The next item is the debate by individual Members under Standing Order 11.21 on the foundational economy. I call on Lee Waters to move the motion.

Motion NDM6210 Lee Waters, Jeremy Miles, Vikki Howells, Hefin David

Supported by David Melding, David Rees

To propose that the National Assembly for Wales:

1. Notes that approximately 40 per cent of the workforce is employed in the ‘Foundational Economy’ supplying essential goods and services such as: infrastructures; utilities; food processing, retailing and distribution; and health, education and care.

2. Recognises that these sectors are often more resilient to external economic shocks and have considerable potential to generate greater local value from the provision of localised goods and services.

3. Regrets that many of the sectors within the Foundation Economy are marked by low paid and insecure jobs

4. Calls on the Welsh Government to develop a strategy to maximise the impact of the ‘Foundational Economy’ across Wales as part of its work on developing a new economic strategy, including measures to improve employment conditions in those sectors.

Motion moved.

Diolch, Lywydd. As we were reminded last week by the speculation about the future of Ford in Bridgend, and the month before by the debate around the future of Tata Steel, our economy is profoundly vulnerable—vulnerable to the decisions of foreign-owned multinational corporations, vulnerable to external shocks like Brexit or oil price fluctuation, and vulnerable, like all modern economies, to the long-term impacts of climate change, food insecurity and energy scarcity.

The purpose of today’s motion, tabled in my name and in the names of my colleagues Jeremy Miles, Vikki Howells, Hefin David, David Rees, and my friend David Melding, is to consider how you might use the framing of a new economic strategy for Wales to think about how the Welsh Government can help our communities build resilience to these threats. My colleagues will explore some of the ways a foundational approach will make a difference in practice. In my opening remarks, I’ll focus on the case for change.

The Deputy Presiding Officer (Ann Jones) took the Chair.

We’ve been trying a variation on the same theme in Welsh economic policy now for several generations, and we are running to stand still. Our national wealth level, or gross value added per head, has barely shifted in 20 years since we promised that the creation of a National Assembly would create an economic powerhouse for Wales. Two decades on, and we continue to search for a magic bullet—that much-loved transformational project. If only we could get a few high-profile inward investment projects and hope against hope for another Admiral Insurance, which, by the way, remains Wales’s only FTSE 100 company, almost 25 years after it was founded. And while we search desperately for a ribbon to cut, the day-to-day economy of our communities continues to tick over.

Today’s motion is a plea to look at what is hiding in plain sight, and discuss what we might do to nurture it—the mundane economy, as Professor Karel Williams has described it. Now, his is a name you’ll hear a few times this afternoon, I’m sure. Along with his colleagues in Manchester Business School, he’s done much to give life to the idea of the economy of the everyday, the so-called foundational economy. As a son of Llanelli, Karel Williams has taken the forlorn state of the town I represent in our National Assembly as a case study in what can be done to bolster the bits of the economy that have been left behind after the heavy industry that inspired their creation has gone.

It’s the foundational economy that underpins the social fabric of our communities, and penetrates even our most disadvantaged neighbourhoods. The industries and businesses that are there because the people are there, the food we eat, the homes we live in, the energy we use and the care we receive. This isn’t a small part of our economy; it accounts for about four out of 10 jobs and £1 in every £3 we spend. Our focus has been on anchor companies employing more than 1,000 people in one place, but there are more than 3,000 people employed in making sofas across Wales, and they don’t feature in any economic strategy, but this is the type of unglamorous activity that forms the bedrock of our local economies.

Globalisation has seen us look the other way as local producers have been crowded out of the market by foreign-owned subsidiaries, who often pressure Welsh suppliers to drop their prices and ship the profits overseas. If we get it right, the foundational economy approach offers the chance to reverse the deterioration of employment conditions, stop the leakage of money from our communities and reduce the environmental cost of extended supply chains. There are big hurdles that stand in our way—it’s pointless to pretend otherwise—and rather than ignoring them, I’d like to confront them head on.

The first is undoubtedly cost. Public sector spending—the £5.5 billion we spend every year buying in goods and services—is often cited as a direct means of boosting our foundational economy. But just as the drive to reduce budgets has led to the domination of large-scale privatised companies in the delivery of our public services, so too a reversal of this trend will require investment. Local businesses will need increased support to bid and deliver public sector contracts. We need to invest in higher skilled staff in local government with specialist procurement skills, and most likely the cost of goods and services we buy at the end of it all will go up, and we need to be honest about that. To achieve any genuine restructure will require significant investment, and a recognition that short-term financial gains should be deprioritised in favour of longer-term benefits, and we must be honest about that, too.

But the realities of our economic landscape and of impending automation make it costly not to. I’ve spoken before about how the eruption of computers being able to learn for themselves means that human brains, as well as human hands, are now in danger of being replaced by machines and algorithms. Accountants, underwriters, clerks and analysts—whole rafts of professions are profoundly vulnerable. In total, an estimated 700,000 jobs are at risk of automation in Wales alone. And whilst the high-value, knowledge-based jobs that will remain following this second wave of automation will hold considerable attraction, we must ensure that the jobs at the other end of the spectrum—those that make up the mundane bedrock of our economy—do too.

