By MARCUS STEAD
WHAT WOULD the implications of Welsh independence be in terms of living standards and the practicalities of daily life?
The Welsh nationalist movement is given a soft ride by the media in Wales. Veteran journalist Paul Starling long ago pointed out that the Welsh media is dominated by people who are sympathetic to Welsh nationalism. Much more recently, former Panorama journalist Phil Parry exposed the close links between BBC Wales and Plaid Cymru. And in the last few years, the print and digital publications owned by Reach Plc in Wales have been increasingly sympathetic to the Welsh nationalist agenda in editorial tone, with a steady stream of articles sympathetic to Welsh independence appearing on the Wales Online website.
What is clear is that those advocating Welsh independence struggle to answer even the most basic of questions as to how Wales would sustain itself economically, let alone prosper, yet this is seldom put under a spotlight by the Welsh media.
Modern-day Welsh nationalism is at best based on naivety and trite sentiment, and at worst on the anti-English racism so often seen from its supporters on social media, based on grudges and fake grievances.
It is worth pointing out that there has not been any great surge in demand for Welsh independence in recent years, nor is there much chance of Wales declaring independence happening any time soon.
A YouGov poll in January this year found support for Welsh independence at 21%, while support for abolishing the recently-renamed Welsh Parliament stood at 24%. For many decades, support for Welsh independence has fluctuated between about 12% and 25%. As the old saying goes, ‘the proof of the pudding is in the eating’, and with that in mind, Plaid Cymru’s number of votes and share of the votes has declined for the last three general elections in a row.
Welsh ‘independence’ is not something that instinctively sits comfortably with most of the Welsh population. Only once in its history was Wales ever an ‘independent nation’. That was between 1055 and 1063AD when under the rule of Grufydd ap Llewellyn.
In historic terms, most of the Welsh population has only been here five minutes. Most of us only need to look back four or five generations (if that) to discover that we are at least in part descended from waves of immigration, especially from Ireland, Devon, Cornwall or Herefordshire, and to a lesser extent from other parts of Britain and the wider world.
People in South East Wales think nothing of going shopping in Cribbs Causeway or going to see a theatre play in Bristol. People in Flintshire often spend a significant part of their working and social lives in Lancashire, Cheshire and Merseyside. These are natural economic and cultural links. And, truth be told, most people in Wales don’t have much appetite for creating artificial barriers based on ancient tribal conflicts. They care a great deal more about being able to cross the border for work and leisure than they do about Owain Glyndwr.
We are proud of our distinct Welsh identity, and celebrate it in various ways – our industrial and mining heritage, music – from classical to Tom Jones to the Manic Street Preachers, various sporting achievements, Brains beer, Welsh cakes, a night on the town, our spectacular coast and countryside. But the vast majority of us consider ourselves proudly British as well as Welsh, and do no wish to think of English and Scottish neighbours (who are often also our family and friends) to be ‘foreigners’.
The danger of Wales sleepwalking towards independence is altogether more subtle. During the last 12 months, opinion polls have consistently showed that no one party will get an overall majority in next May’s Welsh Parliamentary elections. There will be a lot of water under the bridge between now and then, but as things stand, by far the most likely scenario is that either Labour or the Conservatives will be the single largest party, but will fall some way short of the 31 seats needed to form a government.
The only other party set to win seats is Plaid Cymru, who are set to win considerably fewer seats than either Labour or the Conservatives. Shortly before becoming party leader in September 2018, Adam Price categorically ruled out forming a coalition with either Labour or the Conservatives after the May 2021 elections.
Mark Drakeford, Wales’s First Minister
It is a safe bet that Price will not enter into a coalition with the Conservatives – neither he, nor his party members, nor indeed the Conservative Party would even contemplate that. But during the COVID-19 pandemic, it has been noticeable how senior Plaid Cymru figures have repeatedly heaped praise on Labour First Minister Mark Drakeford’s handling. Price has not repeated his pledge ruling out a coalition with Labour for some time, which has led many to question whether he has softened his stance.
It is also worth pointing out how both Welsh Labour and Plaid Cymru have changed in the last 20 years. During the early years of devolution, Plaid Cymru, under the leadership of Dafydd Wigley and Ieuan Wyn Jones, was not especially keen on Welsh independence and only used the word sparingly. What they sought was effectively ‘home rule’ and autonomy for Wales, though their policy was somewhat vague. Twenty years later, that is more-or-less what Welsh Labour stands for, with former First Minister Carwyn Jones openly debating on Twitter whether all but a small number of reserved policy areas should now reside in Cardiff Bay, a stance that has open support from a number of Labour members of the Welsh Parliament.
