Item 8 on the agenda is a debate on the Economy, Infrastructure and Skills Committees report, 'Enterprise Zones: Boldly going?' and I call on the committee Chair, Russell George, to move the motion.

Motion NDM6768 Russell George

To propose that the National Assembly for Wales:

Notes the report of the Economy, Infrastructure and Skills Committee on its inquiry, 'Enterprise Zones: Boldly going', which was laid in the Table Office on 16 May 2018.

Motion moved.

Thank you, Deputy Presiding Officer. The committee Chair has just dropped all his papers on the floor in different order. Thankfully, the notes are numbered.

I move the motion this afternoon, Deputy Presiding Officer. In January and February of this year, the Economy, Infrastructure and Skills Committee undertook a short inquiry into enterprise zones in Wales. Five years after the zones were established seemed a sensible time to take stock. Five years ago, we were told that enterprise zones would boost jobs and growth. Have they? Alas, the answer is not a simple 'yes' or 'no'. Our inquiry took evidence from six of the eight enterprise zone board chairs and from the Cabinet Secretary. Three members of the committee also travelled to Snowdonia and Anglesey to meet with the chairs of those boards. 

The committee’s report makes 10 recommendations, of which the Welsh Government has accepted six outright, and four were accepted in principle—which seems to be a theme this afternoon to a number of committee reports where recommendations have been accepted in principle. The current enterprise zones policy in Wales began as a reaction to the UK Government’s March 2011 announcement of the creation of enterprise zones in England. The Welsh Government had created seven enterprise zones in Wales by January 2012, all of which stated objectives to create jobs and growth. The zones chosen by the Welsh Government reflected various approaches. Some, like Cardiff and Deeside, were chosen to exploit various economic strengths. Others, like Anglesey and Snowdonia, were intended to address significant local challenges.

I think there is a legitimate question as to whether enterprise zones were actually needed in some of the areas selected by the Welsh Government, particularly in Cardiff, where the committee heard the zone was pushing at an open door in economic terms. In contrast, the committee heard from the chair of the Snowdonia enterprise zone board that the board has realised very early on that they were never likely to be able to deliver significant short-term impacts on growth or jobs. Instead, their focus shifted to exploring the opportunities for the long-term development of the zones, and the committee heard that a number of other zones were also in a similar position.

We felt that this change in focus for some of the zones was not widely communicated, and perhaps more importantly was not reflected in the performance indicators published by the Welsh Government initially at an all-Wales level. Building on the work of the fourth Assembly's Finance Committee and the Enterprise and Business Committee has pushed the Welsh Government to release detailed information on the performance of each zone as regards job creation—the stated objective, of course—along with detailed information on Welsh Government's expenditure on each zone. The committee welcomed the Cabinet Secretary's decision to release the most detailed information of this nature to date, albeit after the final evidence session.

Our report states:

'Over the last five or six years this has been a case study in how a drip-feed approach to the sharing of information with Assembly Members and Committees can prevent clear and objective scrutiny from taking place, while also creating the impression of under-performance and inefficiency. It should not be this difficult, or take this long, for the Welsh Government to publish information that allows the performance and value for money of one of its flagship economic policies to be understood properly and scrutinised effectively. The Committee hopes that the Welsh Government takes this constructive criticism on board in the design and delivery of future policies.'

As a committee we agree that there is merit in a regional approach to economic development, and that a focus on supporting deprived areas is a good thing, and should continue. However, we recommended that the Welsh Government should ensure that, for each individual region and local area, the aims of any future regional approaches to economic development are clear and realistic, sufficiently detailed to allow an understanding of the challenges faced, and accompanied by detailed, open, transparent and appropriate monitoring data. This recommendation 6, along with two others also aimed at increasing transparency and improving the availability of monitoring data, was accepted in principle by the Welsh Government, and it remains to be seen how the Welsh Government will implement these recommendations in practice.

The committee recognised the commitment, drive and professionalism of all involved in the enterprise zone boards. Each of the chairs were powerful and passionate advocates for their areas. The committee did feel, though, that on the whole the enterprise zone concept has not proved itself to date in Wales. The evidence we heard suggests that the zones that have achieved against the Welsh Government's stated aims were those that were already in the best position to do so—for example, Cardiff Central and Deeside—and that specific enterprise zone initiatives only played a minor part in their success.