The second equally valid argument against ploughing scarce resources into the foundational economy is that it is radical and an untested approach. But as I set out earlier, our existing economic strategy has been tested—it’s not working. Our failure to rejuvenate our economy through conventional approaches has meant we’ve had to plough money into anti-poverty programmes and employment support programmes to mop up the mess. But the attraction of the foundational economy is that it would address both the weakness of our economy and the social consequences of it. And, yes, it is radical—that’s the point. We are facing a confluence of public disaffection. Brexit and the fourth industrial revolution—our operating environment is changing radically and we must do likewise. We must move away from the orthodox and give experimental a go, because failing to take notice of our foundations means we risk our entire fragile economic structure crumbling. Diolch.

It’s a pleasure to follow the Member for Llanelli and I congratulate him and his colleagues for securing this important opportunity to create some space for new thinking, for the reasons that he has eloquently outlined—we certainly need them, don’t we? I think Karel Williams has said that there’s a word in Welsh for actually repeating the same mistake over and over again, it’s called ‘twp’. And we simply will replicate the failures of the past unless we’re prepared to experiment in the radical way that the Member has suggested.

We should not, of course, shy away from the fact that what the foundational economy and, indeed, other sets of related ideas—the work of Mark Lang on deep place, and Dave Adamson on the distributed economy—represent together, I think, a coherent critique and alternative to the economic policy paradigm that has prevailed over many a generation, which essentially is almost the mirror opposite, indeed, of what has been served up to us as conventional thinking. So, whereas the foundational economy has two core elements, really, which is sheltered markets—local sheltered markets—and grounded firms, we have been focusing on global markets and foreign-owned firms, with little appreciable long-term economic benefit. And so, I think it’s time to turn the world the right way up as far as the Welsh economy is concerned.

It’s going to take, I think, a huge concerted effort, which will take some years and probably efforts across party, I think, to defeat the prevailing paradigm. It is so deeply embedded in our thinking—look at the apprenticeship levy: we actually take the retail sector out of the apprenticeship levy, whereas, actually, in terms of the long-term benefit of employees in that sector in communities, looking at driving up the skills base in a sector that has been bedevilled by low-skill, low-wage labour, you know, is the way that we should be going. So, we need unconventional approaches. I do hope the Welsh Government will create a national innovation body. But that national innovation body, to drive up innovation—in all sectors, in all areas—should not be captured by the old, narrow science and technology global-market-facing version of innovation, because innovation needs to be there at the heart of our foundational economy as well.

So, there are very, very significant challenges, but that is no reason for us to shy away from the opportunity. We will have a new economic strategy unveiled, I believe, in the next few months, over the spring period. Now is the time for the Cabinet Secretary to be bold. The answers of the past have failed us.

One of the themes that Karel Williams and his team have referred to and talked about is the missing middle strand. And one of the problems that many of our successful medium-sized companies have faced, time after time—Rachel’s Dairy, Avana Bakeries, I suppose, is another example of it—is that, when we create success from within our grounded firms and we create successful medium-sized businesses, of course, they reach a point, often due to succession planning, where people want to exit, and yet, of course, we have no means at our disposal, at the moment, of keeping that ownership, keeping that grounded firm grounded, and we all know the results of that.

The policy challenge, to go from the meta to the very specific. The development bank that we are creating, will it be based upon the ideas in terms of finance that are being promoted by Karel Williams and his team? Not the venture capital model, not actually getting people to cash out, but actually creating long-term finance. As I referred previously, La Caixa, the charitably owned bank in Catalonia, which actually takes long-term stakes in businesses that are deeply rooted within their economy, has the double benefit, not just of developing and generating a dividend for the charity that owns the bank, but also making sure that those successful companies stay successful for generations to come.

Thank you very much. Julie Morgan.

Thank you, Deputy Presiding Officer. I’d like to congratulate the Members who’ve put forward this debate, because I think it does give the space to try to look at economic strategy and perhaps try to do it at a bit of a distance and to try to think of new ideas. So, I congratulate them on doing that.

The argument about what makes certain city regions, countries or areas grow faster than others is very long standing. It would be daft to try to claim that people moved from rural Ceredigion to Senghenydd in Hefin David’s constituency, as my grandparents did, because of the schools and hospitals and other infrastructure. They moved because of the coal mines. New coal mines opening up would be classed as population-creating industries, with schools, hospitals and the food and drink industries being classed as population-serving economic activities. If the mine is there, the pit village grows around it; schools and health centres, railways and roads, bakeries and breweries have to grow up nearby to serve the new local population.

This motion, as I understand it, is calling for investment and a fresh approach to the economy of the every day. And I support that, but what I would like to hear in the debate is what that actually means in practice. What would this new approach to the foundation economy actually be? Because it makes absolute sense to listen to and that’s where we should invest and that’s what we should develop. I was very pleased to hear Karel Williams speak, as well, in the Pierhead some time ago. I think it’s very important that we try to look at the situations that we have with fresh eyes and try to think of a strategy that will address some of the long-standing problems that we’ve had.

I think it still remains that, within Wales, the main variable in causing Wales, or indeed different parts of Wales, to prosper or not, is what replaces the original staple industries of the industrial revolution. I think what replaces the mines in the Valleys is as live an issue today as it was in the 1930s. I think that is where I would like to hear some more of the thinking as to how we develop the foundation industry in order to deal with the situation where those staple industries have gone, in places like the Valleys, where I come from.