Plaid Cymru itself has developed into a party unambivalent in its support for Welsh independence, and on policy it has moved firmly to the left, embracing all manner of fashionable ‘woke’ causes along the way, while continuing its historic flirtation with anti-Semitism, a trait which dates back to the party’s founder, Saunders Lewis. However, it is worth pointing out that Plaid Cymru is itself divided, between the wokeism of Price, aided by the party’s foul-mouthed and abusive electronic army on social media of trans activists, fascist hunters and EU enthusiasts, which contrasts sharply with the party’s traditional support base in the west and north west of Wales, who are often older and far more socially conservative in outlook. It remains to be seen whether these internal divides will come to the forefront in the next ten months.
With that in mind, the Welsh electorate need to be aware of where allowing Plaid Cymru to become junior coalition partners from May 2021 could lead. This will have a very different feel to the ‘One Wales’ government which existed from 2007-2011, the last time Labour failed to gain an overall majority. On that occasion, the key concession to Plaid Cymru was a referendum on giving the Assembly (as it was then known) full law-making powers, which duly took place in 2011 and was won by the ‘Yes’ side, albeit with the consent of fewer than one in five of the Welsh electorate. The concession was heavily criticised by many senior figures inside the Labour Party, including former Secretary of State for Wales Paul Murphy, Don Touhig, and Kim Howells, then Minister of State at the Foreign and Commonwealth Office, who claimed it would lead ‘nationalists to the gates of independence’.
In 2021, concessions to Plaid Cymru may well include the devolution of broadcasting powers to Wales, and, at a push, the devolution of criminal justice powers. Don’t be surprised if both are left out of Welsh Labour’s manifesto, with a view to them being used as bargaining chips in talks with Plaid Cymru.
Beyond that, both Drakeford and Price are committed hard leftists, albeit with the emphasis on 21st century intellectual wokeism rather than early-mid 20th century dedication to improving the standard of living for working class people through collectivism.
The danger of Welsh independence happening almost by default comes not through any great surge in support from the Welsh electorate, but through the outcome of next year’s Welsh Parliamentary elections, which, as things stand, will see a hard left Welsh Labour party favouring maximum devolution in coalition with Plaid Cymru, also of the hard left, committed to Welsh independence.
As I recently outlined in my essay, ‘The Welsh media in crisis’, both BBC Wales and the Reach Plc print and digital publications are dominated by staff who are sympathetic to the aims of Welsh nationalist campaigners, which puts them at odds with the vast majority of the Welsh electorate. Therefore, they are not holding the aims and policies of Plaid Cymru or campaign group YesCymru to anything like they level of scrutiny they ought to. However, with the prospect of an Adam Price-led Plaid Cymru being the junior partners in a coalition government come next May, the time is now right to examine more closely the realities of what Welsh independence would mean.
Figures released last July by the Office for National Statistics showed public spending in Wales was £13.7 billion more than the total amount collected in taxes, which works out as a deficit of £4,376 per person. Making up that shortfall alone in a post-independence Wales would, in itself, be a huge task.
Welsh nationalists often like to claim that England is somehow responsible for short-changing Wales and is condemning the Welsh people to poverty, but the facts simply don’t back that up. In 2018/19, public spending per person in the UK as a whole was £9,584, but in Wales, the figure was £10,656, which is 11% above the average. In other words, the people of Wales are having their public services and infrastructure invested in to a far higher extent than the UK average, subsidised by the English taxpayer. This might be an inconvenient truth to some, but it is a truth nevertheless. Meanwhile, social security spending (currently a non-devolved area) is £670 per person per year higher in Wales than the UK average.
Veteran political analyst Dr Felix Aubel, who once (and possibly still does) believe in Welsh ‘Home Rule’ recently calculated that overall, the UK Government has given around £4 billion of extra funding to assist Wales during the Covid crisis. If Wales was independent of the UK, that would mean £4 Billion added to our taxes – equalling approximately £2,600 each – just to cover Covid.
Let us now look at the issue of the Welsh fiscal deficit more closely. The deficit amounts to £13.7 billion, which is 19.4% of GDP. This figure is alarming when put alongside the UK government’s deficit of £32.5 billion, which is just 1.5% of GDP. It goes without saying that without the subsidies of the English taxpayer, the Welsh fiscal deficit, already large, would be absolutely enormous.
