The Welsh Economy VIII: The Public & Social Sectors

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This final sectoral analysis looks at the part of the economy much maligned as not being part of the economy at all, yet at the same time is vital to it – the public sector.

Introduction to the Quinary Sector

The Quinary sector includes all services provided by the government for the sake of maintaining the people’s quality of life. For this section, I’m also going to include the voluntary and social enterprise sector (confusingly referred to a “The Third Sector”).

As mentioned, the public sector is fundamentally about the quality of life for citizens and the (efficient) administration of publicly-owned and operated departments. This includes health (NHS), education, local government, defence and other forms of public administration such as government agencies (i.e. DVLA) and the infamous quasi-autonomous non-governmental organisations – aka. QUANGOS (Part II).

The Third Sector is made up of voluntary and charitable organisations that may or may not provide some frontline services on behalf of the government, but also for special categories of people who require additional help, advice or advocacy.

The public sector in Wales has significantly grown since the 1970s, but despite concerns over high public spending and bureaucracy, the proportion of people working in the Welsh public sector has stabilised.

Sectoral Analysis


(Pic: Cardiff University)


Health – The NHS is Wales’ single largest employer. In 2017, NHS Wales directly employed the equivalent of 77,917 full-time workers; the actual numbers of people employed will be larger once part-timers are counted is closer to 91,000. More than half of the NHS workforce are either nursing staff or administrators; medical and dental staff only make up around 8.1% of the NHS workforce.

Seven local health boards run the NHS in Wales, alongside the Velindre NHS Trust (cancer), Wales Ambulance Service Trust and Wales Blood Service. NHS Wales also has its own specialist logistics and procurement service (Shared Services Partnership).

There are currently 13 major general hospitals (with A&E units) in Wales in addition to 21 local acute and community hospitals with minor injury units (varying part-time and 24-hour) and numerous supporting clinics, psychiatric hospitals and a specialist children’s hospital in Cardiff.

In 2016-17, NHS Wales spent about £6.4billion.

Schools, Colleges & Universities – In 2017 (pdf), there were 1,547 maintained schools (200 of them secondary schools) and 70 independent schools in Wales, serving 451,844 pupils (just under 9,400 of them attending the independent schools) with 23,909 (full-time equivalent) qualified teachers.

There are currently 14 further education colleges – some of which have recently merged or federated – teaching around 17,470 students in 2016-17 (pdf). These offer vocational and technical courses, with some also offering degrees in partnership with universities. In some local authorities, post-16 education is provided exclusively by FE colleges.

Although like housing associations, universities straddle the line between public and private sectors, they play an important economic role. As of 2018, Wales has 8 universities (9 including the Open University) and like the FE sector, they’ve undergone a restructuring process led by the Welsh Government, leading to a number of mergers including the establishment of the University of South Wales and Trinity St Davids University.

In 2016-17, there were 129,395 enrolments to Welsh higher education courses. 23,400 (18%) were postgraduates and around 16% of these were overseas students (including EU). In 2015-16, it was also estimated that the university sector contributes £5billion in Welsh economic activity, contributed £2.7billion to Welsh GVA and supported 49,200 jobs.


(Pic: BBC Wales)


Local Government – The single biggest sector within the Welsh public sector are our 22 local authorities. The WLGA estimates 140,000 people are employed in local government, but this has consistently fallen due to public spending cuts and local authorities being encouraged to collaborate in providing backroom services.

Local authorities (including police authorities, national park authorities and fire authorities) were responsible for up to £8.1billion of public spending in Wales in 2018-19 on rudimentary local services such as education, social services, policing, fire services, waste collection, planning and highways maintenance. Local authorities are provided with around £4billion from the Welsh Government directly annually, topped up by some UK Government direct and indirect grants (i.e. Policing).

Local Government has the power to levy taxes, raising around £2.4billion per year in Council Tax and Non-Domestic Rates on businesses which are redistributed based on a Welsh Government formula. Local authorities might be able to keep more of this money for themselves in the future.

Central Government (Wales & UK) – The National Assembly and Welsh Government are significant employers by themselves. Approximately 6,500 people are employed by the Welsh Government directly, and around 450 by the Assembly legislature. Some of these jobs have been spread around Wales – to Llandudno Junction, Merthyr Tydfil and Treforest for example – though most Welsh Government jobs are in Cardiff.

Wales hosts a few major UK agencies spun-out from the centre including Companies House in Cardiff (766 FTE employees); the DVLA (5,351) and Land Registry (540) in Swansea; the Office of National Statistics (1,000), Passport Office (150) and Patent Office (350) in Newport.

It’s also important to note that pan-UK institutions – like defence – are likely to employ large numbers of Welsh people based outside Wales, whilst employing very few directly within Wales itself. The only significant military bases in Wales are RAF Valley, MOD complexes at Brecon and Sennybridge and MOD St Athan, the latter of which has now been mostly turned over to civilian uses. In Q3 2017, there were only 3,310 UK military and civilian defence personnel stationed in Wales out of a total of 205,000 (1.5% of the total).


