Introduction  (Page 5/20)

Funding for the Assembly is provided by the UK Government with adjustments made according to the Barnett formula that effectively sees Wales receive 6% of UK funds, roughly in line with its proportion of population. This mechanism is however seen by many, including its creator, as a badly designed formula in desperate need of replacement that has operated to the detriment of Wales (McLean and McMillan 2003). However, it should be noted that recent years have seen additional funding from the UK Treasury in reflection of support it is receiving from EU Structural Funds (Salvador and Harding 2003), which itself represents an important source of funding. However, this represents only 1% of the annual Assembly budget (Brooksbank et al. 2001).

In terms of economic development the Welsh Development Agency was now accountable to a Cardiff based minister, rather than the Secretary of State for Wales at the Welsh Office in London. The budget for economic development and transport in 2005-06 totalled just under £1.5bn, or 12% of the total Assembly expenditure. It should though be noted that this includes a significant portion for transport. Approximately £120m p.a. has been allocated for ‘Innovation and Competitiveness’ with a further £80m p.a. for ‘Entrepreneurship’ (WAG 2005).

Much commentary and study has been of this transition, often in comparison with the ‘settlements’ in the other devolved regions of the United Kingdom (Morgan 2001, Salvador and Harding 2005, Cooke and Clifton 2005), as a new level of politics was introduced to Wales. Some observers argue the asymmetric settlements have led to varying outcomes for individual regions (Cooke and Clifton 2005), while others such as Morgan (2001) describe the risk of highlighting regional inequalities and developing interregional rivalry rather than co-operation. The observations of Cooke and Clifton (2005) are of particular relevance to this study. They argue that a project such as Technium is an ‘overambitious’ initiative and a return by the Assembly to the ‘Field of Dreams’ approach as part of a ‘precautionary’ approach to economic development.

Knowledge economy and innovation

The previous section has outlined the migration of the Southwest Wales region from an industrial base built upon heavy industries to one which is more knowledge driven. This section provides an overview of the Knowledge Economy with global, national and regional perspectives.

Here we introduce the concept of knowledge and its role in the Knowledge Economy, together with a ‘three pillar’ model of the Knowledge Economy consisting of: Human Capital, Innovation and Infrastructure. This model is then used in subsequent sections to discuss the Knowledge Economy at the Global, European, UK and Regional levels.

Growth of the global knowledge economy

Economies have always been built upon knowledge (EU 1997), though it is only recently that knowledge has become the driving force behind regional, national and global economies. Developed nations such as the UK have seen their economies become increasingly dependent upon knowledge sectors, particularly over recent years.