Total Managed Expenditure for Wales is estimated at £40.8 billion in 2017-18, around 5.1% of total UK expenditure of £794.9 billion, yet Wales has just 4.7% of the UK population. There are good arguments for saying that the Barnett Formula has had its day and that the block grant calculation needs reform, but what is undeniable is that the standard of living and the running of public services in Wales is to a very large extent paid for by the English taxpayer.
Wales’s government deficit is, even at current levels, consistently higher than that of Greece during the Greek government-debt crisis. However, as Wales is part of the United Kingdom, this deficit is covered by transfer payments from the rest of the UK.
Nine of the 12 UK statistical regions carry a deficit. The three exceptions are London, South East England and East Anglia. All nine other regions are, in effect, subsidised by the three. The region requiring the smallest subsidy per person is South West England at £861, and the largest is Northern Ireland with £4,916. Wales is the second largest, at the aforementioned figure of £4,376, a considerably higher figure than Scotland’s £2,442, which was, in itself, one of the main issues the campaign for independence failed to address adequately in the run-up to the referendum of 2014.
Figures also show that unlike the UK as a whole, where Income Tax is the largest source of government revenue, in Wales it is VAT (Value Added Tax) that generates the largest amount. This places the Welsh tax system in a vulnerable position, as in times of recession or exceptional crisis (including the current pandemic), people spend less on luxuries and leisure, which means the Government receives less VAT revenue.
In 2017/18, ONS data estimated the GDP of Wales to be £73.1 billion. Under such circumstances, how could a viable currency, let alone a central bank be set up? An independent Wales would inherit its share of the UK national debt. With all this in mind, who would lend money to Wales?
So where does Wales get its money from? In the current financial year, 2020-2021, the Welsh Government will spend more than £18 billion:
- 80% of this, £14.7 billion, comes from the UK Government.
- 12%, £2.2 billion, comes from Welsh rates of income tax.
- 6%, £1.1 billion, comes from non-domestic rates.
The remaining 2%, £281 million, comes from fully devolved taxes (£245 million from Land Transaction Tax and £36 million from Landfill Disposals Tax).
The Welsh Government also plans to borrow £125 million and use revenue reserves of £125 million. These figures prove beyond any doubt whatsoever that Wales is dependent on subsidies from the English taxpayer (specifically that of London, South East England and East Anglia) to sustain our standard of living.
All this without having even taken into account the costs involved of setting up and running the various institutions that would need to be created to help an independent Wales function. For example, Welsh patients with serious liver problems are very often treated at a specialist unit in Birmingham, so a Welsh equivalent would need to be created. How much would it cost to set up and run, and could an independent Wales find the relevant medical expertise? There would be a need to create a Welsh equivalent of the Foreign Office, and defence capabilities, plus lots more.
Most Welsh nationalists advocate Wales being an independent state within the European Union, but this, in itself, brings its own problems. First of all, EU membership, from the time of application until the time the state becomes a member, typically takes around ten years. How would an independent Wales survive in the meantime? The figures supplied above strongly suggest that an independent Wales would fail the EU’s membership criteria for a functioning market economy. Or, to put it in even more basic terms, at a time when the eurozone’s finances are in a perilous state, and with the EU itself facing an uncertain future, why would it want to accept an independent Wales as a new member, facing demands for enormous subsidies?
With Wales inside the EU and England outside, how would a hard border work to protect the EU’s customs union? The current problems over the future of the Northern Ireland border are trivial by comparison. The border between England and Wales runs for 160 miles from the Dee estuary in the north to the Severn estuary in the south. There are two well-known Severn bridges linking Wales with the South West, where vehicle tolls were removed in late 2018, more than 52 years after they were imposed when the first bridge opened. In addition, thousands of vehicles cross daily and seamlessly along the A48 between South Wales and the Midlands, while in north east wales, thousands of people in Flintshire and Denbighshire cross between Wales and England for work and recreation, and are to a large extent economically and culturally aligned with Cheshire, Merseyside and Lancashire. There are also numerous other smaller road crossings along Offa’s Dyke, plus railway lines and footpaths. A hard border between Wales and England would be both absurd and impractical.
The onus is on the Welsh nationalists to explain how all the shortcomings outlined in this essay would be addressed. How would an independent Wales pay for itself? Would it be paid for by an astronomical level of borrowing each and every year well into the future? If so, who on earth would lend the money? Or would it be paid for by hefty tax rises? With a small, ageing population and a higher level of welfare dependency than the UK average, how much would this yield in real terms, and to what extent would it drive businesses and individuals out of Wales? Or is the reality that neither eye-watering levels of borrowing and tax rises possible or desirable, and that people living in an independent Wales would have to get used to a massively lower standard of living? Because if this is the case, Welsh nationalists should say so.