In my constituency of Cardiff North, it’s a very different situation, because what keeps Cardiff North going is the world of public services. It’s never been a manufacturing constituency and it never was, except for the Royal Ordnance Factory, which came in the last war and continued, I think, for 50 years after that—the only big base of manufacturing and, of course, it’s all now houses. But what has kept Cardiff North on an even keel today is the huge investment in health services by way of the University Hospital of Wales at Heath park; the children’s hospital; the medical school at Cardiff University; the dental hospital; and, of course, the forthcoming massive investment in creating the new Velindre hospital. So, of course, the provision of public services of that character links with the emergence of new high-tech industries. Of course, on the Velindre site there’ll be a cancer research and a clinical trials business park allied with the new Velindre, and if there was more room at UHW, there would be an even bigger facility for spin-offs from the medical school. I think there’s a wider lesson there about how the foundation economy side interacts both ways with the more mobile parts of the economy.

I think, if you look at some of the most successful cities and regions in the United States, you can see that places like Austin, Texas, and Columbus, Ohio, have grown up as public sector infrastructure state capitals, providing state administration and huge, well-resourced, prestigious state universities. Now, that’s where the new high-tech industries want to locate, because both Apple and Google have decided to locate their second campuses in Austin because it’s got the right buzz. I think it’s very important that we look at the areas of growth that are most successful, that we put our resources into those, and that we plan carefully where they should be throughout Wales, and put the impetus there as well as trying to look at the foundation economy and do what we can to develop that. So, I’m very grateful to have taken part briefly in this debate today, and I congratulate the Members who are doing this economic thinking about where we’re going in Wales today. Thank you.

I’m pleased to be able to contribute to this debate today, and I also congratulate the Members for securing the debate on this subject—a subject that I hadn’t previously known a great deal about. As we’ve already heard today, the concepts of the foundational economy enshrine the principles of ‘mittelstand’ and social franchising, and there is great potential, I think, for Wales, given the fact that a significant percentage of our workforce is employed in sectors that provide essential goods and services. So, I hope I can bring a few ideas of my own to this debate this afternoon, with regard to supporting the principles of a foundational economy in Wales.

I think the fact that the UK Government’s industrial strategy has recognised the capacity for involving businesses as a social franchise for education and skills is something to be welcomed. Also, of course, the establishment of university technical colleges would introduce a business and entrepreneurship element to many vocational courses and would, of course, bring learners, colleges, universities, and businesses together, prioritising skills and improving the status of vocational qualifications. In practice, I think this will mean that members from local business communities will be encouraged to participate on school governing panels, to advise on the curriculum, to create an environment where students can develop the work-ready skills that industry say that they need, as well as, of course, working with employers to increase the diversity of apprenticeships. Spreading the growth across the country was, of course, a priority of the UK Government’s industrial strategy, and this includes additional infrastructure funding to unlock growth in areas where connectivity is holding it back, taking into account the balance, of course, of spending per head between different regions of the UK when developing future rounds of infrastructure funding. We’re still waiting, of course, for the Welsh Government’s new economic strategy, but when it’s published, I certainly hope that it will put a similar emphasis on addressing the regional disparity in economic prosperity and the skills shortages that exist.

Point 2 of the motion, I think, is particularly strong. For me, for some years I’ve been very keen to have a red meat charter—something that I would like the Welsh Government to consider again—and this is something that could really promote the local procurement of our outstanding red meat products. I have asked previously for the National Assembly for Wales to have the ability to scrutinise the development bank’s business case to ensure that businesses are fully supported through the proposals. Such scrutiny, I think, will lead to developing it further into a model that would really support the foundational economy. So, I think we’ve got an opportunity in that regard there, as well.

The development bank, also, I think, should have a regional element in Wales, giving small and medium-sized businesses the opportunity to access finance locally. I want to see a series of regional high street banks across Wales established, and localised access to finance for small businesses. I also want to see a system where a number of geographical, accountable, Welsh regional investment banks can be brought forward as well, bringing finance closer to businesses in all regions of Wales. A few of the speakers today have talked about the differences in different parts of Wales and the different needs, so I think having a localised focus to regional funding would be good, as well.

Finally, the Localism Act 2011 has also devolved a number of significant powers to local communities that should empower them to support the foundational economy. So, England has implemented the community rights since 2011, and Scotland is also implementing its own version of community rights. So, I’d like to see the Welsh Government take this approach as well, because I think that would help communities and councils to come together to deliver services supporting the foundational economy. The foundational economy has a significant role to play and to ensure, I think, that Wales does have a healthy economy. I welcome the debate today and I’m happy to indicate my support for the motion.

It’s a pleasure to speak in a debate that had its own cinematic trailer, which featured Professor Karel Williams on his visit to the Pierhead that Julie Morgan mentioned. It’s an unusual personal honour to be elected to represent, here in the National Assembly for Wales, your community and the one in which you were born and brought up. It encourages reflection on what the place that’s always been home can be.

As an academic, I’ve been interested in business and the roles small firms play in our economy. I’ve interviewed for my own research many business owners in south Wales and the west of England. However, in preparation for this debate today, I took a walk down Hanbury Road and High Street in Bargoed, and I reflected on the businesses that operate there, from Rossi’s cafe and Chisholms’ carpets to Thomas’s pet and garden supplies, which has been there since the 1950s. I took time to appreciate their existence, the role that they’ve played in my background and in my life as I went to school at Heolddu.