(Pic: Wales Online)

Third Sector – (See also: What does the Welsh Third Sector look like?) The Third Sector (also known as the voluntary and charitable sector) is made up of companies and organisations with a formally recognised charitable or non-profit status, with a sizable proportion of their labour provided by volunteers. Some organisations might directly run local services, others might be advocacy or research groups, others might be non-profit social organisations like amateur sports clubs and arts groups.

In 2015, the Third Sector in Wales generated £1.09billion in income and 116,600 people, with more than half of the funding coming from government sources. As of July 2017, there were 32,397 Third Sector organisations operating in Wales, with 31,312 of those having a registered address in Wales.

All-Wales context

Wales has the largest public sector of the UK’s nations and regions. 25.3% of Welsh GVA came from public administration, education and health in 2016 compared to 17% in England, 21.7% in Scotland and 24.7% in Northern Ireland.

Health and social work is the dominant sub-sector of public services, with 10.6% of Welsh GVA coming from that in 2016, compared to 7.9% for general public administration and 6.9% for education.

The region most reliant on public services for its economy is Swansea (32.8% of GVA), closely followed by Conwy & Denbighshire (30.6%). The most obvious explanation would be the large number of hospitals and FE colleges in both NUTS3 regions, as well as – in the case of Swansea – two universities. Swansea also, as mentioned earlier, hosts several UK Government agencies like the DVLA.

Cardiff & Vale of Glamorgan (28.5% of GVA) is also fairly high up the list – for obvious reasons as it includes the capital – but perhaps doesn’t top it due to a much more diversified economy. Gwynedd (28.6%) and South West Wales (27.3%) are also fairly high up the list and both regions are home to several local authorities, major district general hospitals, FE colleges and universities.

In a slight change to other sectoral analyses, I thought it would be better to use the proportion of jobs in a local authority which are in public services (as of March 2018). 387,500 people were estimated to work in the public sector, or 27.1% of the workforce.

The number of jobs is generally proportional to population – the more people, the bigger the public sector. However, when you look at the proportion of jobs to the whole workforce there are some clear patterns.

What we call “Y Fro Gymraeg” – Anglesey, Gwynedd, Carmarthenshire, Ceredigion – is the area most reliant on public sector jobs, averaging around 29-30% which is above the Welsh average. Swansea is the most reliant overall at 33% of the workforce, but that was explained earlier.

You would’ve expected Cardiff to be towards the top (29.7%) due to its capital status, but what’s a little surprising is how relatively low the proportion of public workers is in some areas – particularly in the Valleys which are either at or not far below or above the Welsh average when they’re perhaps stereotyped as being over-reliant on the public sector.

The border councils are also relatively low down, perhaps because they’re sparsely populated and – with the exception of Wrexham – lack universities, colleges, have fewer schools and fewer or no major district general hospitals.

One of the most common economic tropes is that Wales is over-reliant on the public sector for jobs. That might be true at some local levels, but nationally the proportion of people working in the public sector has remained relatively stable – as the above graph demonstrates.

The proportion of public sector workers peaked during the Great Recession (when the private sector contracted and unemployment increased), then gradually reduced in the post-recession period of austerity and public spending cuts. Although Wales had a higher starting point, it broadly kept pace with changes in the public sector workforce at a UK level until around 2015.

Also, different policies will affect the public sector workforce – introducing the foundation phase and pupil deprivation grant in Wales has resulted in more teaching assistants being hired, while local government sees job cuts as the Welsh Government pursues regional collaboration.

SWOT Analysis: Welsh Public & Third Sectors



The public sector in Wales pays more, on average, than the private sector. (Pic: ITV Wales)

The public sector pays relatively well and provides a measure of job security – In 2017, ONS figures stated that while the Welsh average annual salary was £25,400 a year, the public sector average was £28,489, while the private sector average was £23,390. While in all cases Welsh employees earn less than the UK average, the gap between public and private sector pay was larger in Wales compared to the UK – meaning public sector workers have great spending power and economic influence, which means….

A strong public sector boosts the private sector – While the public sector is disproportionately large in Wales compared to most of the rest of the UK, this can have positive benefits for the local economy. A major public sector employer and its workers (i.e. a district hospital) can help sustain local services by providing large numbers of secure jobs with people willing to spend money, as well as the possible procurement benefits (if used appropriately).

The public sector is a hidden engine of productivity and helps reduce general inequality – The public sector’s role in economic productivity is overlooked. Ultimately, having good schools, efficient local services and hospitals pay for themselves by improving the skills and health of workers regardless of where and for whom they work. Better skills and health also means better earning potential and, when compared to previous centuries, the provision of essential public services (particularly universal health care and education) has done more to reduce inequality than anything else; it’s just a shame that in many parts of Wales it’s not working for everyone.