Just one of the FTSE top 100 companies is based in Wales (vehicle insurance firm Admiral) and even that has American management. There is little in the way of a dynamic, entrepreneurial ‘get up and go’ culture in Wales of the sort seen in London and south-east England.
When challenged about how Wales would survive (or thrive) as an independent nation, Welsh nationalists very often talk about water, but it soon becomes apparent that they have grossly overestimated the financial benefits of selling water to England. A number of posters (such as these) proclaiming the benefits of selling water to England have been spread far and wide on social media by Welsh nationalists, some of which appear to have been created by YesCymru itself.
Depending on which poster you go by, Wales exports 214 billion, 243 billion or 100 billion litres of water to England each year. Here’s where their maths 
becomes very, very dodgy. One poster claims that if Wales charged a market price of £0.003 per litre, that would amount to £642 million per year, which equates to £204.52 per Welsh citizen, per year. Alternatively, we can go by the second poster, which puts the market price at £0.03 per litre, which would amount to £6.4 billion per year, which would amount to £2,045 per person, per year (yep, someone’s done a multiple of ten!).
Now let’s look at the reality of the situation: The utility companies don’t own the water (though they do own the reservoirs themselves). The utility companies have the right to abstract it. Ownership of the water is in Government hands via the Environment Agency, and is devolved in Wales. Let’s be generous and say that Wales exports 356 million cubic metres (356 billion litres) per year and compare it to the maths in this attached chart:
10p per m3 = £36 million pa.
25p per m3 = £89 million pa.
Now let’s pretend Welsh nationalists get their way and the Welsh Government puts a huge levy on the extraction charge, say 50p per m3 = £178 million pa.
Anything beyond 50p (already roughly twice the current rate any company in England pays) means alternatives such as desalination (removing salt from sea water) become viable alternatives.
The very high end figure of £178 million divided by the 3,176,000 people who live in Wales works out at a meagre £56.05 per person, per year.
In terms of inward investment, Wales has gone backwards in the 21 years since devolution began. The Welsh Development Agency had certain well-publicised failings, but during the 1980s, 1990s and into the 2000s, Wales, largely but not exclusively thanks to WDA activities, secured 22% of all inward investment into the UK, which was an incredible achievement. Today, that figure stands at a miserable 2%.
Particularly in its later life, the WDA was an organisation of people (predominantly Welsh people) who cared about lifting the prosperity of the country, and knew how to go about it. But in the early years of devolution, the Welsh Assembly Government became more and more demanding of information from the WDA, and increasingly interfered in its activities.
Welsh Development Agency
The WDA was not designed to service the Welsh Assembly Government. It was designed to deliver economic development to external customers. When First Minister Rhodri Morgan abolished the WDA as part of his ‘bonfire of the quangos’, its former CEO, Graham Hawker, told him he’d ‘screwed the Welsh economy’. Hawker went on to resign in front of a Senedd committee.
Following Hawker’s resignation, Gareth Hall was installed as the Welsh Government’s puppet CEO of the WDA. The period that followed saw a massive cultural shift at the WDA. The entrepreneurial cultural spirit of the organisation was replaced with a culture of answering to Government ministers and civil servants. Hall was close to Marc Clement of Swansea University. The WDA was being steered by Economic Development Minister Andrew Davies, who also had close links to Swansea University.
The politicisation of economic development has killed off any possibility of raising Wales’s GDP above 75% of the UK average. The years since have seen gross mismanagement of EU funds coupled with the pushing of funding to the ‘third sector’ economy (effectively under the control of the Welsh Government, who control the purse strings) and failed pet projects such as the ongoing Cardiff Airport debacle.
The folding of the WDA is a case study of how to destroy successful economic development practice and replace it with political and ideologically-driven policies of inclusion, sustainable development and socialist dogma.
Those making the decisions in the Welsh Government and those forming its policies consist largely of former social workers, former school teachers, former trade union reps and dry academics. What Wales needs is entrepreneurs and businessmen and women who know what is required to encourage inward investment and develop a dynamic private sector.
