is a Welsh challenge. It’s more at the sort of macro policy end that we have seen that failure. But it affects us very much. I other areas we have been able to use our powers to make marginal but important differences. We don’t seem to have been able to do that with productivity.
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