The failure of the Williams Commission is an example of resistance to reform in the Welsh public sector. (Pic: Wales Online)

A “silo mentality” that’s resistant to reform – The public sector in Wales has a reputation for being insular, risk-averse and reluctant to reform (points touched on in Part VII). While it’s true that Wales has seen its fair share of botched public service reforms, the reluctance seen, for example, to reform of local government has led to numerous proposals being scrapped despite there being a broad agreement that the current system of 22 councils can’t continue. While the Welsh Government should shoulder its part of the blame by displaying a lack of leadership, the reluctance of the public sector to adequately engage with reforms is equally as obstructive.

Unnecessarily complicated management and administrative structures – The Williams Commission revealed a highly complex intermixing of different boards, agencies and authorities, which you can see for yourself here (pdf). This is before addressing the complicated management structures within the public sector. There’s rarely a “one department, one manager” model. Instead, there are deputy directors, senior administrators, assistant administrators to the deputy director etc. It’s very hard to see who’s accountable for what sometimes and that probably reduces public sector efficiency. Anecdotally, in some local authority departments, there are often more administrators and managers than frontline staff.

Duplication and empire building – This is a particular problem within the Third Sector. With more than 30,000 charitable organisations operating in Wales – roughly one for every 96 people – there’s clearly going to be a lot of duplication. Each one will need its own chairs, trustees, treasurers etc. and will probably be competing with other very similar organisations for government, private and donated funds. This can’t be the most effective way to help vulnerable groups, can it?



Many government departments currently based in London will have to be replicated in Wales post-independence. (Pic: Paul Robert Lloyd)

Spending more public procurement money within Wales – The Welsh public sector collectively spends around £6billion a year on outside services and products, yet at the end of 2017 only around 50% of that was spent in Wales when the European average is about 90% of public procurement being spent in the same nation. Plaid Cymru previously estimated that increasing internal public procurement to 75% could create or support between 40,000-50,000 jobs.

Innovation and use of “big data” – There are many ways in which “big data” can be used to improve the productivity of public services and, by extension, the rest of the economy. Five examples listed here include traffic management, personalised healthcare, skills & education monitoring, agricultural monitoring and poverty measures. Doing this through some sort of national cloud database and giving access to (mostly non-sensitive) data to various public, private and Third Sector organisations could make running an independent Wales a lot easier and give us a far better idea of where resources are most needed than the Census.

Establishment of new government departments after independence – One of the most commonly used arguments against independence is that major public sector employers – namely UK Government agencies based in Wales, such as the DVLA – would have to close leading to mass job losses. Wales would undoubtedly need an equivalent of the DVLA, Companies House etc. and they would be much smaller operations, but any jobs lost from downsizing these agencies would likely be made up by the creation of new government departments and agencies which are currently based in London (or elsewhere) in order to serve the whole UK. If employees at existing UK agencies were given the first refusal for jobs in any new departments and agencies, then independence shouldn’t lead to an overall net loss of public sector jobs, they’d just be different jobs.



(Pic: The Guardian)

Budget cuts – Cuts to public spending are inevitably going to hit the public sector harder than the private sector, even if the public sector is generally resistant to economic recessions. Under traditional Keynesian economics, public spending should increase during downturns and be kept under control during growth periods. In the post-Recession era (since 2010 or so) this had been largely abandoned, with centre-right governments making spending cuts or enacting spending freezes whilst relying on low-interest rates and consumer confidence to generate growth. Brexit and Welsh independence would no doubt provide more major economic shocks that would require crisis management of this kind, though the precise numbers can be nothing more than an educated guess.

Service reorganisation and centralisation – While the public sector has been resistant to internal reforms, the general direction of travel is towards outsourcing and fewer, bigger providers. In areas which may see the downgrading of local public employers (i.e. centralising services away from local district general hospitals to fewer sites), it’s inevitably going to cause some upheaval and hollow out local economies at the expense of larger regional hubs. One antidote to this might be the creation of a pseudo-federal model for local government in Wales or building up services at mid-sized centres (i.e. primary care centres/community hospitals taking on some general hospital services).

Changing demographics and pressures on public services – One of the biggest threats to the Welsh public sector other than austerity is longer life expectancies and the demographic changes in rural Wales. Younger people (workers) are moving out and in the main being replaced by the retired and those who can’t move away so easily (i.e the long-term disabled), leading to higher levels of economic inactivity and more reliance of local services to maintain their lives as they gradually get sicker and less mobile. This may, in the longer-run, lead to possible labour shortages in some parts of Wales and in terms of independence, places an unnecessary burden on health and social care that otherwise wouldn’t be there if younger people and the economically active were retained in the first place.