FT commentator Martin Wolf backs Welsh development bank
More financial powers and the creation of a development bank could bring "considerable benefits" for Wales, a leading economics commentator has said.
By Brian MeechanBBC Wales business correspondent The Financial Times's Martin Wolf said there is evidence that these measures could help tackle UK inequalities. But he warned it was important that any development bank was a public-private partnership to avoid it becoming "heavily politicised". The Welsh government is expected to decide soon whether to set up a bank. Mr Wolf was speaking to the BBC's Wales at Work programme during a visit to the Hay Festival to promote his book, The Shifts and the Shocks, which looks at the failure to learn lessons from the financial crash. He was appointed by the UK government to the Vickers' Commission on banking which recommended major reform including the separation of high street and investment banks to reduce the risk of a future crisis. Mr Wolf believes that the changes introduced have not gone far enough to prevent another shock to a financial system that's inherently "unstable". The creation of national and regional development banks is "the most important area of financial innovation," according to Mr Wolf. "Our financial system has never been good at long-term investment in real businesses. "It's pretty conservative and stodgy… and it's very monopolised. It increasingly focuses on property lending, which is not unimportant but it's not going to make us rich." "So I would like to look at institutions that are prepared to take a risk, take a long-term view and accept they're going to make losses." Following a series of independent reports by Prof Dylan Jones-Evans that have called for the creation of a development bank, Economy Minister Edwina Hart is expected to decide on the proposal in the next few months. It is not an uncontroversial one with many supporters of the current arms-length business support body, Finance Wales, believing a new organisation is unnecessary and could lead to greater political interference. But Mr Wolf said these organisations are known to work. The decline of the heavy industries that Wales historically relied on, such as steel and coal, has led to significant levels of inequalities between different parts in the UK. Meanwhile, the growth in the service sector, particularly in finance, has been particularly pronounced in London and the south east of England. Rebalancing of the economy means the UK being less dependent on sectors like services but also that different nations and regions are able to experience growth and job creation to ensure wealth is more evenly spread.