Wales can afford to be better

Llywelyn ap Gwilym

Can Wales afford to be independent? It is a common question, but not an easy one to answer. The answer depends on the kind of country that we want an independent Wales to be.

The “economy” of a country is not something in and of itself. Instead, a country’s finances reflect the social and political choices made, as well as how such choices are paid for. Therefore, the answer is “yes” because any country can afford to be independent, as long as it makes appropriate choices.

The more relevant question is whether an independent Wales could make similar social and political choices as it does now, and how it would finance them.

This is important since many people consider independence against the status quo: can an independent Wales afford to look as it does now?

A recent paper by think tank Melin Drafod, which pulls together recent academic work in this area, suggests that it can.

The current situation is not encouraging. Office for National Statistics revenue and expenditure estimates for Wales as part of the UK indicate that Wales runs a large nominal budget deficit.

However, it must be recognised that this estimated deficit reflects the choices made today, largely by the UK government in Westminster who control almost all financial levers, and which directs investment to the southeast of England, locking in the need for fiscal transfers to Wales (and most other regions of England).

Therefore, this current situation does not necessarily reflect the finances of an independent Wales making the same social and political choices. An independent Wales could finance these choices differently. Wales’s future position, if independent, will also rely on negotiations with the remainder of the UK.

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Deficits

Analysis cited in Melin Drafod’s paper suggests that historical precedents, including those set during the Scottish independence referendum campaign in 2016, imply that Wales’s economic situation post-independence would be much stronger than its current position.

Moreover, negotiations over historical debt or pensions obligations, several areas of “non-identifiable” spending currently allocated to Wales, such as spending on the armed forces, make ONS-estimated deficits look outsized when compared with international comparators.

Taking all these factors into account, the deficit of an independent Wales which makes similar social and political choices to those that it makes today would be 3.1%, which is in line with European peers.

While many of these assumptions are open to challenge, the clear answer is that, yes, Wales can afford to be an independent country which looks very similar to the country that it is today.

However, the question remains, is this what people want?

Many supporters of Welsh independence believe that Wales is not reaching its true potential as part of the UK. Perhaps more pressingly, as part of the UK, Wales is beholden to a government which is increasingly right-wing, resulting in a declining standard of living for the majority, while a tiny minority thrives.

People are struggling to heat their homes, and dependence on food banks has exploded. Inequality has reached levels last seen in the 1920s, suicide rates are increasing, and life expectancy is falling.

The future looks bleak, and it is unclear how or when things will improve for the majority. While it is true that Wales, in its current form, could afford to be independent, this is not a satisfactory conclusion: child poverty still means empty stomachs, regardless of whether the decisions which lead to such poverty are made in Westminster or in Cardiff Bay.

Improvements

Melin Drafod's paper should be viewed as a starting point rather than a conclusion. By gaining an understanding of the financial landscape of an independent Wales that mirrors today's Wales, we can begin to consider what improvements Wales could afford to make.

Whether it is a Universal Basic Income or Universal Basic Services or anything else, we can start exploring the benefits and the costs, as well as how we might pay for them.

Moreover, we can begin to rethink our economy and its purpose. In an independent Wales, what would we choose to prioritise?

The “economy” of a country is not something in and of itself. Instead, a country’s finances reflect the social and political choices made, as well as how such choices are paid for.

Therefore, people should not worry about contributing to a healthy economy for the sake of the economy. Instead, we should think about how we can create a happy, confident, welcoming nation, where everyone can prosper.

That is the message from Melin Drafod’s paper: not only can Wales afford to be independent, of course it can, but Wales can afford to be better.

Llywelyn ap Gwilym is a member of Melin Drafod’s national committee. The think tank’s finance discussion paper will be discussed at the policy group’s next public meeting at 7:30pm, 19 May in Tŷ Tawe in Swansea. More information is available at melindrafod.cymru