More than two decades of devolution have seen the Welsh economy go backwards in terms of entrepreneurialism, the private sector and inward investment. Whether we like it or not, the reality is that Wales is dependent on huge subsidies to sustain its standard of living. Those advocating an independent Wales need to be honest with the electorate by acknowledging that an independent Wales would be a substantially poorer country than at present, or alternatively explain their masterplan for reviving the Welsh economy. Don’t hold your breath on that happening.
EARLIER today, I appeared on Radio Sputnik, where I argued that the UK needs to embrace the opportunities Brexit brings. Not enough emphasis has been put on the opportunities being free from the shackles of the EU will bring. In terms of ‘risk’ of a so-called ‘No Deal’ Brexit, the biggest danger comes from energy. Closing down fossil fuel burning plants has left us increasingly dependent on foreign energy. Outside the European Energy Market, the danger of the lights going out increases: 
The podcast was recorded on the afternoon of Wednesday 1 July. On the Tuesday evening, Geraint retweeted a comment from actor and activist Laurence Fox, which attracted little comment, but several hours after the podcast was recorded, it attracted the attention of Ben Jeffreys, CEO of Pontypool RFC. Jeffreys then published a tweet making it clear that Geraint was no longer welcome at their matches, despite having supported the club through thick and thin since childhood.
Marcus Stead 
The True Cost of Welsh Independence
with 12 comments
By MARCUS STEAD
WHAT WOULD the implications of Welsh independence be in terms of living standards and the practicalities of daily life?
The Welsh nationalist movement is given a soft ride by the media in Wales. Veteran journalist Paul Starling long ago pointed out that the Welsh media is dominated by people who are sympathetic to Welsh nationalism. Much more recently, former Panorama journalist Phil Parry exposed the close links between BBC Wales and Plaid Cymru. And in the last few years, the print and digital publications owned by Reach Plc in Wales have been increasingly sympathetic to the Welsh nationalist agenda in editorial tone, with a steady stream of articles sympathetic to Welsh independence appearing on the Wales Online website.
What is clear is that those advocating Welsh independence struggle to answer even the most basic of questions as to how Wales would sustain itself economically, let alone prosper, yet this is seldom put under a spotlight by the Welsh media.
Modern-day Welsh nationalism is at best based on naivety and trite sentiment, and at worst on the anti-English racism so often seen from its supporters on social media, based on grudges and fake grievances.
It is worth pointing out that there has not been any great surge in demand for Welsh independence in recent years, nor is there much chance of Wales declaring independence happening any time soon.
A YouGov poll in January this year found support for Welsh independence at 21%, while support for abolishing the recently-renamed Welsh Parliament stood at 24%. For many decades, support for Welsh independence has fluctuated between about 12% and 25%. As the old saying goes, ‘the proof of the pudding is in the eating’, and with that in mind, Plaid Cymru’s number of votes and share of the votes has declined for the last three general elections in a row.
Welsh ‘independence’ is not something that instinctively sits comfortably with most of the Welsh population. Only once in its history was Wales ever an ‘independent nation’. That was between 1055 and 1063AD when under the rule of Grufydd ap Llewellyn.
In historic terms, most of the Welsh population has only been here five minutes. Most of us only need to look back four or five generations (if that) to discover that we are at least in part descended from waves of immigration, especially from Ireland, Devon, Cornwall or Herefordshire, and to a lesser extent from other parts of Britain and the wider world.
People in South East Wales think nothing of going shopping in Cribbs Causeway or going to see a theatre play in Bristol. People in Flintshire often spend a significant part of their working and social lives in Lancashire, Cheshire and Merseyside. These are natural economic and cultural links. And, truth be told, most people in Wales don’t have much appetite for creating artificial barriers based on ancient tribal conflicts. They care a great deal more about being able to cross the border for work and leisure than they do about Owain Glyndwr.
We are proud of our distinct Welsh identity, and celebrate it in various ways – our industrial and mining heritage, music – from classical to Tom Jones to the Manic Street Preachers, various sporting achievements, Brains beer, Welsh cakes, a night on the town, our spectacular coast and countryside. But the vast majority of us consider ourselves proudly British as well as Welsh, and do no wish to think of English and Scottish neighbours (who are often also our family and friends) to be ‘foreigners’.
The danger of Wales sleepwalking towards independence is altogether more subtle. During the last 12 months, opinion polls have consistently showed that no one party will get an overall majority in next May’s Welsh Parliamentary elections. There will be a lot of water under the bridge between now and then, but as things stand, by far the most likely scenario is that either Labour or the Conservatives will be the single largest party, but will fall some way short of the 31 seats needed to form a government.