Indigenous businesses, buffered but unbowed, provide goods and services that contribute to our everyday lives. These businesses, rooted in our different communities, are far from immune from global economic shocks, but they are the necessary foundation to our local economies. As noted in the motion, small firms can thrive in such an environment and are less likely to leave, and, instead, can become embedded in their local supply chains. Here, they can grow and contribute to regeneration within our town centres.

My own understanding of this is heavily based on the concept of social capital. Whereas human capital refers to the knowledge and skills held by the individual, social capital refers to the extent to which that individual can gain further benefits from the knowledge that exists in their environment. Small businesses know this intuitively and connect with each other in a way that simply does not happen with larger firms, and, indeed, there is more of a hostile experience with larger firms. Using what is termed ‘bridging’ social capital, described also by Mark Granovetter in his seminal work as ‘the strength of weak ties’, firms form economic relationships that become social in nature and participants gain personal understanding, abiding trust and a deeper knowledge of one another. You may have seen it when you use local businesses and the way they talk about ‘we’ and ‘us’.

There’s a body of research that suggests that transfers of knowledge between small firms influences growth and this itself is influenced by the business network that supports social capital. It’s been argued that in order to be beneficial in the long term, networks need to be extended beyond local social contexts, and this is important, because the topography of the south Wales Valleys has been a barrier to this, and the consequence has been low-paid, low-skills work in the foundational economy.

Our environment encourages us to think in terms of our connections with the city, rather than looking to our eastern and western valley neighbours. And, alongside my colleague Vikki Howells AM, I advocate a change in our thinking and our language. We should consider our communities from Cynon to Blaenau Gwent as the northern valleys, connected and interdependent places, and not spokes linking to a vibrant city hub. By doing so, we will gain a better understanding of how we can regenerate our economic prosperity, tackle infrastructural challenges, and grow social capital. A foundational economy should stretch across the northern valleys.

In his evidence to the Economy, Infrastructure and Skills Committee’s inquiry into the rail franchise and the metro, Dr Mark Lang—mentioned already by Adam Price—cites the fact that there is a

'lack of international evidence to support the view that transport investment leads to positive economic or social outcomes’.

He also raises concerns that a

'lack of a detailed spatial understanding of South East Wales against which to plan an integrated transport network’ can be inhibitive. It’s as well to voice these concerns, and the committee will consider them in detail.

I don’t dispute the view that cross-valley connections alone will assist growth. But, if our communities are to prosper, if we are to connect in a way that we haven’t in my lifetime, if we are to harness the potential of our reserves of social capital, then we need to make these connections to that social capital, across the northern valleys.

Can I start by saying that, if I’d signed the form in the right place, I would have been one of the co-proposers of this motion? I am relieved I am at least a supporter. I’m yet to go on the basic skills course, ‘life in the modern office’, but I will do that at some point—I promise my PA.

I think, as we’ve heard from the excellent speeches so far—and I do like these backbench debates, because I think the range of subjects we’re discussing are really insightful, and the level of consensus also, and challenge, that they generate is really refreshing—this is a really overlooked area, because it is so resilient and so fundamental to everyday life.

But, you know, as Hefin said, walking down the Bargoed high street—I was brought up in Neath, and in Skewen in particular. And I remember, as a boy, being sent off to do the shopping, if my mother, who helped run the family business, was particularly busy. I could go to Mr Jones the butcher—and he was Mr Jones—and I could just say, ‘We need meat for the weekend’, and that’s all I needed to tell him. He would prepare it, I would take it away, and he’d call later for payment. It’s a remarkable service, and leaves one with really fulfilling memories. But it is also full of potential for economic growth for enterprise, and, really, for allowing people to flourish in their communities, because of the confidence they get.

We do live in an age, I think, when people feel dislocated and undervalued. The lack of common worth, the equality of worth, in our populations in western countries is a real, real concern. The message ‘take back control’ I think spoke to much more than just the Brexit debate. There’s a real, real problem, I think, in western societies about this sense that there are people who are economically successful, and then there are the rest. It’s a real, real problem. So, I think, in terms of citizen fulfilment, and citizen confidence in the whole political economic system, this subject should not be overlooked.

Can I just give a couple of examples? Social care, childcare: the first thing here is that it’s a growing need, because of the patterns of change in our population—people living longer, but also both parents seeking work. But we’ve not caught up with the fact that these skills should be better rewarded. That’s probably the basic problem we have now, that those jobs cannot really give a proper living wage. So, that’s something that our economy has to look at and challenge. But it’s a really important sector, it’s one that invites innovation—the range of services that are required to support people in their homes or to have really effective childcare, at hours that are convenient and demanded. That, I think, is something that we need to look at.

Also, specific programmes that we do sponsor to increase childcare in deprived areas to allow people access to jobs—really, really important, but sometimes we don’t even start with making sure that those childcare job opportunities are given to local people. That would be a start, wouldn’t it, and would be a good way of empowering that local economy. This goes through a lot of procurement, as has already been mentioned. We deliver a lot of services—social services, a range of services provided by public agencies—and they’re often given to people who do not live in the area, who are fairly middle-class, when locals could be doing those jobs very, very effectively. We need to remember that principle.

