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Nearly two decades after the birth of devolution, Wales remains “almost powerless” over key aspects of industrial policy, according to the professor who chaired the 1997 referendum Yes campaign.

Kevin Morgan, Professor of Governance and Development at Cardiff University, warns of the potential for a major “crisis” as the UK leaves the European Union and says trust between governments has plummeted to an “all-time low”.

He writes that “years of devolution have left Scotland and Wales almost powerless to influence the fundamentals of fiscal policy, trade policy and overseas student recruitment policy”.

A key flashpoint could be conflict over the future of regional development cash. Wales has received billions of pounds in EU funding but there is wariness in Cardiff and Edinburgh about proposals to introduce a UK Shared Prosperity Fund.

Warning this could “trigger a major inter-governmental crisis”, he notes in a chapter for a new book that the Welsh Government has already stated it “explicitly and vigorously” rejects “any notion of a UK centralisation of regional economic development policy, including the creation of a Whitehall-managed UK Prosperity Fund”.

The book is called Place-based Perspectives on the UK Industrial Strategy and Prof Morgan contributed a chapter related to Wales and Scotland

Relations are at an 'all-time-low'

Prof Morgan argues that “political conflicts over Brexit have soured relations between the devolved administrations and Whitehall to such an extent that the level of inter-governmental trust has plummeted to an all time low” and warns this will make it harder to secure the partnerships needed to take forward the UK Government’s industrial strategy.

Meanwhile, devolved administrations are “acutely aware of the constraints on their ability to pursue a bolder, more integrated economic development strategy”.

Noting the cancellation of the planned electrification of the Cardiff to Swansea Great Western line and the continuing uncertainty about the Swansea Bay Tidal Lagoon, he said the Welsh Government “feels constrained by its lack of powers in key priority sectors”.

Nothing less than the “territorial integrity” of the UK is at stake, he claims, writing: “One of the key issues to be resolved in the Industrial Strategy will be the role of the state and this is likely to expose deep political tensions between the social democratic values of the Scottish and Welsh Governments and the neoliberal proclivities of the (current) UK Government. Managing these tensions will be one of the great challenges of the post-Brexit era, not least because the territorial integrity of the UK as a multi-national state could stand or fall on its ability to secure unity-in-diversity.”

Prof Morgan says that “Brexit poses both economic threats and political challenges” but he claims these are not acknowledged in the UK Government’s Industrial Strategy White Paper which is “ideologically fixated on the alleged opportunities of EU withdrawal”.

A key challenge facing the UK Government is securing Welsh and Scottish support for “frameworks” to ensure that different policies across the nations do not impede trade post-Brexit.

Prof Morgan sees an “urgent need to fashion new federal-like governance structures to ensure that the common frameworks for the post-Brexit period respect their devolution settlements”.

He argues that “radically reformed joint governance mechanisms – like a UK Council of Ministers – would seem to be necessary to resolve inter-governmental disputes within the Industrial Strategy”.

Ministers from across the UK already sit down together at meetings of the Joint Ministerial Committee (JMC) but Prof Morgan calls for a new approach.

He said: “Whitehall would need to change its attitude to joint governance mechanisms like the JMC because, in the eyes of the Scottish and Welsh Governments, it has shown little interest in them to date because it has no respect for them.”

How Wales and Scotland differ

The professor also notes the differences between Wales and Scotland in how economic development is pursued. Controversially, the Welsh Development Agency (WDA) was brought into the civil service in what became known as then-First Minister Rhodri Morgan’s “bonfire of the quangos”.

Prof Morgan writes: “Whereas Scotland retained Scottish Enterprise to spearhead its place-based economic development strategy, the Welsh Government abolished the WDA more than a decade ago and has struggled ever since with the lack of place-based institutions. To fill the vacuum left by the WDA the Welsh Government recently launched a new ‘regionally focussed model of economic development’ based on three development regions in North Wales, Mid and South West Wales , and South East Wales...

“As things stand, Wales has neither a national enterprise agency as in Scotland nor a locally-based [Local Enterprise Partnership] structure as in England.”