The only other party set to win seats is Plaid Cymru, who are set to win considerably fewer seats than either Labour or the Conservatives. Shortly before becoming party leader in September 2018, Adam Price categorically ruled out forming a coalition with either Labour or the Conservatives after the May 2021 elections.
Mark Drakeford, Wales’s First Minister
It is a safe bet that Price will not enter into a coalition with the Conservatives – neither he, nor his party members, nor indeed the Conservative Party would even contemplate that. But during the COVID-19 pandemic, it has been noticeable how senior Plaid Cymru figures have repeatedly heaped praise on Labour First Minister Mark Drakeford’s handling. Price has not repeated his pledge ruling out a coalition with Labour for some time, which has led many to question whether he has softened his stance.
It is also worth pointing out how both Welsh Labour and Plaid Cymru have changed in the last 20 years. During the early years of devolution, Plaid Cymru, under the leadership of Dafydd Wigley and Ieuan Wyn Jones, was not especially keen on Welsh independence and only used the word sparingly. What they sought was effectively ‘home rule’ and autonomy for Wales, though their policy was somewhat vague. Twenty years later, that is more-or-less what Welsh Labour stands for, with former First Minister Carwyn Jones openly debating on Twitter whether all but a small number of reserved policy areas should now reside in Cardiff Bay, a stance that has open support from a number of Labour members of the Welsh Parliament.
Plaid Cymru itself has developed into a party unambivalent in its support for Welsh independence, and on policy it has moved firmly to the left, embracing all manner of fashionable ‘woke’ causes along the way, while continuing its historic flirtation with anti-Semitism, a trait which dates back to the party’s founder, Saunders Lewis. However, it is worth pointing out that Plaid Cymru is itself divided, between the wokeism of Price, aided by the party’s foul-mouthed and abusive electronic army on social media of trans activists, fascist hunters and EU enthusiasts, which contrasts sharply with the party’s traditional support base in the west and north west of Wales, who are often older and far more socially conservative in outlook. It remains to be seen whether these internal divides will come to the forefront in the next ten months.
With that in mind, the Welsh electorate need to be aware of where allowing Plaid Cymru to become junior coalition partners from May 2021 could lead. This will have a very different feel to the ‘One Wales’ government which existed from 2007-2011, the last time Labour failed to gain an overall majority. On that occasion, the key concession to Plaid Cymru was a referendum on giving the Assembly (as it was then known) full law-making powers, which duly took place in 2011 and was won by the ‘Yes’ side, albeit with the consent of fewer than one in five of the Welsh electorate. The concession was heavily criticised by many senior figures inside the Labour Party, including former Secretary of State for Wales Paul Murphy, Don Touhig, and Kim Howells, then Minister of State at the Foreign and Commonwealth Office, who claimed it would lead ‘nationalists to the gates of independence’.
In 2021, concessions to Plaid Cymru may well include the devolution of broadcasting powers to Wales, and, at a push, the devolution of criminal justice powers. Don’t be surprised if both are left out of Welsh Labour’s manifesto, with a view to them being used as bargaining chips in talks with Plaid Cymru.
Beyond that, both Drakeford and Price are committed hard leftists, albeit with the emphasis on 21st century intellectual wokeism rather than early-mid 20th century dedication to improving the standard of living for working class people through collectivism.
The danger of Welsh independence happening almost by default comes not through any great surge in support from the Welsh electorate, but through the outcome of next year’s Welsh Parliamentary elections, which, as things stand, will see a hard left Welsh Labour party favouring maximum devolution in coalition with Plaid Cymru, also of the hard left, committed to Welsh independence.
As I recently outlined in my essay, ‘The Welsh media in crisis’, both BBC Wales and the Reach Plc print and digital publications are dominated by staff who are sympathetic to the aims of Welsh nationalist campaigners, which puts them at odds with the vast majority of the Welsh electorate. Therefore, they are not holding the aims and policies of Plaid Cymru or campaign group YesCymru to anything like they level of scrutiny they ought to. However, with the prospect of an Adam Price-led Plaid Cymru being the junior partners in a coalition government come next May, the time is now right to examine more closely the realities of what Welsh independence would mean.
Figures released last July by the Office for National Statistics showed public spending in Wales was £13.7 billion more than the total amount collected in taxes, which works out as a deficit of £4,376 per person. Making up that shortfall alone in a post-independence Wales would, in itself, be a huge task.