I think some other areas—we heard earlier about community energy projects; their management and maintenance is something that local people can be involved in. I think there’s a whole range of activity out there in the civic sector where people without formal skills run organisations, raise tens of thousands of pounds for charities: this sort of activity can also be directed into our economy. There is that potential there with people. And many community assets, I think, could benefit from taking on this approach.

Tourism is an ideal activity to examine from the foundational economy point of view. The potential is massive. We live in Wales. It just invites tourists to come, really—the tourism capital, whatever we call it, or the cultural capital that we have. But we could be better at the bespoke services. That’s what people want. They want to stay in really interesting, individual hotels that are not replicated. They want a food culture. Livestock’s been our staple for a long time, but we’ve not really gone that stage further to ensuring that we finish the higher products in the food chain. So, there are many, many things, I think, that can be built on. And, in empowering local people and giving them the confidence to flourish, I think it would be a marvellous way of getting some economic optimism back into our communities.

Today in the House of Commons, the UK Chancellor of the Exchequer announced a £1,000 business rate relief for the pubs in England, no doubt under pressure from his own back benches. Whilst the pub can indeed in some communities be the last business standing, having seen the closure of the shop, the primary school, and the community centre, I hope that we in Wales can be a bit more discerning in how we keep the glue of community cohesion together. It’s a pity we don’t have a more vociferous voice giving rate and rent relief to fruit and veg shops, which are much more at threat than pubs, rather than the purveyors of alcohol, with all the attendant problems that can cause, as well as the opportunity to socialise with our neighbours.

I’m distressed to hear that the main fruit and veg shop in the community of Llanedeyrn, which I represent, is considering giving up after over 20 years serving the community because she’s said that she’s simply not going to be able to afford the increased rent once the shopping centre is redeveloped and the rents inevitably go up. So, that is a huge cause of concern as to how that community is going to be able to access fresh fruit and vegetables in the future. And we can see that many of the corner shops that do survive in communities rarely offer any real, fresh food.

Some three years ago, Cardiff Council was forced to stop employing the couple of staff who ran the community café in the community, which provided fresh food for people who often lived alone and didn’t any longer have the capacity to cook their own meals. Although there was an initial attempt by a voluntary organisation to run it from outside the community, that foundered because they didn’t have the commitment or the organisation required to run a consistent, reliable service. So, it withered on the vine. So, I’m hopeful that the renewed community bid to reopen the café can both be glue to keep our community together, but also a mechanism for promoting real food to families who often never prepare food at home but simply buy processed food and serve it up without any input themselves, and also to provide work experience for young people who may need a better understanding of the requirements required to work in the retail industry.

Looking at the health service, Wales is a major trainer of doctors, nurses, and other allied professionals. Although these services are highly valued by our communities, we nevertheless have a persistent shortage of nurses, midwives, doctors, and other health professionals who want to stay and work in Wales. This is a conundrum that we really need to get our heads around, because, at the moment, the only people who benefit are the employment agencies, who charge very large premiums on supplying us with extra staff.

So, I was very pleased last night to hear from the vice-chancellor of Swansea University, who attended the Milford Haven event, that Swansea University is working with Abertawe Bro Morgannwg University Local Health Board and others to recruit more Welsh-based students to enter into the health profession, as it’s much more likely that these people are going to want to stay and work in Wales. I think that’s an excellent example of how we can be boosting the foundational economy.

But I also want to reiterate the challenge that’s involved in automation. The experts tell us that a third of all existing jobs at the moment are going to be done away with as a result of automation. I have to say that I think we need to ensure that we can use automation to enhance the foundational economy rather than simply seeing it as a way of eliminating staff. There are so many jobs that remain undone in our society that we need to be able to re-vive those resources, to liberate them, so that we can tackle some of the things we’ve already discussed today, whether it’s domestic violence, healthy relationships, fire safety, decent homes—these are things that we really need to think about deeply as to how we’re going to ensure that automation is not a way of simply cutting services, but of enhancing services, and replacing jobs that can be done by machinery with better jobs done by people.

The foundational economy, whilst not a complete analysis of our economy, is a very important analysis of a key part of it. Given the needs that the sectors meet, the foundational economy is here to stay, but public policy in all parts of the UK hasn’t adequately addressed how we can help it to flourish and to deliver jobs that support a decent living. I want to focus in my speech on the particular role that the public sector can play to support the foundational economy generally.

Public bodies, and I include in that local councils, NHS bodies and universities, are huge economic actors as well as deliverers of essential services. They have the capacity to stimulate their local economies through procurement. Some see this role as closer to their core mission than others. Whereas local councils probably have this at least as an aspiration, I’m willing to bet that there aren’t many conversations happening within our universities, for example, about how they can proactively grow the local supply chain.

It’s not realistic to expect to procure everything from the local economy, but we need an approach to procurement that cultivates the local economy, helping to develop and grow businesses in the local supply chain over the long term, and not being satisfied simply with community benefits or a billing-postcode approach.

In a recent conference that I convened in Neath on the regional economy, we heard of contractors shut out of bidding for construction work because the contracts let were too large, when they could have been disaggregated and made accessible to local players. What we need to tackle this sort of issue is a new duty of local economic development on major public bodies, which would take us beyond the idea of community benefits.