Other zones that started from a very different place found the incentives to be of some benefit. The committee recognised the fact that these zones, such as Anglesey, Snowdonia and Ebbw Vale, are still very much on a journey, and have been focused on putting the building blocks in place for the longer term. We concluded that the original aims of the enterprise zone policy to create jobs and growth have not been achieved across the board. At the same time, we acknowledged that these were probably unrealistic to begin with, given the varying starting points of each enterprise zone.

The Cabinet Secretary used his appearance before the committee to announce a series of changes to the way that enterprise zones will operate. He mapped a future, which we support in part, but there are areas where we believe he should reconsider. The proposed merger of the Anglesey and Snowdonia enterprise zones has a certain appeal. Both depend on nuclear power developments outside of the Welsh Government's direct control and both are located in north Wales. However, the committee is concerned that this merger risks losing the specific focus on the very different challenges each area faces. Another way forward is possible.

In response, the Cabinet Secretary has suggested it is a matter of timing. I hope that this debate will clarify what exactly that means. I’m not convinced that there will ever be a right time for this merger. It seems to me that allowing both to continue, at least in the short term, might allow both boards to achieve their objectives in a clearer and more effective way. For the Port Talbot enterprise zone, our review has come too soon to be meaningful. For them, we hope being part of this process has focused minds on how they report their successes and ambitions as they develop their plans. I look forward to a good debate this afternoon amongst Members and look forward to the Cabinet Secretary’s response to our report today.

It’s a great pleasure to follow the Chair of the committee. It’s difficult to know what to say about this policy, because it’s a policy that had mixed objectives in mixed areas, and the results have also been very mixed, as the Chair mentioned. Altogether, we could differentiate between the enterprise zones that were created as a result of specific opportunities, and then those enterprise zones that were created as a reaction to an economic crisis. One can’t say, about the seven enterprise zones, of course, with any certainty, that this policy has succeeded in either of those two cases that I mentioned. In those cases such as Cardiff Central, it’s very difficult, even though the results, in terms of job creation and so on, are better. It’s very difficult to attribute that to the enterprise zones. And then, of course, in those other zones, well, the figures speak for themselves.

What’s true to say, of course—and the Chair is right in that regard—is that the enterprise zones, as with any local economic intervention that leads to the creation of partnerships, can then generate enthusiasm and momentum, and we did see that in our visit to the enterprise zone on Anglesey. But we do have to ask the question whether it’s the policy itself and the incentives, and so on, that are associated with enterprise zones that have created that, or would it be possible to create the same kind of effect and local economic momentum through other means.

We have to say that what is clear is that the enterprise zones as a policy had been created almost as a reaction to developments over the border in England and creating the local economic partnerships that existed everywhere. I do believe that we have seen, over several years now, a failure in Wales to come up with a spatial economic policy, either on the local level or on the regional level. And I think that we’re still getting to grips with that, even though there has been a major emphasis in the new economic strategy of the Government on spatial policy, on regional policy. I don’t think we’ve found the right medium for that, and, of course, the changes with regard to the enterprise zones that have been announced do reflect that. In looking forward, I think that one of the major lessons is to focus on specific incentives for zones—for the size of the enterprise zones. 

Thinking particularly about a post-Brexit scenario, it was very interesting the evidence that we heard from the chair of the Haven Waterway zone talking about the potential with regard to free ports and free economic zones, because that, actually, is a policy idea where there is strong evidence globally that it works. It's much more specific than the broad-brush enterprise zone idea. Particularly, whatever happens over the next few days and weeks, if we do end up in a crash-out 'no deal' situation, then, actually, free ports could be a very, very important tool for many parts of Wales, some of which are covered by the enterprise zones. It would mitigate some of the worst economic damage that we could face.

So, I would urge the Welsh Government to look proactively at this. Several mayors of the north of England have developed detailed proposals for free ports. They're lobbying the UK Government very actively, and the Cabinet Secretary has said in evidence to the External Affairs and Additional Legislation Committee, if there was a designation by the UK Government, then Wales should get its fair share. We need to do better than that. We need to actually be developing the business cases now. And, of course, free ports could include airports—it could include Cardiff Airport, it could include Airbus, of course, where we could designate the Airbus site in Broughton as having its own free port. It has the airport, of course, which it uses to transport its wings to Toulouse. Designating the Airbus site as a free port could actually be a means of dealing with any economic damage as a result of policies from the UK Government.      

