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.