Thursday 5 July 2012

Weak Wales

I may not like some of the comments made by Gerry Holtham in his evidence to the House of Lords, as reported yesterday, but it is hard to disagree with those relating to the economic situation of Wales, even if some of his comments about Welsh, Gaelic and the Highland Clearances seem to be somewhat outside his usual sphere of expertise.
The Welsh economy is indeed a great deal weaker than that of Scotland, and we do indeed have a problem with a deficit budget.  And we certainly don’t have any oil – well, none that has been proven yet anyway.  He may even be right that the departure of Scotland will not improve the prospects for a renegotiation of Barnett, although that is more political opinion than financial analysis.
He’s very blunt about Wales’ negotiating position; we have no cards to play, so can expect nothing.  And his line that we’ll get what we’ve always got, “which is nothing”, is similar to a point made by many in their critique of the current relationship of Wales with the UK.
With all of that I can, more or less, agree.  I’m not so convinced about the conclusions drawn on the basis of the analysis however – mostly because they offer no constructive way forward.  They seem to assume that this is the way things are, this is they way they’ve always been, and this is the way that they’ll always be.  It’s a depressing prospect.
It would be too easy simply to blame the current set-up for Wales’ position.  Of course the situation in which we find ourselves is a result of the policies followed over a lengthy period.  It isn’t, though, that those policies were designed to do Wales down; it’s more that policies which only look at the bottom line for the UK as a whole have allowed the variation in prosperity to remain and grow.  It’s a result of policy, not an intention of policy, although that’s little consolation to those on the wrong end of the policies concerned.
The question is how we bring about change, and simply carrying on as at present seems to be the least likely way of doing that.  Apparently, despite popular belief, it was not Einstein who said that “The definition of insanity is doing the same thing over and over but expecting different results”, but the misattribution takes nothing away from the relevance of the quote.  It doesn’t necessarily mean that doing something different will bring a different result, of course; but surely doing something different at least deserves some consideration from the sane.
Greater autonomy for Wales carries no guarantee of a solution for Wales’ economic problems, but not having that autonomy seems almost to guarantee that we will be forever seeking mitigation of effect rather than solution.  My conclusion has long been that taking responsibility for our own future has to be a better alternative than waiting for someone else to do something – at the very least, it gives us the focus on the problem which is currently lacking. 


Robert said...

It would have been nice to hear more of this when we were in coalition with labour, I though you had all become labour.

Then a few months before the election you all found your Plaid voice again, to late.

John Dixon said...


Not quite sure who this comment is aimed at; but I don't think it's different from what I've been saying over many years.

G Horton-Jones said...

If we are in a deficit budget where are the raw statistics that support this statement

John Dixon said...

I don't think that anyone seriously doubts that Wales is currently running a current account deficit; any argument is over the size of that deficit, what to do about it, and to what extent it matters anyway. Accurate figures to prove or disprove the assertion are a little harder to come by though; the books just aren't kept that way.

What we can say is that the UK as a whole is running a significant annual budget deficit (and, of course, the fact that it is doing so rather proves the point that a deficit per se isn't a problem). Wales has 5% of the UK's population, so as a starting point, we're responsible for 5% of the deficit. However, there are then some factors which would tend to push that 5% share upwards (lower wages, higher proportion of people on benefits). Then there are things which an independent government could do to push the deficit downwards (avoid foreign wars and not have nuclear deterrents for instance). The post-independence deficit depends more on which government is then elected and what decisions they take than on the mere fact of independence.

Different people will suggest different figures for the scale of the deficit that an independent Wales would face; but around £5 -6 billion is probably not far off the mark based on the situation today.

I see little purpose in trying to debate with people whether there is or is not a deficit; or whether there would or would not be a deficit if Wales were to become independent tomorrow. The first is, I think, inarguable; and the second ain't going to happen.

The more relevant questions to ask are:

1. Does running a deficit preclude independence? I think not; there are lots of independent countries which run deficits. What decides how big a deficit we can run and for how long depends on this elusive stuff called confidence. We can borrow as long as the lenders think they have a realistic chance of getting their cash back. We do, though, need to improve the Welsh economy to the point where an independent Wales would not be running a permanent or excessively large deficit. Which brings me to:

2. What is the route, mechanism or structure which is most likely to improve the Welsh economy? Is it to carry on as we are, or is it to take responsibility ourselves?