Tuesday, 5 April 2016

Truth, proof, and piffle

The Government Expenditure and Revenue Wales 2016 report produced by the Wales Governance Centre makes for interesting reading and is a valuable contribution to discussion about the fiscal position of Wales.  There’s a lot of detail in it and a few general reservations, and I’ll return to some of both of those categories in the coming days.  But overall, I’m glad that someone has committed the time and effort to doing this work.
The document was always going to be misinterpreted, and deliberately so, by those with an agenda.  WalesOnline gave us the screaming headline “The five figures that show how indebted Wales would be as an independent country”, which is precisely what the report does not tell us.  The report makes no attempt whatsoever to predict what the situation of an independent Wales would be; indeed, as far as I can see, it makes no mention of the question at all.  The closest that a rational reader could get to a statement like the headline would be to say that if we make the following four assumptions:
·         Wales had become independent at some time prior to 2014/2015
·         All the estimates of the apportionment of income and expenditure set out in the paper turned out to be correct
·         Independence changed nothing
·         The ‘independent’ Welsh government decided to keep to the same taxation and spending decisions as the then UK government
then Wales would have had a budget deficit (not at all the same thing as being ‘indebted’, by the way) of close to £15 billion in 2014/2015.  The first assumption is patently untrue, the second may or may not be true, the third is extremely unlikely to be true, and the fourth is plain daft.  Still, why let mere facts interfere with a good headline?
There was no surprise at all in the way that some Labour politicians pounced on the report claiming that it ‘proves’ that Wales cannot be independent.  The report proves no such thing, but one has only to look at the awful figures themselves to realise that Labour’s grasp of economics is shaky to say the least.  I could equally claim that the report ‘proves’ how badly Wales is served by the current arrangements, but in truth I’m not sure that it ‘proves’ that either.  There are too many factors and assumptions involved to jump to such simplistic conclusions. 
But insofar as any figures looking at what has happened in the past can act as evidence for either of those hypotheses, it is inevitably the case that figures from the past are more likely to tell us something about the effects of what has been done in the past than about what might happen under a different scenario in the future.  So I think my claim would be the more accurate – or perhaps merely less inaccurate – of the two.  But arguing the toss over those two hypotheses is akin to arguing about the number of angels dancing on a pinhead – an interesting diversion, but not adding a great deal to the sum of human knowledge.  On the other hand, I suppose that ‘adding to human knowledge’ is not exactly the prime function of Labour politicians, especially when there’s an election in the offing.
I was taken aback a little by the reaction of the Tories’ Assembly leader, though.  Faced with a headline telling us that there is a very, very, very big gap between taxes raised and money being spent, his response has been to argue for reducing the rate of income tax and thereby making the gap even larger.  His faith in the power of a penny off tax to turn round an economy is touching, even if more than a little lacking in evidence.  Perhaps there were just too many noughts at the end of the number for him to cope with.

9 comments:

Anonymous said...

'That said, at around 24% of estimated GDP, Wales’ £14.7 billion net fiscal deficit is a very substantial gap between the revenues raised in Wales and public spending for Wales, and there is no evidence that the gap between Wales and the rest of the UK is being bridged.'

*** Ed Poole and Guto Ifan outline the findings of their Government and Expenditure Review for Wales ***

John Dixon said...

And your point is what, precisely?

Anonymous said...

Ed Poole is an ex-branch chair and current Plaid Cymru member. No matter which way you look at it, he has seriously damaged the case for Welsh independence.

Phil Davies said...

I agree that the publication of this report is important and is to be welcomed, not because it is 'right' (I suspect that it is a long way from being accurate) but because the process of interrogating the disaggregation methodologies can begin in earnest.* To that extent the authors should be congratulated, especially if they are prepared to honestly engage with constructive criticism going forward and revise both the mechanics and outputs going forward.

*Whilst an overwhelming amount of data for a report of this kind depends on a) aggregated UK revenue and expenditure data which need to be disaggregated by abstract modelling (and hence myriad assumptions) and b) that aggregated data and those modelling assumptions are largely provided by an interested party (the Treasury), there can be little confidence in the accuracy of the report.

Its utility is in the fact that it comprehensively articulates the areas for its own deconstruction in due course.

Anonymous said...

Surely the fact that Ed Poole is a member of Plaid is salient? Those who know him have questioned his loyalties in the four years since he joined the party. I understand that you don't want to publish critical comments, John, but this betrayal of his party should be unforgivable.

Bored of Labour said...

I think anon is trying to suggest that Ed and Guto have done harm to the Welsh independence cause by writing and publishing the report – could be a disgruntled welsh nationalist or Plaid Cymru member but more likely a Labour plant.

Anyway back to the post, the Wales Governance Centre deserve credit for the report in my mind they did Welsh independence a favour yesterday, Wales is one the poorest regions of the UK by the design of the UK and Welsh Governments whichever parties govern. And it wasn’t reported anywhere but Guto Ifans the report’s other author said at the launch that the figures shouldn’t be taken as evidence that this would be the situation if Wales were independent.

As someone critical of the current Plaid Cymru leadership I was pretty pleased to see them hammer Labour for gloating over their appalling economic record that’s got Wales in this mess on social media last night – I hope it continues through the campaign and beyond.

As a friend put it to me Westminster gives us enough money to not drown but not float either and going by my own work and friendship circles the report has at least made a few question the wisdom of carrying on doing the same thing time and again, it’s a start.

And don’t forget that not everyone Welsh voter is taken in by the snide, smugness of the Owen Smith, Leighton Andrews and Martin Shipton’s of this world, for all the spin yesterdays report helped to clarify a lot of issues, it made tough reading but if we don’t know the facts how can we fix the problem, as Glyn said by making independence the most attractive solution.

John Dixon said...

Anon 10:05 - I really don't see what Ed Poole's political affiliations have to do with the quality or otherwise of his research nor do I understand why you think that serious research into the income and expenditure accounts of Wales within the UK damages the case for independence. I think you should try reading the report again; it's quite clear throughout that it makes no attempt whatsoever to deal with the question of an independent Wales, and anyone claiming otherwise is deliberately distorting and misusing the figures.

Anon 12:24 - Firstly, I do not censor critical comments; the only comments that get censored tend to be offensive or off-thread. Secondly, I do not see why the question of Ed Poole's membership of any party is salient, nor why serious academic research should be regarded as any sort of betrayal to anyone. You seem to believe that only research which gives the answer you want to hear should be published, but surely only hearing what they want to hear is part of the problem with Welsh politics in general?

Bored of Labour and Phil - I see this report as you do, as a really useful contribution. Of course there are issues with it, and I'll be coming back to some of those. But to repeat what I said in the post and what has been evidenced by some of the other comments, people with an agenda will attempt to present it as something which it very clearly is not, i.e. an indication of the financial position of an independent Wales.

Anonymous said...

Upon whom would 'an independent Wales' call on to bail out the Port Talbot steelworkers?

Ireland? England? Scotland? The EU?

Luckily the question doesn't need answering because I suspect there won't be a steel works in Port Talbot for very much longer. If we carry on getting rid of heavy industry at this rate we'll be the first country to reach its greenhouse gas emissions targets.

John Dixon said...

Anon,

That really isn't relevant to the original post, but it seems to me that you are arguing both that Wales couldn't afford to bail out the steel industry and that the UK won't do so. If you're right, you succeed in making both options look unattractive.