I'm pleased to contribute to the debate today. I'd also like to thank my committee colleagues and the support team for putting together what I think is an interesting and useful report. Contrary to what the title might suggest, the inquiry was a chance to revisit Wales's eight enterprise zones, rather than going where no-one had been before. By doing so, we were able to assess their progress to date and, I hope, help clarify the road ahead.

I'm going to limit my points this afternoon to the Haven Waterway project, and the headline figures are hugely encouraging, with more than 1,000 jobs created, safeguarded or supported through the support that's been given, and that is excellent news. As the Cabinet Secretary confirmed to us, the Haven Waterway board will continue for a further three years, through to July 2021, and it's that sort of stability that enables that sort of strategic planning underpinning the success of the enterprise zone model of economic development. 

When the chair of the Haven Waterway enterprise zone gave evidence to us in January, he asked for specific work to look at—and I'm going to repeat it—the potential of free ports post Brexit. That was also the recommendation of the External Affairs and Additional Legislation Committee, when it concluded its work on ports in the Brexit inquiry of last summer. And I know it's been mentioned already, but I'm going to reiterate that. 

The Cabinet Secretary has been proactive, establishing a dedicated ports team with Government, and in his evidence to the committee he did confirm that he had commissioned specific work to be conducted with regard to the potential of free ports, and a distinctive offer for a post-Brexit Wales. I wonder if he's able to give us any update on that here today. 

If I move on to another development, the new energy demonstration zone—the Waterstone site has been sold and the company is seeking planning permission to turn that into a centre of renewable energy excellence, and I'm sure it's worthy of some serious consideration. It has potential for jobs, training and inward investment to west Wales, but also the wider economy. And in light of the Swansea tidal lagoon fiasco, I think it's vital that Wales and the Welsh Government supports home-grown, green energy projects like that, as, clearly, we cannot entrust those to the Tory Westminster Government.

One of the most interesting factors to come out of the committee's scrutiny of enterprise zones was the disparity between them. Deeside and Cardiff enterprise zones were already well developed in their respective sectors, whilst Anglesey, Snowdonia and Ebbw Vale were effectively starting from scratch, with Port Talbot coming late to the fray. We, therefore have to be very guarded in our analysis of the success of one zone against another. What other factor we have to take into account is the relative crudity of the figures given, actually, in the first instance, for the cost per job created. For instance, Ebbw Vale, it was suggested, received £94 million to achieve just 390 jobs, or £241,000 for each job. These figures are very misleading as, in the Government's analysis of where money was allocated in the enterprise zone, the figure for transport for Ebbw Vale enterprise zone was £88 million. As this was clearly referring to the extension of the railway line from the festival park site to the town centre, it should therefore be viewed as an overall infrastructure improvement for the whole region, not for the enterprise zone itself. So, contrasting this figure for cost per job created or safeguarded as against, say, Deeside, where the cost was just £4,822, is very misleading. So, could the Cabinet Secretary outline how he proposes to analyse the effectiveness of EZs in the future?

It became apparent to the committee, and, indeed, to those who made up the enterprise boards, that the original aims of the zones would have to be considerably amended. The boards of most of the zones realised their roles would become enablers to economic growth rather than that of direct job creation. In many instances, they put in place the infrastructure, both physical and spatial, to allow this growth to take place. Many of them referred to the time factor involved in bringing some of these projects to fruition. Mark Langshaw, of the Ebbw Vale enterprise zone board, which the Government Secretary says will close this year, said that it had many projects in the pipeline and expressed his concern as to who would take these to completion. So, perhaps the Cabinet Secretary could inform us as to how these projects, and, indeed, the general work undertaken by the enterprise zones that are to close, will be safeguarded going forward.

If we ask ourselves, 'Have the enterprise zones been a success?', it is difficult to extrapolate a firm answer because of the disparate elements involved in the zones and their overall objectives. Perhaps one of the real positives has been the input from the boards themselves, who seem to have worked well with many stakeholders and created very positive networks and initiatives on a local basis.