Welsh nationalists often like to claim that England is somehow responsible for short-changing Wales and is condemning the Welsh people to poverty, but the facts simply don’t back that up. In 2018/19, public spending per person in the UK as a whole was £9,584, but in Wales, the figure was £10,656, which is 11% above the average. In other words, the people of Wales are having their public services and infrastructure invested in to a far higher extent than the UK average, subsidised by the English taxpayer. This might be an inconvenient truth to some, but it is a truth nevertheless. Meanwhile, social security spending (currently a non-devolved area) is £670 per person per year higher in Wales than the UK average.
Veteran political analyst Dr Felix Aubel, who once (and possibly still does) believe in Welsh ‘Home Rule’ recently calculated that overall, the UK Government has given around £4 billion of extra funding to assist Wales during the Covid crisis. If Wales was independent of the UK, that would mean £4 Billion added to our taxes – equalling approximately £2,600 each – just to cover Covid.
Let us now look at the issue of the Welsh fiscal deficit more closely. The deficit amounts to £13.7 billion, which is 19.4% of GDP. This figure is alarming when put alongside the UK government’s deficit of £32.5 billion, which is just 1.5% of GDP. It goes without saying that without the subsidies of the English taxpayer, the Welsh fiscal deficit, already large, would be absolutely enormous.
Total Managed Expenditure for Wales is estimated at £40.8 billion in 2017-18, around 5.1% of total UK expenditure of £794.9 billion, yet Wales has just 4.7% of the UK population. There are good arguments for saying that the Barnett Formula has had its day and that the block grant calculation needs reform, but what is undeniable is that the standard of living and the running of public services in Wales is to a very large extent paid for by the English taxpayer.
Wales’s government deficit is, even at current levels, consistently higher than that of Greece during the Greek government-debt crisis. However, as Wales is part of the United Kingdom, this deficit is covered by transfer payments from the rest of the UK.
Figures also show that unlike the UK as a whole, where Income Tax is the largest source of government revenue, in Wales it is VAT (Value Added Tax) that generates the largest amount. This places the Welsh tax system in a vulnerable position, as in times of recession or exceptional crisis (including the current pandemic), people spend less on luxuries and leisure, which means the Government receives less VAT revenue.
In 2017/18, ONS data estimated the GDP of Wales to be £73.1 billion. Under such circumstances, how could a viable currency, let alone a central bank be set up? An independent Wales would inherit its share of the UK national debt. With all this in mind, who would lend money to Wales?
So where does Wales get its money from? In the current financial year, 2020-2021, the Welsh Government will spend more than £18 billion:
The remaining 2%, £281 million, comes from fully devolved taxes (£245 million from Land Transaction Tax and £36 million from Landfill Disposals Tax).
The Welsh Government also plans to borrow £125 million and use revenue reserves of £125 million. These figures prove beyond any doubt whatsoever that Wales is dependent on subsidies from the English taxpayer (specifically that of London, South East England and East Anglia) to sustain our standard of living.
All this without having even taken into account the costs involved of setting up and running the various institutions that would need to be created to help an independent Wales function. For example, Welsh patients with serious liver problems are very often treated at a specialist unit in Birmingham, so a Welsh equivalent would need to be created. How much would it cost to set up and run, and could an independent Wales find the relevant medical expertise? There would be a need to create a Welsh equivalent of the Foreign Office, and defence capabilities, plus lots more.
Most Welsh nationalists advocate Wales being an independent state within the European Union, but this, in itself, brings its own problems. First of all, EU membership, from the time of application until the time the state becomes a member, typically takes around ten years. How would an independent Wales survive in the meantime? The figures supplied above strongly suggest that an independent Wales would fail the EU’s membership criteria for a functioning market economy. Or, to put it in even more basic terms, at a time when the eurozone’s finances are in a perilous state, and with the EU itself facing an uncertain future, why would it want to accept an independent Wales as a new member, facing demands for enormous subsidies?
With Wales inside the EU and England outside, how would a hard border work to protect the EU’s customs union? The current problems over the future of the Northern Ireland border are trivial by comparison. The border between England and Wales runs for 160 miles from the Dee estuary in the north to the Severn estuary in the south. There are two well-known Severn bridges linking Wales with the South West, where vehicle tolls were removed in late 2018, more than 52 years after they were imposed when the first bridge opened. In addition, thousands of vehicles cross daily and seamlessly along the A48 between South Wales and the Midlands, while in north east wales, thousands of people in Flintshire and Denbighshire cross between Wales and England for work and recreation, and are to a large extent economically and culturally aligned with Cheshire, Merseyside and Lancashire. There are also numerous other smaller road crossings along Offa’s Dyke, plus railway lines and footpaths. A hard border between Wales and England would be both absurd and impractical.
