The Rarely Talked About Truth Regarding Welsh Economics

This is a guest post contributed by John Young.

Could Wales Afford to be Independent?

A great many Welsh people believe that Wales cannot afford Independence. It’s not surprising because so much of the UK national media actively promote the idea.

What The UK Mainstream Media Says

The UK press regularly produces reports about Wales giving the impression that the country is a financial basket case. The way they do this is by quoting just two figures, Welsh Revenue and Welsh expenditure. The last time they did this the figures they quoted were £38 billion Welsh Expenditure and £24 billion Welsh revenue. They then translate the difference into the ‘Welsh Fiscal Deficit’. And very many people read this and just take the numbers at face value and form the opinion that Wales cannot afford Independence. It should be obvious to anyone who spends any time thinking about it that it takes more than two numbers to explain the entire Welsh financial situation.

Conversely – How I See It

Firstly the revenue (tax) figure is meaningless unless it includes ALL Welsh taxes. The majority of the major companies with a presence in Wales have their HQ in England and most of them declare their VAT and Corporation Tax as one figure where their HQ is based. So Tesco, for example, declare it at their HQ in Hertfordshire. ALL the VAT on their £60 billion UK sales is registered in England. Their sales in Wales would be about £3 billion just simply taking 5% (Welsh share of the population). Not all their sales are VAT chargeable but you can see that that would still be a huge number. The same applies to Corporation Tax. Another huge number. But they are not counted as Welsh taxes.

Multiply that by all the companies with a Welsh presence but declaring in the same way and you would end up with billions. I can only guess at the amount but it would be very easy for the Government to establish the correct figure.

Secondly, Welsh Expenditure. Most people, when you ask them what Welsh Expenditure means, say it’s money spent in Wales. Wrong. The bulk of it is spent in Wales but there is a large amount that is not.

How The Books are Cooked

By Master Chef London Treasury.

When the UK government decides to go ahead with a project that they deem to be for the benefit of the whole of the UK they allocate a part of the cost to the nations and regions based on population. So, Wales gets 5%. The trouble is that the vast majority of those projects happen in England and most of THEM happen in London and the South East of England. Crossrail for London has, so far, cost Wales £1 billion (cost rising). HS2, by the time it’s complete will have cost Wales about £5 billion. Heathrow expansion and Crossrail 2 will cost a combined £3 billion or so. If they go ahead with Trident that will cost us £6 billion. The key point about all these huge spends is that they provide virtually no benefit to Wales whatsoever even though it’s adding billions each year to the ‘Welsh Expenditure’ figure and the so-called Welsh Fiscal Deficit.

It’s worth making a local point here by saying there was no £1 billion of Welsh Expenditure for the Swansea Bay Tidal Lagoon (a project that would have given a huge financial boost to the poorest region in North Western Europe – West Wales) but there are billions of Welsh Expenditure to invest in the richest region in Europe.

I’d also like to make the point that this is not a Wales v England argument. The same logic re tax and expenditure applies to the rest of the UK as well so it’s actually the rest of the UK versus London and the SE of England.

If the real Welsh revenue figure was calculated and the real Welsh Expenditure figure (the amount ACTUALLY spent in Wales) was calculated, the gap, the real Welsh Deficit, would be far smaller than is quoted by the press.

A further £2.3 billion of spend is allocated as Welsh Expenditure as our 5% share of the cost of the UK army. If Wales was Independent it is reasonable to suggest that Wales would spend an amount on defence perhaps proportionate to Ireland. That would be £300 million. So another £2 billion would come off the deficit.

The Fiscal Deficit

There would still be a Welsh Fiscal Deficit but almost every country in the World, including England, runs a fiscal deficit. But no one ever says England couldn’t be Independent.

So, back to the question ‘could Wales afford to be Independent?’. The answer is yes. And it is yes because Welsh people work and pay tax just as others do.

I’ve read many posts on many internet forums written by Welsh people who appear to relish stating that Wales needs to be funded by Westminster. They don’t appear to want to listen to arguments that say Wales can stand on its own two feet.

If you are one of those people imagine this situation. You meet an English person and get talking about Welsh Independence. Imagine if that person said Wales can’t afford Independence, that Wales needs to be subsidised by Westminster. He would effectively be saying that you need to be subsidised by him.

Would you not like to be able to say to that person, now hold on butt, it’s not quite as simple as that . . . . .

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