To conclude, I think we all have to consider their achievement against the question, 'What would have happened if they had not been created?' There are instances of those, especially with those close to the English border, that would have been disadvantaged if they had not been made enterprise zones. Deeside and, to a certain extent, Ebbw Vale are such examples. However, we must recognise that the enterprise zones up to the 2000s were very different projects to those of the 1980s, and therefore their achievements or failures must be viewed from a very different perspective. So, is the Cabinet Secretary still convinced that enterprise zones that will be remaining will still have a part to play in the economic development of Wales, and is he willing to supply them with the resource that they need in order to deliver on what should now be their clearly defined goals?

As our report of this states, there is little evidence to show that Wales's eight enterprise zones have been transformational in terms of job creation, but different outcomes are inevitable because each has faced different challenges and different local circumstances. The Cabinet Secretary's conduct when he attended committee for his final scrutiny session with us on this inquiry, and announced his intention to reconfigure enterprise zones, including to merge the Anglesey and Snowdonia boards, before we had questioned him and before he knew our evidence-based recommendations, may unfortunately be considered disrespectful to the committee. Referring to the Star Trek analogy in the title of our report, this was not to boldly go where no man has gone before, but at least he appears to have partially backtracked on this now.

In accepting our recommendation 2, he describes excellent progress in the availability of modern commercial floor space. I therefore encourage him to reread our report and note that the witness statements that are a current theme among enterprise zone chairs was the lack of available property for businesses and that there is a lack of modern floor space across Wales.

I hope his statement, that he will be seeking advice from the Development Bank of Wales to ascertain the potential for a commercial property fund, will address the evidence in our report that there is a shortage of units across the board, and that across the whole of Wales, there are perhaps, quote,

'only two or three vacant industrial buildings, and apart from 1 square mile of our capital city, there is no speculative development to note anywhere.' 

It is regrettable that the Cabinet Secretary has only accepted in principle our recommendations that the Welsh Government should return to annual reporting of the enterprise zones with clear data provided for each zone, and that it should make its priorities for each of the enterprise zones explicit, publishing clear annual targets.

The Cabinet Secretary's acceptance in principle of our recommendation that the Welsh Government should reconsider its proposed merger of the Anglesey and Snowdonia boards is at least an improvement on his previous position. He justifies this by stating that he's taken advice from the chairs of the Anglesey and Snowdonia enterprise zone advisory boards, and, together with his officials, will consider the appropriateness and timing of the merger of the two boards further. Well, the week prior to his statement to committee that he intended to merge these two boards, I'd chaired the committee in north-west Wales when we took evidence from each of these boards. It's a shame that he had not also taken this evidence before announcing his premature intention to merge them.

In Trawsfynydd, we heard that, alongside the Snowdonia board's progress with the Snowdonia Aerospace Centre at Llanbedr, it was responsible for mitigating the progressive reduction in local employment at the former Trawsfynydd nuclear power station. On a positive note, we also heard that the site was a candidate to host future UK small modular reactor development. The board emphasised strongly to us its need to remain in existence, and independent from neighbouring Anglesey, although it would retain and develop its strong links with developments on Anglesey. The UK Government's launch of its new £200 million nuclear sector deal at Trawsfynydd a fortnight ago reinforced the importance of this, with Trawsfynydd tipped as a front-runner for the development of advanced modular reactors, sharing up to £44 million for research and development, and Menai Science Park on Anglesey the preferred location for a £40 million thermal hydraulics facility. When we met the Anglesey board, they also emphasised their need to remain independent so that they may take forward their work on the Morlais west Anglesey tidal demonstration zone, on the Holyhead port expansion, and on the new nuclear power station at Wylfa Newydd.

A report commissioned by the UK Government published in May 2018 confirms the potential significant economic benefits of tidal stream energy. Anglesey can be at the centre of global leadership in tidal power, and the north Wales growth bid includes funding for Morlais. We also heard last month that the UK Government will enter into formal negotiations with Hitachi on the development and construction of a new nuclear power station at Wylfa on Anglesey. And as the Anglesey enterprise zone chairman, Neil Rowlands, said to both the Cabinet Secretary and me, 

'The board is made up of predominantly Anglesey people, is of an extremely high calibre and directly linked. It is imperative that the Anglesey enterprise zone board should continue.'

Diolch yn fawr.

Thank you. Can I now call the Cabinet Secretary for Economy and Transport, Ken Skates?

