Can Wales afford independence?

I posted this Twitter thread on July 10th, 2021. I’ve tweaked it a little bit here. We often hear the argument that Wales is “too small” or “too poor” to be independent. Isn’t it strange how there are dozens of countries smaller than Wales? Isn’t it curious that Wales’ economy on a per person basis is bigger than that of Spain? Yet nobody questions Spain’s capacity to exist as a Nation State. But “The Deficit!” You know, the one the UK Government creates on our behalf … *whispers* but don’t mention that they run their own deficit (just like most other states).

I’ve been doing some thinking about this economic case for #indyWales Here’s some data … (Taken from https://worldpopulationreview.com/countries/countries-by-gdp)

Too small, too poor.

“Wales is too small.”

Smaller countries tend to be more affluent.

“We’d have to stand on our own two feet.”

There are 88 countries on the above list with a population smaller than 5 million. Just like Wales.

“We can’t afford it.”

Out of the near 200 countries listed Wales would rank about 35th for GDP per Capita. Out of the 88 smaller countries, Wales would be 16th. That’s top quartile in both lists. Here’s the rank order of small European countries if Wales was included:

It’s very clear from the data that the “too small, too poor” claim is nothing more than a badly founded lie.

One thing I should mention in this thread is currency. There are probably three serious contenders.

  1. Use the £/sterlingisation
  2. Use the Euro
  3. Use our own currency

I personally favour using our own. It would allow us far more in terms of fiscal policy.

“A Welsh currency would be worthless. Your credit rating would be junk.”

Iceland went down this same road just over a century ago.

https://en.wikipedia.org/wiki/History_of_Iceland#Home_rule_and_sovereignty

See this for info on the Icelandic economy and Moody’s rating.

https://thebanks.eu/countries/Iceland/economy

Then remember we have ten times the population.

The Deficit

At this point I’m going to revisit a bit of an old thread because I know the next question is “What about the deficit?”

https://blogarwyn.wales/2021/08/08/the-deficit/

Wales has no deficit. The Welsh Government is permitted only a very small amount of borrowing and otherwise spends within its’ budget which is set via the Barnett formula according to spending decisions for England. For example, if England’s NHS funding is reduced, ours will be cut by the same percentage. The UK Govt accounts for 45% of the spending in and on behalf of Wales & it is responsible for the deficit it incurs in doing so. The https://www.cardiff.ac.uk/wales-governance-centre publishes the GERW report with detailed estimates on government spending and revenue with respect to Wales. Since the Welsh Government has extremely limited control over public spending and revenues in and on behalf of Wales it is clear that Wales does not run a deficit … A deficit is run in our name.

For example Wales is contributing an estimated £3-5Bn to HS2. @swalesmetroprof has written here: https://swalesmetroprof.blog/2020/01/07/wales-and-hs2/ about the net £150 Million annual cost to the Welsh economy. He also estimates that underfunding on rail will have cost Wales £3Bn between 2001 and 2029.

For example, spending on defence attributed to Wales comes to 2.6% of GDP. That’s higher than the NATO target of 2%, higher than the UK as a whole at 2.2% and higher than Ireland at approximately 0.5 – 0.6% of GDP. If an independent Wales spent the same percentage as Ireland we’d save a billion pounds every year.

So you see, the power to decide where our taxes go is beyond the Welsh Government and they are often spent in a manner that damages our economy.

This brings me to productivity … also known as GVA.

GVA

I think this infographic speaks volumes. It demonstrates what lies behind the 30% and rising of Welsh children who are growing up in poverty. Moreover, the low average wages & in work poverty of workers, all of which leads to poorer health outcomes & life chances.

http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3/

The GERW report (p.20) states that if Welsh GVA per Capita matched roUK then annual revenues would be £5.3Bn higher.

https://www.cardiff.ac.uk/__data/assets/pdf_file/0009/1542474/full_gerw_print.pdf

The same GERW report also points out that Wales’ ageing demographics (we also lose young people in search of work) costs Wales £1.5Bn every year (p.75).

https://www.cardiff.ac.uk/__data/assets/pdf_file/0009/1542474/full_gerw_print.pdf

Uneven Economic Development

So it should be obvious by now that the key factor in our current economic underperformance is low GVA – but the big question is “Why?” One word. Investment. Or to be precise, the lack thereof. The story of Wales in the 20thC was one of industrial disinvestment. I always remember something my Dad told me back in the ’80’s. “The mines would have had to go in the end either way. It’s just that they never put anything back.” How much Welsh manufacturing has been lost? How many processing plants? But it’s not just that.

Coming back to GERW again, capital expenditure in key areas such as Education, Science & Transport is circa 70% of the UK average per person in Wales. Compared to London, it’s even less. Those who say Wales is a net beneficiary of the UK are being disingeuous. There is an economic theory which describes the relationship between core countries and peripheral and semi-peripheral countries. I’d argue that Wales is semi-peripheral to the London core. https://web.mit.edu/esd.83/www/notebook/WorldSystem.pdf. Ultimately the fiscal and macro-economic policies which govern these outcomes are the responsibility of the UK government. And it has been a succession of poor governments with respect to Wales’ economy. UK governments have allowed the Welsh economy to fall further and further behind.

So we have the diagnosis. What is the solution? It is to equip our nation with statehood as a starting point, the means with which to rebuild our economy. We must work hard and learn to build our country and set our comunities on sustainable footings that will last generations.

#indyWales is the means by which we set the agenda and build our own future. If we don’t someone else will do it for us – and that “someone” more often than not, is the Tory Party no matter how many times Wales votes Labour. That’s the UK. We can do better than that. #indyWales is both economically viable and politically feasible.

In the end, the question is really “Who should govern Wales?”