Can Wales survive without England? Independence Economics

February 16, 2023February 16, 20231 year ago 11 min read

Whether you like it or not, the calls for Welsh independence is growing. In recent years, over 50% of Labour members in Wales are in support – partly, no doubt, down to problems at Westminster. I spoke with economist and Yes Cymru member Dr John Ball to discuss the financial side of an independent Wales. Would Wales really be stronger outside of the UK? In which case how and why?

Before we get onto independence. In your eyes, how is the economy in the UK right now?

There are major problems. No question about it. We are in a recession and we are likely to remain there for some time. We have high interest rates and high inflation – Stagflation as we call it. The UK economy is in a serious intensity ward. A combination of high inflation and interest rates is a major problem and the problem for me is that when England catch a cold economically, Wales catch the flu. It will be felt worst here than there.

There is no simple answer. Inflation is the major problem, we have increasing interest rates but that doesn’t cure inflation, it just kills growth. The single driver of inflation is the cost of energy. I don’t generally believe in subsidies because I believe in the market but there comes a time when we must support it and we haven’t. If we were to do this then we will begin to see improvement. There were complex things in the 60s and 70s but this is almost singly an issue with energy costs. The cost of energy across Europe is a fraction of what we are facing. We pay over £2500 a year, the highest in Europe is about £600. There isn’t always a case for a subsidy but on this occasion, it is needed.

The government insists that the cost of borrowing is the reason against it. It is one of these things that people like me think about and read about. No government in the world balances the book. All governments run a debt. All governments pay interest on that debt. The UK government only pays interest on its debt. The idea that suddenly this will cost a fortune is not the case. And I’m appalled that the opposition aren’t saying this. The current cost of borrowing is about 120 billion. Compare that to the GDP of the UK which is over 2 trillion. It is relatively peanuts. Only one government ever paid back some of the debt and that was in 1968.

The current overall debt of the UK which has built up over the last 100 years is £2.4 trillion. The United States, which most people look at as a very successful economy has a debt of $22 trillion. Nobody is paying it back.

Give us an idea of where you sit on the political spectrum?

I’d like to say throughout this that this is my personal view and not that of Yes Cymru but I would say that I am politically to the right. I believe in the market. I believe it has its faults, but it is the best model we have. When you look at the successful economies of Europe like Finland and Demark, they are market driven economies.

I live in a cul-de-sac of 12 houses or so, all detached and I suppose that we have all been successful in our way and had to work for it. I think this reflects a lot of the Welsh public. I don’t think we are all raving socialists, I’m no Tory mind you. I do understand that to some extent Welsh politics is to the left but not all.

Why do you think that Wales would be economically stronger outside of the union?

Because of its size. I’m often asked this. Ultimately, small nations are easier to develop and to build services. They tend to have greater pride. Economics isn’t just about the world of business but also about pride. A population of 3 million, we can build an economy. The UK is one of the biggest 20 states in the world. It is too big. There is a link with small nations and good welfare. I just came back from Estonia, and it has 1.1 million people and been independent since 1992 and their economy is booming, and they are a very proud nation and proud of what they are building.

Would you want tax powers for Wales?

Yes. I want to put this to bed – we would not necessarily be a high taxing state. We are already a high taking state. The UK has the highest level of personal taxation in the EU and second in business. Independence would give the chance to change the tax system. I’ve looked at numbers that would work without hitting personal taxes. Tourist tax for example, we are the only country in the world with a tourist industry but with no tourist tax.

A tax on business turnover as against profit is another option. A land value tax is another option. On top of that. We are currently charging nothing for water which we export free of charge to England. We produce a third more electricity than we use. There would be many ways to raise national income without needing to raise personal taxation.

The UK owes 2.4 trillion pounds. In any divorce bill, and we saw this with the EU, how much of this would Wales inherit from day one?

That will be an interesting source of negotiations. It may well be that we shouldn’t take on any of it. When we break it down a part of that is the cost of renewing trident, and decommissioning the old one for example, this will cost in the region of 100 billion. That’s a debt we had no say in.

There is still an argument that we would accept 4 or 5% of that debt. Paying interest on that, we would pay about £2.5 billion, which is a fraction of taxation. A reminder is that figures for ONS on our current Welsh economy include £2 billion in interest charges and so we already pay that amount being a part of the UK economy.

But in order for us to inherit the debt which we have occurred with Wales being in the Union, we would need to receive our share of the assets that the UK has attained while Wales have been in the union. The Royal palaces, the crown Jewels, the huge wealth which was created off the back of our coal and steel industry. It would need negotiations, but it wouldn’t just be one-way. Currently, we pay our share of the debt, but we don’t get our share of the assets.