Thank you, Deputy Presiding Officer, and can I thank Members for the opportunity to respond to this important debate today? I'd like to thank the committee for its report into enterprise zones. I was pleased to be able to assist the committee in its inquiry, as were the enterprise zone advisory board chairs. I was particularly pleased to see that the work of the enterprise zone advisory boards was acknowledged so strongly in the committee's report. The chairs and boards have been key, I believe, in bringing about the success and achievements of the programme to date, and I, too, thank them for all of their efforts.

My written response to the committee's report sets out my detailed reply to the report recommendations. I have accepted, in full or in principle, the 10 recommendations and I'm pleased to report that good progress is being made against each of them. Specifically, I've already written to the Treasury to request the extension of enhanced capital allowances in Wales for a further five years until March 2025, so that we may retain this important incentive to attract or bring forward investment within our enterprise zones, and I currently await their response.

While I'm pleased to advise that the programme continues to deliver across each of the enterprise zones, with 1,550 jobs supported in the latest financial year, I've taken on board the committee's recommendations that the published performance indicators perhaps don't reflect the situation as well as they might. So, in response, I will shortly be publishing key performance data for the enterprise zones in the financial year 2017-18 that include a more detailed breakdown as part of a broader annual report. Looking forward, while indicators can never capture the totality of the progress that is being made across the eight distinct and different zones in Wales, I have asked my officials to further consider indicators as part of the broader review of the enterprise zone programme.

I'm also mindful of the recommendation with regard to the proposed merger of the Snowdonia and Anglesey boards. Taking account of the views of the respective chairs, I have agreed to extend the term of the two current boards for a further 12-month period to help facilitate a timely and effective merger in due course.

I remain proud of the achievements and success across the enterprise zone programme since the inception of it in 2012. There is no doubt that the programme has a strong track record of delivery. More than 12,250 jobs have been supported since the inception of the zones, and I accept that the pace of delivery has been variable across the zones. I've spoken previously about how this reflects a place-based approach and the different starting points of each zone and their distinct opportunities and challenges, as was clearly stated by David Rowlands. A sense of place and ensuring regional distinctiveness is an essential element of the new economic action plan.

Like the opportunity posed by the EAP, when we chose the locations of the zones, we did not choose the easiest options. It was clear from the outset that those zones that were more investment-ready would be able to deliver in the short term, whilst others would need to focus on laying foundations for much longer term economic growth and results. A good example of this was demonstrated only last month when the UK Government nuclear growth deal was launched at Trawsfynydd. This was due, in no small part, to the continued effort of the board and John Idris Jones in particular pushing the case for small modular reactors.

There's been continued comment made about the value for money of this programme. I believe that not only has the programme consistently delivered value for money, it's also laying the foundation for future prosperity in areas around Wales. The significant investment in infrastructure, for example, and the important new road links in Anglesey, Deeside, Cardiff Airport, St Athan and Ebbw Vale, and also, of course, a new railway station in the latter zone will facilitate the development of sustainable jobs, both in the zone and, of course, using the zone as a focal point in the wider local area, not just in the short term, but also in the much longer term.

I think it's also important to recognise the really significant and important projects that have emerged as a result of this programme—huge game-changing projects that will contribute incredibly to our regional economies, for example, the development of the advanced manufacturing research institute at Deeside and the Tech Valleys programme at Blaenau Gwent. Both of these programmes will be game changing for their respective areas and certainly would not have happened without the input of the respective boards. The projects are anticipated to generate billions of pounds in GVA for the regional economies of Wales and would not have come about were it not for the existence of the enterprise zone programme. 

I'm pleased that Adam Price welcomed the work of the Haven Waterway enterprise zone in examining the potential of creating a free port, because I was the person who asked them to do it. I think the idea of a free port at Airbus, whilst it might sound very novel and very bold, the fact is it's a non-starter, because the airport in Broughton is reserved for Airbus activities. I think it's important to recognise that Airbus is right at the heart of the Deeside enterprise zone and that the board there, within the zone, determined that the best vehicle for growth within the Deeside area is the creation of the advanced manufacturing research institute, which will, indeed, contribute around about £4 billion in GVA over the next two decades.