Julie Morgan mentioned examples from Ohio, and, in Cleveland there, public bodies have worked together, developed a collaborative model, through which, in partnership, they proactively support local economic development through their procurement capacity. We are a small country and this is what we should be doing in Wales as well. But there is a more ambitious role for public bodies to play in key parts of the foundational economy. Take the social care sector, which several speakers have already referred to: a growing sector embedded in local communities, and one where the foundations on which it will grow in future are, frankly, precarious. Councils could invest in building care homes and rent them to not-for-profit operators. There’s an enormous gap between the profit margins that a commercial operator demands and the current returns on local authority pension funds, and somewhere in between those two points is a point where the public sector can invest for a better return, and for care to be provided more cheaply and with better wages for the workforce than today. Most care workers are women, of course, so let’s recognise today, of all days, the particular need to address terms and conditions in this sector.

Take, as well, the energy sector, which has also been mentioned. Our communities are totally detached from their own capacity to generate energy, resulting in loss of value to major utilities companies and in fuel poverty, which will never be addressed by a community benefits approach, however generous that is. There are 300,000 residential properties across the Swansea bay regional area. A large number will need energy efficiency measures or renewable energy installation, and all can benefit from cheap energy. Nottingham council owns and operates an ESCo, an energy supply company, Robin Hood Energy. It has created local jobs, cut fuel poverty, reduced energy inefficiency and cut carbon emissions. It generates revenues to reinvest locally. They’re looking to expand, by the way, so it’s another growing sector.

We should also acknowledge today some of the very innovative work under way in both energy and care, and other fields, by social housing providers in our community, who are key partners in the foundational economy. Smart local intervention could transform the foundational economy across, say, the Swansea bay city region. We are about to have a city deal. What we need alongside our city deals are region-wide community deals, investing in sustainable models in the foundational economy to take advantage of low borrowing costs, as well as the potential of the new UK municipal bonds authority and innovative joint pension fund management. There are long-term returns to the public sector and huge economic and well-being gains to the community.

What the foundational economy is about is a broader, less economistic view of the economy—one that takes well-being seriously. It isn’t about altruism, but about a sustainable economic model with a long-term horizon. It requires some imagination and the confidence to look at the economy differently, informed by a sense of common purpose.

Thank you. Finally, Rhianon Passmore.

Diolch, Deputy Llywydd. It gives me great pleasure also to speak in this debate. The foundational economy, as the Bevan Foundation rightly states, is a grand name for those business activities that we use every day and see all around us. Business like the Welsh retail, care, food, health and energy industries that have been mentioned may not have the glamour of other aspects of the economy, but it is high time that we all gave them the importance that they are due. I believe also that social procurement has a vital and critical role to play in stimulating our economy.

In Wales, the foundational economy provides real jobs for over half a million people. It provides essential services that form the heartbeat of local communities such as the village shop or care setting or processing or distribution or health centres. It is essential for a safe, sustainable and secure society less reliant on wider nations and insecure supply lines. The foundational economy is also relatively stable against external economic shocks—critical, post Brexit. It is relatively evenly spread across Wales. But equally, it is proven to have majoritively poorer terms and conditions, as has already been mentioned—majoritively women. So, addressing these issues could improve Welsh workers’ pay and also our economic and fiscal base.

We know that we live in an ever-changing world, and no longer are people afforded the security of a job for life. Pay a visit to any national supermarket and you are met with self-service tills where once you were met by a member of staff, as has been mentioned by Lee Waters and Jenny Rathbone. Yet in this world of hurtling change we know one constant, and that is: work affords people the opportunity to earn money and the opportunity to have enhanced self-respect in their lives, and adds to the well-being of a shared community where everyone’s success impacts on us all. We must all back a renewed emphasis on the foundational economy, because at its heart it is vital as we seek to combat poverty, and all in a world of vastly shrinking public sector funding and hugely retracting welfare safety nets.

Today in the UK, 13.5 million people are living in poverty. Of these, 7.9 million are working-age adults. Sadly, most shocking of all, 66 per cent of working households are in poverty—and they have someone doing paid work. When the political journalist of the ‘Argus’, Ian Craig, interviewed me earlier this year, he asked me what my priorities were as Islwyn Assembly Member. The answer was obvious. I said to him that, as a young adult, I was instrumental in setting up a number of tenants and residents associations, including at the Ty-Sign housing estate where I live today—the largest in my county borough—and that as a Welsh Assembly Member, I want to do everything that I can do to tackle poverty, both in Islwyn and across Wales.

The biggest issue for the people I see in my office, as many do in this Chamber on a regular basis, is poverty. It is paying your bills. It is having a decent standards of living. It is employment rights. It is security at work. It is economic viability. Many people today are suffering through a whole tranche, a tsunami of things, which are forced on them, increasing poor mental health, increasing workload on our hospitals, increasing people’s unhappiness.

Will the Member take an intervention?

I’m sorry, I don’t have time.

