.comment-link {margin-left:.6em;}

Wednesday, October 01, 2008

The price of independence?

This morning's Western Mail carries news of an interesting report by the consultancy Oxford Economics, which tells us that Wales pays £9bn a year less in taxes than it gets back in public spending:

According to UK Government statistics analysed by the researchers, people and businesses living and operating in Wales pay £19.3bn in taxes but receive £28.4bn in public services and benefits, a difference of £9.1bn.

The report states: “As in previous years, the analysis shows that it is only the wider South East of England (Greater London, the South East and the Eastern Region) that made a positive net contribution, of £37.7bn, to the UK public finances in 2006-07, with the Northern regions, the Midlands and the South West joining Northern Ireland, Wales and Scotland as a net drain on the Exchequer.

The response of the Plaid Spokesperson faced with these inconvenient facts is to try and muddy the waters but all they succeed in doing is to raise more questions:

A Plaid Cymru spokesman said: “This difference of £9.1bn is the higher end of this estimate provided by this think-tank and it could, in reality, be significantly lower. It is also the case that some of the unidentifiable government expenditure may not have been spent in a way which directly benefits the people of Wales such as regenerating parts of London for the Olympics.

“What is interesting from this is that every single penny spent by the Assembly Government on services in Wales is raised by the Welsh taxpayer, which dispels the myth that those services are subsidised by those on the other side of Offa’s Dyke."

It is certainly the case that the Assembly Government's expenditure could be contained by the taxation raised this side of Offa's Dyke, however that is hardly the point. An independent Wales would need to spend additional money on social security and a whole range of other presently-non-devolved functions.

Of course we could meet the £9 billion spending gap by borrowing money, raising taxes, cutting public expenditure, increasing the wealth of the country and the consequent tax take or a mixture of all four, but how realistic or sustainable are these options? In the short to medium term Wales would struggle to maintain even our present levels of economic prosperity.

I am not closing the door on Independence but I am still awaiting some idea from those who advocate it of how we will achieve and sustain it. Hard facts are needed, not romantic assertions of nationhood. This study throws down the gauntlet, will Plaid Cymru pick it up?
One advantage I see of stronger devolution is an opportunity to close that gap by innovation.

The talk given by Adrian Wrigley at the ALTER fringe at conference (link below) highlighted the huge potential for change. Unfortunately, Scotland is using their powers to go in the wrong direction, so far! (i.e. implementing LIT rather than LVT/CI).

Interesting that the Plaid spokesman did not come out with the old stock answer that the shortfall would be met by the EU, as in the case of the Republic of Ireland.
The economic history of Eire is instructive in this regard. It is only recently that their economy has come good, largely due to investment from Europe, a favourable tax regime and a clever strategy. In the decades after independence they continued to suffer depopulation and their economy struggled.
Maybe Wales at the moment would have a deficit but it is not as if it is only Wales that is not covering its expenses. The UK at the whole is currently spending £37bn more per year than it raises in taxation.

As for Eire you forgot to mention that the republic had just come out of a long hard struggle for independence and a bloody civil war. Since joining the EU they have made good use of a compartatively attractive taxation system and have seen extraordinary growth.
They had a long time to recover from that civil war before their economy started to turn in a favourable direction.
An interesting post - I would like to read the actual report.

As a northerner, I would be interested to see government spend when the wages of workers are taken into account.

The redistributive influence of the armed forces mainly being located in the south and of the London Whitehall machine, is quite large and rarely picked up in such surveys. I tried to do some research like this and in reality the treasury has little to no idea where money is spent. The impact of basing most governemnt in london is that many other industries have clustered there.
Neale> great idea, but for innovation to work Wales also needs IP protection - at the moment Wales is doing very badly in the registered patent front and it's R&D is woefully below the European and UK average - I seem to recall that Wales spends only one third of the European average per comparitive unit (probably production unit measure).
but peter existing levels of public expenditure - whether in wales or the rest of the of the uk - cannot be sustained at current levels Anyway! Your own party leader demonstrated that when he promised 20 billion pounds worth of taxcuts at the recent lib dem conference! So to blindly assume that in a future self governing wales we would have the same levels of public expenditure in relation to gdp is just plain wrong!

Also in case you have missed it levels of borrowing by the british govt are currently at record levels - basically britain is broke! While unemployment is rising steeply, the tax burden on the low paid is greater than it has been fr 30 years, the gap between rich and poor is wider than it has been since the 1930s and small business faliures are at levels not seen the early and brutal thatcher years! Given such a dire state of affairs perhaps the argument should centre on the question why on earth would wales want to remain part part of such a shambles?

Leigh, I did offer the option of public expenditure cuts as a means of closing the gap. What I am waiting for is a demonstration that an Independent Wales is sustainable.

There is no evidence that public expenditure levels in Britain cannot be sustained at current levels. In addition it is not true that Nick Clegg promised £20 billion of tax cuts. He has promised a revenue neutral tax package in which the wealthy and polluters pay more so as to fund a 16p basic rate of tax.

In addition there is a £20 billion package which involves cutting wasteful expenditure so as to fund more spending on health, education and the police. If there is any money left over then there will be additional tax cuts.

