Martin Shipton has written an interesting valedictory interview with Rhodri Morgan in which he reflects on his own political philosophy and the challenges ahead. It is worth a read
In one passage that caught my attention Rhodri muses ”What are the limits to which left-of-centre parties can go?”. He said:
“It’s going to be very much put to the test over the next few years now in this period of taxation restructuring which we are having to have in Britain because North Sea oil revenue is going out. We’re going to have to start making things again and encourage capital and enterprise to make up the trade gap because we haven’t got North Sea oil and gas any more.
“We’ve got a 30-year run of oil and gas, then it’s gone. There’s a massive change in the economy needed now, so you have to persuade people with the capital to use the capital or borrow capital to run those businesses, and run those businesses to believe that Wales is a very good place to run those businesses”.
Rhodri always has been an astute analyst of the economic scene. He is right to identify the enormous trade gap which is already beginning to emerge through the decline of the North Sea oil field. The ongoing implications for the balance of payments will be profound.
But there seems to me to be a piece missing from the analysis. Of course we need to start manufacturing things again, but if North Sea Oil is running out this is likely to be part of a piece. It is not just revenues that will dry up. The price of the remaining oil from other parts of the world (often unstable regimes) will inevitably rise. And an economy based on traditional manufacturing will struggle.
Rhodri Morgan’s solution – according to Martin Shipton’s account - is “You need more people like Admiral Insurance – you need half a dozen Admiral Insurances, not just one”.
I can’t help but feel this is akin to fighting the last war. It is not just that we need to start making more things, but we need to start putting a heavy emphasis on cleaner technologies – allied with measures to encourage people to change their behaviour and the way we consume. We need to become less dependent on oil.
If we don’t we face a considerable threat. If we grasp the challenge there is a considerable opportunity for Wales to lead. But to do it we need a change of mindset.
Dic 9:49 pm on 27 December, 2009 Permalink
We’ve certainly had plentiful supplies of gas emanating from Rhodri et al in WAG on the economy. It’s still in a complete mess and not even moving in the right direction.
Jeff Jones 9:40 am on 28 December, 2009 Permalink
What’s new Lee? Everyone for years has known that one day the oil and gas reserves in the North sea would run out. Production probably peaked in 1999. Without more investment, the industry argues that a great deal of oil and gas could even be left in the North Sea. At the moment production is dropping at about 5% per year. The worst case scenario could see the North Sea producing only about 12% of the UK energy demand by as early as 2012. The industry’s solution is more investment driven by tax breaks. A bit difficult for a Chancellor who with falling tax revenues gets about 30% of corporation tax from the North Sea.
For over 30 years everyone has known about the likely effect of the decline of the North Sea revenues on the UK economy. The failure to plan for the future is yet another example of the short termism in energy production which has dominated the policies of successive governments. Unfortunately those who will pay for the failure of politicians to plan for the 21 st century will be our children and grand children.
We all know what the problem is. The real hard bit is producing a solution and I’m afraid a dozen Admiral Insurance call centre operations is not the answer. It’s a nice sound bite but it doesn’t really scratch at the surface of what is required. Politicians could start by being honest about the mess we are in and prepare people for the long hard slog to recovery over the next 30 years.
Lee Waters 10:50 am on 28 December, 2009 Permalink
Jeff, there’s two issues here. Oil production is declining in the North Sea therefore there’s less tax revenues – Rhodri’s point. But there’s also the issue of energy supply. Our economy is predicated on the availability of cheap oil. Of course there is oil left – it’ll just cost a lot more to get out.
Rhodri’s analysis only focused on the first issue. So though we do need to find new sources of tax revenue by recalibrating our economy with a greater emphasis on manufacturing. But we also need to think about how we do without cheap oil. Sure, technology can help us get away with needing less. But we also need to address the way we consume and behave.
Macsen 7:12 pm on 29 December, 2009 Permalink
Rhodri Morgan once again stating the bleeding obvious under the guise of saying a great unkown truth whilst not actuallu offering any remidy and doing that as it was some great truth too, I really don’t see the point of Rhodri Morgan. The Objective One money has been wasted and then Morgan always says that there isn’ much that governments can do. Why vote for him? There’s no remidy for Wales except hope that another Admiral Turns up?! Is that it?
What about creating a stronger financial infrastructure in Wales with its own exchange as the Libs and Plaid suggest; vary taxtion in Wales, and economy built more on land value tax, control over Welsh resources (water -which is specifically excluded from the Gov of Wales Act 2006) The man offers nothing. Eight wasted years – no vision only cliches.
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