I’m particularly concerned about people in work not earning enough. In preparing for this debate, I found the Joseph Rowntree report ‘UK Poverty: Causes, costs and solutions’ important and also refreshing. I wholeheartedly support the call for better pay and conditions. We can and must press for the voluntary living wage to be introduced as a high priority in all public sector employment and rolled out in public procurement contracts. Private sector employers should be supported and encouraged to introduce it. It is right that we in Welsh Labour propagate and lead the way and, as such, I wish to thank my Welsh Labour colleagues Lee Waters, Hefin David, Vikki Howells and Jeremy Miles for bringing this motion forward today. I want to add my voice to a call for innovation, bravery and ambition with a new Welsh resilient economic strategy, fit for purpose, for a modern, vibrant and prosperous Wales. Thank you.

Thank you. I call on the Cabinet Secretary for Economy and Infrastructure, Ken Skates.

Thank you, Deputy Presiding Officer. Can I begin my speech by thanking Members for their thoughtful contributions today? It’s been an absolute pleasure to listen to each and every Member. This debate on the foundational economy comes at a very important time because, as Members are aware, I’m currently taking a fresh look at our economic priorities and, as part of this work, I’ve been talking to people, businesses, trade unions and organisations right across Wales.

It’s struck me that the economy does have many strong features. From Airbus and Toyota in the north to BAMC and GE in the south, there is a world-class innovation, knowledge and skills base right across the economy, more than we sometimes actually appreciate.

But also, as I’ve travelled around the country, one thing is very clear. Rhianon Passmore identified it, David Melding identified it and many others have as well. People feel insecure. Communities feel insecure. Beyond the headline of the 150,000 jobs that the Welsh Government supported in the last Assembly term, it’s clear to me that our economy and our economic model needs to be re-engineered to ensure that regional and local economies are more sustainable, to remove the lumpiness of growth across the economy. Indeed, not just to build economies but, as David Melding alluded to, to build places—places that people have pride in and feel secure in. We need an economy that is itself more secure to the shocks of globalisation, technology and political disruption, which will only increase and intensify in the coming years.

The vulnerability that Lee Waters talked of risks intensifying, unless change happens there. That’s where today’s debate makes an important contribution and, indeed, why the cross-party consensus that is so obvious on the importance of the foundational economy will be of enormous assistance in delivering a bolder, more inclusive strategy for a prosperous and secure Wales.

I can confirm to Members that our ‘prosperous and secure’ strategy will within it contain a very strong role for the foundational economy. If we get the approach right, not just within my department in terms of the services that I’m responsible for delivering and the support that I’m responsible for, but right across Government, then the foundational economy can play a hugely significant role in not just helping to grow our economy, but growing our economy with a purpose: reducing inequalities between people and between our communities.

We know the best route out of poverty is work, so we need to help people into work, to stay in work, and, crucially, to progress through work. The foundational economy offers great opportunities in that regard. The foundational economy happens where people live, so offers opportunities to stimulate sustainable, local economic growth—better jobs, closer to home. And I recognise that some parts of the foundational economy are marked for low-paid work, as Members have identified, relatively poor employment conditions and an absence of progression opportunities. That is the reason for the Welsh Government taking a clearer leadership role, when four out of every 10 jobs in Wales are in the foundational economy. By supporting innovation, improving management, filling skills gaps, helping develop new business models and, ultimately, encouraging better pay and conditions, we can develop those more resilient local communities.

An example of this is in the social care sector, which Jeremy Miles and others spoke eloquently of. Here, a new approach, drawing on the breadth of our levers across Government and focused on this national priority sector, can deliver real results and better outcomes for our economy and society. We are under no illusion that there is pressure on the social care sector, arising from factors such as financial constraints and an ageing population. So, we’re looking at ways in which we might be able to better support this sector and the businesses that operate within it. There are things we can do around procurement, around skills support and property that could make a real difference to service delivery and the sustainability of the sector, and the social care sector is, of course, geographically dispersed. Assisting local homes could help with accessibility to employment for people in communities right across the country and, crucially, in the process, driving up the quality of jobs, employment conditions and the sustainability of the businesses within it.

Members also spoke about energy, which isn’t just an essential component of the foundational economy. Arguably, it is, for Wales, our twenty-first century economic hedgehog, demonstrating how we are leading the world in certain energy subsectors. We’ll have much more to say on this and our broader ambitions for the foundational economy as our ‘prosperous and secure’ strategy is presented in the coming months. I am in no doubt that we want to harness the power and opportunities presented by the foundational economy, and so I welcome this debate today and the thoughtful input of Members, which we can factor into our work.

Thank you very much. I call on Vikki Howells to reply to the debate.

Diolch, Ddirprwy Lywydd. Thank you to all the Members who have contributed to today’s debate. For my closing remarks, I want to start by outlining a few reasons why the foundational economy is so different. In contrast to what has been described as ‘the monoculture of mainstream economics’, where growth and innovation have been constrained within a one-size-fits-all policy, a refreshed focus on the foundational economy will allow us to develop bespoke solutions that meet different needs across different parts of Wales, including, critically, in my own constituency and the rest of the northern Valleys. A foundational economy would, instead, be built around innovative policies that engage the specifics of activity, time and place. It also challenges us to review, reappraise and re-evaluate the activities already going on all around us, moving away from a blinkered rejection of the everyday to instead embrace their benefits and importance. This is a point well made by David Melding when he talked about aspects of our workforce feeling undervalued.