Britain may be 'broke' but Wales cannot simply opt out of that mess. For a start an independent Wales will have to take its share of the debt with it. Secondly, it is likely that we would have to borrow a lot more on top of that to make ends meet. The gap between rich and poor in Wales will grow.

The more you look at it the more economically illiterate independence becomes.
Interesting that this report was commissioned by Oxford Economics on behalf of the City of London Corporation.

Also very notable that the top knob in the City of London Corp. is the Lord Mayor who happens to be a Welshman - Alderman David Lewis. His career is firmly based in financial services.

One other point, this story was originally published in the WM back at the end of July. Why are the WM repeating EXACTLY the same story 4 months later? Are the planning regular 4 monthly bulletins until we give up and accept the reality of our supposed dependence on the City of London?
"What I am waiting for is a demonstration that an Independent Wales is sustainable."

Pretty much summarizes what I think/hope for. I want an independent Wales - but the underperforming economy MUST be fixed. That's why I keep chipping away at the need for the WAG to finally wake up to the fact that Welsh innovation is THE key. If WAG harnesses Welsh innovation for the nation, for Welsh people - to boost GVA per head of population to turn the low wage Welsh economy into a high wage Welsh economy where ordinary citizens up and down the land can feel secure in the knowledge that hard work is rewarded with decent pay - enough to support a Welsh family, to bring back hope to the mega sized council house estates, to bring back pride in one's well being, to rebuild the nation in place of 'survival mode' existence.

A Free Wales, an Independent Wales, a Wales that doesn't loose its people for lack of good paying jobs. It can be done and it should be done.

PROTECT WELSH INNOVATION. Every Welsh party should unite around this common cause - GROW THE NATION THROUGH INNOVATION - a Welsh mantra for our tough times.
Dr Wood >> A Free Wales, an Independent Wales, a Wales that doesn't loose its people for lack of good paying jobs.

What would you suggest to buck the trend of loosing people for lack of good paid jobs?

The big problem with Wales is, those with some get up and go, do just that get up and go.

Have the WDA created any substancial jobs lately: full of hot air, look at the 6,000 to 10,000 jobs that were to be created by the Baglan Energy Park/White Elephant.
I'm not afraid to pick up the gauntlet - but my response would be too long for a comment. So I'll post myself on the issue.
John Dixon> First of all let me thank you for taking this issue seriously.

Let me reply with something that has gotten very little coverage in the main-stream media ...

Monoclonal antibodies (“MABS”) was a British invention – hundreds of millions of dollars and hundreds of jobs (ultimately leading to an empire in the biotech industry) were built on the discovery of MABS – sadly the empire of jobs and wealth creation based on MABS discovery were not made in the UK where MABS were invented, but in the USA – where patents were filed on the application of MABS technology (e.g., diagnostic assay kits for HIV, Glandular Fever, you name it there’s a MABS test kit for it. The NHS had to pay a tidy price for these kits even though scientists working for a UK government funded research institution created MABS technology.

In Cardiff there is a scientist who won the Noble Prize for creating a whole near field within biotechnology – how many jobs/wealth creations came from his unique discovery? Thousands? Nope. Hundreds? Nope. Well, not in Wales because there wasn’t a meaningful patent that protected his invention – his own publications undermined securing decent patent protection. So he’s a great man – but where’s the jobs? What impact did his discoveries make on the low GVA rating for Wales? A lot? Not much? Which?

The time when our universities in Wales can give away IP are over. Especially in view of the pitiful Welsh GVA rating and the pathetic amount of commercial R&D in Wales - R&D in Wales is only 1/3rd of the UK rate.

The WAG can fix this with very little spend. By simply driving home the message that it is immoral to spend hundreds of millions on academic research and ending up with such a pitiful number of registered patents. It is immoral when there are so many Welsh families living in pitiful circumstances trapped in a vicious circle that so few can escape from. ENOUGH ALREADY.

The WAG should finally pull its finger out and DO SOMETHING TO FIX THE PROBLEM.

An economy with a hopeless GVA per head rating further undermined by an awful – simply awful – discovery protection record.

When you here somebody associated with the WAG talk of percentages – improved % output in patents – remember that a doubling of 1 is 100% - we need to hear absolute numbers – how many registered patents vis–à–vis enterprise universities in S. E. Asia. If those former backward economies can achieve such spectacular success from nothing – we should be comparing ourselves to them and not to the NE of England.

WAG must look to the best performing enterprise universities around the world, particularly Asia – WAG should seek to emulate their success. Inaction is not Action.

We are well beyond inaction. WAG MUST ACT.
Lets face facts; the academics in our univesities aren't up to the job, if they were any good they would be like you Dr Wood and across the other side of the pond.

The only thing the two professors were interested in when I was doing my physics degree was getting as many people into Teacher Training, in the vein attempt to keep a healthy supply of undergraduates.

Twenty years on this physics graduate finds himself unemployed. The teacher training colleges don't want me because I'm 17 years too old. Never mind the 16 years spent in industry, two years spent in the NHS, the six A levels and the counselling qualification.

Perhaps I should join you Dr Wood, cross the pond, Wales has absolutely nothing to offer!

The only jobs going are the jobs for the boys (we keep the red flag flying here!).
Post a Comment

<< Home

This page is powered by Blogger. Isn't yours?