The onus is on the Welsh nationalists to explain how all the shortcomings outlined in this essay would be addressed. How would an independent Wales pay for itself? Would it be paid for by an astronomical level of borrowing each and every year well into the future? If so, who on earth would lend the money? Or would it be paid for by hefty tax rises? With a small, ageing population and a higher level of welfare dependency than the UK average, how much would this yield in real terms, and to what extent would it drive businesses and individuals out of Wales? Or is the reality that neither eye-watering levels of borrowing and tax rises possible or desirable, and that people living in an independent Wales would have to get used to a massively lower standard of living? Because if this is the case, Welsh nationalists should say so.
Just one of the FTSE top 100 companies is based in Wales (vehicle insurance firm Admiral) and even that has American management. There is little in the way of a dynamic, entrepreneurial ‘get up and go’ culture in Wales of the sort seen in London and south-east England.
Now let’s look at the reality of the situation: The utility companies don’t own the water (though they do own the reservoirs themselves). The utility companies have the right to abstract it. Ownership of the water is in Government hands via the Environment Agency, and is devolved in Wales. Let’s be generous and say that Wales exports 356 million cubic metres (356 billion litres) per year and compare it to the maths in this attached chart:
25p per m3 = £89 million pa.
Now let’s pretend Welsh nationalists get their way and the Welsh Government puts a huge levy on the extraction charge, say 50p per m3 = £178 million pa.
Anything beyond 50p (already roughly twice the current rate any company in England pays) means alternatives such as desalination (removing salt from sea water) become viable alternatives.
The very high end figure of £178 million divided by the 3,176,000 people who live in Wales works out at a meagre £56.05 per person, per year.
In terms of inward investment, Wales has gone backwards in the 21 years since devolution began. The Welsh Development Agency had certain well-publicised failings, but during the 1980s, 1990s and into the 2000s, Wales, largely but not exclusively thanks to WDA activities, secured 22% of all inward investment into the UK, which was an incredible achievement. Today, that figure stands at a miserable 2%.
Particularly in its later life, the WDA was an organisation of people (predominantly Welsh people) who cared about lifting the prosperity of the country, and knew how to go about it. But in the early years of devolution, the Welsh Assembly Government became more and more demanding of information from the WDA, and increasingly interfered in its activities.
Welsh Development Agency
The WDA was not designed to service the Welsh Assembly Government. It was designed to deliver economic development to external customers. When First Minister Rhodri Morgan abolished the WDA as part of his ‘bonfire of the quangos’, its former CEO, Graham Hawker, told him he’d ‘screwed the Welsh economy’. Hawker went on to resign in front of a Senedd committee.
Following Hawker’s resignation, Gareth Hall was installed as the Welsh Government’s puppet CEO of the WDA. The period that followed saw a massive cultural shift at the WDA. The entrepreneurial cultural spirit of the organisation was replaced with a culture of answering to Government ministers and civil servants. Hall was close to Marc Clement of Swansea University. The WDA was being steered by Economic Development Minister Andrew Davies, who also had close links to Swansea University.
The politicisation of economic development has killed off any possibility of raising Wales’s GDP above 75% of the UK average. The years since have seen gross mismanagement of EU funds coupled with the pushing of funding to the ‘third sector’ economy (effectively under the control of the Welsh Government, who control the purse strings) and failed pet projects such as the ongoing Cardiff Airport debacle.
The folding of the WDA is a case study of how to destroy successful economic development practice and replace it with political and ideologically-driven policies of inclusion, sustainable development and socialist dogma.
Those making the decisions in the Welsh Government and those forming its policies consist largely of former social workers, former school teachers, former trade union reps and dry academics. What Wales needs is entrepreneurs and businessmen and women who know what is required to encourage inward investment and develop a dynamic private sector.
More than two decades of devolution have seen the Welsh economy go backwards in terms of entrepreneurialism, the private sector and inward investment. Whether we like it or not, the reality is that Wales is dependent on huge subsidies to sustain its standard of living. Those advocating an independent Wales need to be honest with the electorate by acknowledging that an independent Wales would be a substantially poorer country than at present, or alternatively explain their masterplan for reviving the Welsh economy. Don’t hold your breath on that happening.
Written by Marcus Stead
July 27, 2020 at 4:18 pm
Posted in Business, Cardiff, Comment, Health, Law, Opinion, Politics, Review