Can Wales survive independently without the EU?

In the longer term yes. We are surviving now without the EU although I’m in favour of being in it. Essentially, we could survive outside of the EU but it would be to our advantage to be in it and also in the Euro too.

You say that we are surviving outside of the EU but how much of our current issues are down to Brexit?

The UK is poorer because of Brexit. This is clear. GDP is down 2% or 3% which doesn’t sound a lot but 2% of £2 trillion is lot of money. As well as this, we are struggling with access to services, health services, struggling to access medicine. It is a wider question of trade. There hasn’t been the personal impact people thought but exports have declined, less people are travelling both ways. It has been a hit at the higher level. London financial services has had a huge hit. Arguably that affects us, currently taxes in London helps to pay taxes everywhere. We are standing still. We should be in the EU because that’s where the growth is. Croatia joined the Euro on January 1st and the EU keeps on growing. We are the ones missing out.

For you, is independence merely economic or is there a nationalistic edge to your beliefs?

I think its both. We used to go to Malta regularly and I remember being at a bus station and there were safety notices and stuff on the board etc.. but it was all in English. I thought that’s the great risk that we are running. We are a nation without a state. I worry that we will become a state without a nation. I’m a nationalist and proud of it. I want our culture and language to thrive, our performers, our singers. There is a lot of economic studies that say that culture is driven by economics and economics is driven by culture.

Would the boundary need to be Wales? The city of Liverpool has a well-known distain for the UK. Could Liverpool join a breakaway Wales?

That’s a good question actually. The boundary is set quite clearly but interestingly, there are loads of people who genuinely argue that places like Oswestry is traditionally Welsh. No, I think we need to be realistic, there is a boundary set 1,000 years ago and that’s that.

Assuming that Wales, Scotland and Northern Ireland left the union. England would still face the same issues that it has today though, wouldn’t it? London-centric

Yes.

How would Wales be different? Why wouldn’t it become Cardiff-centric? If you look at the UK and the demographic make-up of it, the South East has the wealth, the bulk of the population. Wales is similar.

First of all, the size but let me go back to England a minute. I think that its up to the people of England to sort it out. The north is beginning to ask serious questions. The Torys did well in the Red Wall seats in the North because Labour ignored the problems that the people in the North of England had. I don’t think that has been resolved and there will be issues there.

With an independent Wales, we would need to sit down and take a good look at everything. We do have that same problem where the growth in the Southeast of Wales is faster than elsewhere. The first issue is communication. I can’t get to Wrexham. It is 120 miles and I have to take a car or I can’t go, its lunacy. I did a talk in Merthyr before Christmas and I had to drive there too. I can take a train to Cardiff and another one to Merthyr, but it would take 3 hours to go 30 miles.

The reality is that we can begin to build transport links here. I was totally amazed that the First Minister said recently that its difficult because we are mountainous – Switzerland has amazing trains, and it is far more mountainous than us. It’s also worth remembering that railways flourished in the narrow coal mining valleys of the south and the mountains of the north.

It has been said by some that in Scotland, they would lose their pension if they were to get independence. What do you make of that?

During the Scottish referendum, the No campaign said that Scots would lose their right to pensions and it was a complete smear. The UK government is legally obliged to pay pensions to those who have already paid in. If independence was to happen tonight, my pension would continue to be paid by the UK government. The UK has a clear legal obligation to pay those who have paid in. What could their argument for not paying possibly be? For anyone who has paid in, the UK is legally obliged to honour it.

How far are we away from independence becoming a reality?

I am optimistic. I think we are closer now than we have ever been. The polls are saying its anything up to a third of people are already committed and that’s before we put the arguments out. I think if there was a referendum now, then I think that we will be successful. The difficulty is more political. Scotland has a political mandate to be independent. Currently, there is no clear political way for Wales. Yes Cymru remains non-political and it must be but we need the majority in the Senedd to be pro-independent.

I think there are interesting things going on. We now have people like Calwyn Jones, saying that he thinks Wales needs more powers. That he has seen the opportunity Wales has and what we can be, but we need more power. People in the Labour party openly talking about independence. I saw that there are even 5% of Tory members that want independence. I know 5% is small but the Tory party have historically been totally against it. At present, there is nobody in the Senedd talking about it, but I don’t think that we are far away from that.

Thank you to Dr John Ball for his time and sharing his expertise in this field.