Ducking the question

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Last week, the Institute for Government published a ‘helpful’ paper setting out the difficulties which independence would bring for Scotland or Wales. Well, ‘helpful’ to unionists who were just looking for a headline figure with which to attack the independence cause. In fairness, the detail of the report does accept that after independence Wales and Scotland might choose different patterns of spending which would affect the calculations and thus the headline figure. And there is some useful analysis of the different pattern of revenues raised by different taxes in the constituent parts of the UK. But the headline figure on which the unionists have seized is very clearly drawn from a number of key assumptions:

·        That the independent administrations continue with the same patterns of taxation and expenditure as at present

·        That the estimates of tax raised and expenditure undertaken are largely correct

·        That fiscal deficits are generally a bad thing and that having a higher budget deficit as a proportion of GDP than the UK currently operates is ‘unsustainable’

·        That independence brings no other economic benefits

·        That the newly ‘independent’ countries continue to use sterling rather than establish their own currencies (not stated, but implied)

It’s easy to see why anyone would use those assumptions as a starting point, because there are at least some known or almost-known figures to use as a basis, but whether precisely aping the current UK’s priorities and approaches really counts as a meaningful form of ‘independence’ is a question which doesn’t really get asked. And starting from those assumptions predetermines the outcome: if the assumptions are all valid it’s hard to argue with the headline conclusion. The question, though, is whether (or to what extent) those assumptions are a valid basis for drawing conclusions about an independent Wales as opposed to a devolved Wales.

There are plenty of examples of English / UK priorities which an independent Wales might choose not to copy. Nuclear weaponry is one of the most obvious examples: the headline conclusion that Wales is unviable without tax increases or spending cuts includes the implicit assumption that an independent Wales would continue to pay for England’s Trident replacement programme. Those who claim Wales is unviable without receiving fiscal transfers from England are, in effect, telling us that an independent Wales couldn’t afford to pay 5% of the cost of England’s nuclear weapons unless England ‘generously’ gave us the money first. “Why on earth would we want to?” is a much more appropriate response than “This proves we need English money”. To generalise the point: we are being told that we can’t afford to pay England for things we neither want nor need unless England gives us the money first. It’s impossible to disagree with that, but it doesn’t do much to advance the state of human knowledge.

It is impossible for anyone to produce an accurate analysis of the fiscal position of an independent Wales, not least because that depends more on the policies adopted by the newly-independent state than on the fact of independence itself. A Labour-run Wales would not be the same as a Tory-run Wales, or a Plaid-run Wales – and the fiscal impact of those different perspectives would only increase over time. (It’s worth noting that the same applies to the UK – no government has shown that it can even accurately predict the fiscal impact of its own policies, let alone those of other parties.) It follows that anyone who claims, with absolute certainty, that Wales would be a basket-case economy – or, alternatively, that it would immediately soar to the top of the world’s rich league – is talking nonsense. They simply cannot know. What we can analyse, with the benefit of hindsight, is the experience of other countries which have become independent and followed their own paths. Unsurprisingly, it’s an overwhelmingly positive picture. What the unionists need to tell us (but can’t) is why they believe that Wales and Scotland are somehow uniquely unable to follow so many other countries of similar size which have become so successful. Using a set of obviously invalid assumptions to predict the future is a woefully inadequate response.