How to turn Wales' budget deficit into a surplus?

answer.

Make Wales Independent.

How to turn a £13.7 billion budget deficit into a £2 billion budget surplus., without raising taxes.

Mark Drakeford, Wales First Minister has said that Wales future is better with the " Union "

This is an article that shows the opposite to be true.

That the inability to make important decisions is costing Wales and conversely the ability of an Independent Wales to freely make them, improves Wales economic position.

It is this that sets the conditions to turn the deficit to surplus.

This article does not attempt to go beyond Wales budget. It is not an economic plan, that's for another day, but shows that on day one of Independence, Wales has a budget surplus, not the deficit, Independence detractors trumpet.

It is important, essential even, that Wales starts it's Independent journey, with an economy that can pay its way. That the concentration is on the country's growth and development, not finding the means to pay for it's essential services.

So exchanging the deficit into a surplus. A little bit of magic? Or just claiming what's fair.

Firstly, To understand that the deficit is the product of Wales present constitutional arrangements. Not the product of an independent Wales.

Next. No widespread changes to the present budget are necessary in order to make this transformation..

The deficit is arrived at in a report on Wales financial position, by the Wales Governance Centre.

The authors conceded that Wales financial data is difficult to find as the data is collected on a UK wide basis by HMRC and ONS. There is no collection by Wales, for Wales.  It is then allocated to Wales using various methodologies.

It is presented,  subject to " estimates ", " assumptions " and " adjustments".

The report estimates that Wales revenues are £27.1 billions.

Wales spending is £40.8 billions.

Wales' budget deficit is therefore £13.7 billions.

This is not the budget of an Independent Wales however.

Revenues.

Corporation tax is apportioned to Wales in the sum of £1.3 billions.

However HMRC allocates much of corporate tax to the location of the business headquarters. This disadvantages Wales, as many of its businesses have headquarters elsewhere.

As the report found, accurate data is difficult to find, however as a guide. If corporate taxes were apportioned on a population share, as with most other taxes, Wales should have received £2.7 billions.

An increase of £1.4 billions.

Wales tax system would ensure that taxes are paid where profit is made.

HMRC has conceded that £35 billions of revenue is " lost ", avoidance, evasion, inefficiencies, etc.

Wales' population share of these losses is £1.6 billions.

A Wales tax system preventing these losses would add £1.6 billions to Wales revenues.

The financial report found that Wales raised less than the UK average in Income Tax and NI. £5.4 billions less.

The reason is the lower level of earnings in Wales. £1690 per person less than the UK average.

This was brought about by lower investment in the Wales economy. Also by the higher than UK average number of public sector workers in Wales. Any Westminster policies in capping public sector earnings, impacts, disproportionately on Wales.

Wales free of Westminster policies and investing, to regain the previous lack of investment in skills and technology, would raise Wales worker earnings to UK levels, thereby adding £5.4 billions to Wales revenues.

Expenditure.

The report estimated Wales expenditure as £40.8 billions.

However only £33.6 billions is spent in Wales. The remainder, called " unidentified items ", is what Westminster says Wales must pay to UK wide spending. Defence, International affairs, border control and debt repayment etc.

This amounts to £7.2 billions. An independent Wales wouldn't be responsible for these payments and would make its own arrangements in these areas.

Wales budget deficit contains a payment for state pensions. This amounts to £5.8 billions. Although Wales revenues are debited to this amount, Wales has not received the lifetime contributions of tax and NI paid by these pensioners. That has gone to the UK government.

However on Independence, Wales won't be responsible for this payment, that will be the responsibility of the UK government. 

The UK government is legally responsible to pay the pensions of all pensioners who have paid their NI contributions, wherever they choose to live.

Although Wales will be responsible for new pensioners as they become eligible to claim in the new nation, that has been estimated at. 5% per year. £290 million in the first year.

An expenditure saving of £5.5 billions.

With Just five changes to the budget, claiming what rightfully belongs to Wales.

Revenue becomes.

£27.1 billions + £1.4 billions + £1.6 billions = £30.1 billions and £5.4 billions to come.

Expenditure becomes

£40.8 billions - £7.2 billions - £5.5 billions = £28.1 billions.

So. Not a Wales budget deficit of £13.7 billions, but.

A Wales budget surplus of £2 billions rising to £7.4 billions.

There are costs to Wales Independence. They will need to be addressed in an economic plan and in the context of a growing economy.

This article merely emphasises that an Independent Wales goes into that plan, not with a budget deficit, but a surplus.