In an excellent seminar here at the Senedd yesterday, Professor Julie Froud noted the need to build, grow and develop grounded firms. By doing so, the foundational economy offers Wales a chance to be a world leader. Growing internationally recognised brands, which can be exported around the world, is one area that has been identified as a key challenge for us as we strive to grow our foundational economy. I’m very proud to be able to say that Penderyn whisky, which is distilled and packaged in my constituency before being sold around the world, is perhaps one of our best examples of a recognisably Welsh international brand. Its success shows us that by thinking outside the box, having confidence and accessing appropriate business support, as referred to by Russell George, it is possible for us to access niche markets and to become a world leader.

But, aside from these more glamorous high-end niche sectors, there are powerful economic arguments in favour of the foundational economy. Professor Karel Williams has highlighted what should be a self-evident truth: the Welsh economy is dominated by the foundational economy, producing the mundane basic goods that we all rely on. Nearly 40 per cent of Welsh jobs are located in the foundational economy. In the Cynon Valley, enterprises like furniture makers Ashwood Designs and dairy producer Ellis Eggs are key local employers. In Mountain Ash, Rocialle provides essential consumable items to healthcare, employing just under 400 people to make things like bandages, bowls and cotton-wool balls.

Carpet Fit Wales, another very successful firm based in my constituency, boasts well-developed horizontal supply chains, and highlights the way in which local procurement networks can be used to grow and stimulate the Welsh economy. During my preparation for this debate, I spoke to Carpet Fit Wales and was impressed by the way they are connected to neighbouring businesses. Their suppliers are based in Swansea, Cardiff and Bridgend, they use a local floor manufacturer based in Caerphilly, and their human resources, information technology, design and garage services are all provided within the Cynon Valley.

As this example shows, the foundational economy benefits all of Wales, not just hotspots that can leave other swathes of Wales feeling isolated and left behind, providing localised goods and services that communities can be proud of. An additional strength is provided by its longevity and resilience, with the businesses, services and infrastructure within the sector having proved remarkably resilient to external crashes over time—a point stressed by Lee Waters.

Cresta Caterers in Aberdare has been in business for over 50 years, and Welsh Hills Bakery for over 60 years—still a family owned business in Hirwaun that exports across Europe, America, Australia and the middle east. Both of these are examples of the food sector so well referenced by my colleague Jenny Rathbone. In addition, my colleague Hefin David drew on examples from his constituency and his academic background to powerfully reinforce the message of social capital being used as an asset.

In addition to the powerful economic arguments for focusing on the foundational economy, there are also strong moral arguments in its favour, too. The manifesto for the foundational economy persuasively argued that a rebalancing of economic and well-being gains will enable us to aim at a Wales with a reinvigorated social franchise that has a stronger focus on reciprocal social relations. In this model, economic needs and quality of life would go hand in hand, so that employers cannot impose unacceptable working practices and bigger businesses cannot ride roughshod over smaller suppliers or local concerns.

This is very necessary, because, as the Bevan Foundation has rightly pointed out, many of the industries and occupations associated with the foundational economy have a real problem with low pay and poor working practices—a point well made by Rhianon Passmore. We must take action to improve problems like work insecurity, zero-hours contracts and inadequate pay. One area to focus on, as Karel Williams notes, is the opportunities and challenges provided by the growing adult care sector. We must consider these elements not just as economic determinants but as providers of invaluable social benefit, and value them accordingly.

Jeremy Miles used care as one example where strengthening the foundational economy will bring long-term returns to the public sector and huge local economic and well-being gains to the community. I welcome the work the Welsh Government is doing around this, and also similar initiatives like the childcare pilot. When this policy is fully implemented, there is the potential for significant growth in the childcare sector, providing additional jobs in the foundational economy, and it is another area in which Wales can again take a lead. It is vital that the employment opportunities provided by this policy are well planned on a local and regional basis, with the Welsh Government overseeing the process to ensure that the jobs created are secure and fairly paid.

To conclude, today marks a call for action in a renewed focus on the foundational economy. As Members have pointed out, many of the businesses and activities that make up the sector have been with us for years, but have never been properly integrated into our economic vision. I hope the Welsh Government will fully integrate support for the foundational economy into its forthcoming economic strategy. As Julie Morgan stated, it would be beneficial for us to consider this in our existing and current economic plans. And I am very pleased with the commitment that the Cabinet Secretary has made here today in his response to the debate, focusing on aspects of the foundational economy and issues such as procurement.

At the heart of the economic strategy must be a focus on developing grounded firms. I have cited some excellent examples from my own constituency but they tend to be exceptional in a Welsh economy that is defined as possessing a missing middle—a point well-made by Adam Price—where we lack the medium-sized enterprises that adapt and thrive within, for example, the German economy, by building on first-class reputations and exemplary brand presence. There are clear challenges here around access to finance and succession planning, and I hope that we can meet these.

Additionally, we must look again at how procurement works in Wales. I know the Welsh public sector spends £5.5 billion on goods and services, and although moves have been made to strengthen local procurement, they haven’t always gone far enough. There are opportunities around local government reorganisation and regional working to really get this right, but we need to get public sector and our foundational economy enterprises together to make sure conversations can be had. This can, in turn, then be used to strengthen and protect working conditions and really build a prosperous Wales that works for all of its citizens. I commend this motion today.

Thank you very much. The proposal is to agree the motion. Does any Member object? No. Therefore, the motion is agreed, in accordance with Standing Order 12.36.

Motion agreed in accordance with Standing Order 12.36.