As you know, as part of implementing the economic action plan, I've reviewed all advisory bodies within my portfolio, and I've identified opportunities to simplify the landscape. Under a newly formed, overarching ministerial advisory board, the future governance structure of the zones has been designed to best meet the stage, opportunities and the distinctive needs of each zone. As part of that work, I've asked the enterprise zone chairs to review their strategic plans, to reflect their priorities and aspirations for those zones over the next three years. These new plans will be published later this year, and, alongside that, I've also asked my officials to undertake a comprehensive review of the enterprise zone programme as a whole, one that considers the current economic conditions, EAP priorities, and the latest plan and future direction for each of the zones. We should not be afraid to abandon the past when more effective solutions exist for the future.

I want us to develop a clear strategic focus for the programme, moving forward, and it's important that we continue to offer the right incentives to business, and also that we remain competitive with other UK enterprise zones, especially, as David Rowlands identified, those nearby on the English side of the border. The review that I've asked officials to conduct will address these issues and take into account the committee report's findings on areas such as commercial property availability, and I can assure Mark Isherwood that we are already in discussions with the Development Bank of Wales in that regard.

The enterprise zones embrace the importance of recognising a sense of place, and my senior officials, and, specifically, the newly appointed chief regional officers, have a very clear role as the voice of each region in Welsh Government, and they are already building strong relationships with the business community, enterprise zones and other key stakeholders in creating regional plans for economic development. The presence of enterprise zones within each of our regions is undoubtedly part of the asset base that we will build upon in the years to come, as we implement new ways of working that will deliver inclusive growth across Wales.

Thank you. Can I now call on Russell George to reply to the debate?

Thank you, Deputy Presiding Officer. It does seem to me that enterprise zones have been, perhaps, a series of place-based experiments and will continue to merit further study over the coming years. The clear lesson, I think, to date, is that there is a real benefit to knowing your strengths and bringing partners together around a shared vision, and I think that the lesson learnt is that this lesson must be a building block for the new regional approach to economic development that the Welsh Government is developing.

The question that I first presented in the opening comments was: have enterprise zones boosted jobs and growth as planned? There was some uncertainty whether that was a 'yes' or a 'no', and I think Adam Price, in his contribution, went into a bit more detail in that regard, and also in terms of obtaining the information from Government in order to scrutinise this area effectively. I would say that it was Adam Price, Mark Isherwood and David Rowlands who went to visit the Snowdonia and Anglesey zones, so I'm very pleased that each of the Members covered their visit extensively in their contributions. Joyce Watson highlighted the Haven Waterway project and board, to no surprise, in that part of the region that she represents.

David Rowlands, I noticed, focused a little bit on the issue of job creation versus costs, which is something I didn't go into in detail in my opening comments, but this is something that the committee did look at quite extensively. The Cabinet Secretary, perhaps, had some different figures that he presented in terms of that area, but I think perhaps this does highlight how the drip-feed approach of information sharing has not been helpful. But I was very pleased with the Cabinet Secretary in regard to his response on improved indicators and performance measures. I think that is very welcome indeed, and I'm very pleased with those comments.

Mark Isherwood focused on quite a few areas. I was particularly pleased that he focused on the issue of commercial units being available, and property availability and land availability. This is an issue that was raised by a number of enterprise zones, to my surprise, because in my own constituency this is particularly a problem, and I thought it was perhaps located to mid Wales, but it's not, it's an issue right across Wales—in the north, in the south, in the west. I know that the committee are very keen to come back to the issue of land availability, property availability, commercial units and the support from Welsh Government to build commercial units as well. I appreciate that the Cabinet Secretary is actually coming up to my constituency the week after next to meet with businesses who have the difficulty—businesses that want to expand but simply can't expand because there are no commercial units to be made available for them.

I would like to thank, in particular, all the chairs of the enterprise zones for their co-operation, and in particular John Idris Jones and Neil Rowlands for their assistance in arranging visits to their areas. I'd like to thank all the committee members who took part in this debate this afternoon, and all the members of the committee for their work; and also, of course, say thanks for the great support we had from committee services, as always, that contributed towards our report. I'd also like to thank all those who gave evidence either in oral or written form as well. I'm very grateful. I'm very grateful to all those who took part in this debate this afternoon. Thank you, Deputy Presiding Officer.

Thank you very much. The proposal is to note the committee's report. 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.