The Future of Wales Report. [ Or take your pick ]

The Independent Commission on Wales Future Constitution, has issued its final report, so we can all stop holding our breath.

It's a wordy document. 135 pages

It has an impressive bibliography referencing a seemingly endless supp;y of publications.

It has had contributions from an equally impressive list of worthies.

And it has an expert panel

It was enough to almost overwhelm. Almost, but not quite.

What was striking, that in spite of this, they were unable to come to conclusions.

Not just that they were unable to come down just a teeny bit in favour of one option, but in most areas.

The report is heavy, to use the phrase of the economist Arun Bose, on errors of reasoning.

It also contained a fair share of contradictions and also, I'm afraid, substantial errors.as we shall show.

It is beyond the scope of this modest piece to analyse in detail and the intention is to concentrate on the Commission's approach to the Independence option, but it would be remiss not to have a little comment on the other options and the shortcomings of the report.

As the report is 135 pages long, with apologies, the response is inevitably lengthy.

The Report.

Two years, £1.5 million cost, with £550,000 spent on events and research, So what did we get for our money. 

They come up with three viable options.

Enhanced Devolution.

Federalism.

Independence.

Not yet worth the money and time. 

Any pub discussion group. You know the ones that put the world to rights, they would have had those in 25 minutes and the cost of a pint.

There are no other realistic choices.

Enhanced Devolution, is the Welsh Labour governments preferred option, that had to be on the list.

Independence, well that's a bit of an embarrassment, as the Commission was meant to find the best option, within the Union. However, Independence was bound to push its way in.

Federalism is the halfway house option.

The Commission found, unsurprisingly, that people felt most comfortable with Enhanced Devolution as an option. Unsurprising as that's all people in Wales have known, They have mainly never considered or been offered any other option, nor have the pros and cons been discussed. Little wonder that any option, regardless of the advantages, that takes them from their comfort zone, would arouse some trepidation.

As for the degree of viability, that would depend to a large extent on the ambition for a future Wales.

So what else for this significant investment.

The report finds that the Welsh public feel disenfranchised, are politically ill informed and without the skills to make informed choices.

No surprises there.

They find the Welsh more sceptical of Independence. They could have added that possibly this can be explained by Wales having no SNP or Sien Fien to push Independence up the public agenda. Plaid Cymru are not in the same league as those and not really giving a clear message as to how much Independence they want..

Independence in Scotland and Unification in N Ireland is almost a daily topic.

The Methodology.

The Commission itself concedes the limitations.

It was largely conducted online and was subject to respondents having the knowledge to search for the site.

This obstructed those who are not online literate and those without sufficient interest to seek it out.

The figures can also be subject to double counting, with some of the same people taking more than one engagement method.

There were online forums, rather like Facebook pages. The most popular options on these seem to be none of the above, but rather Drakeford out.

There were discussion groups for those invited.

And contributions from organisations and of course experts.

Then there were the heralded roadshows, Meet the people and the opportunity for the public to engage, in person, with the Commission.

Except it wasn't the Commission at all. Or even the Commission staff, It was representatives of a company hired by the Commission.

They stressed that they were independent of the Commission, could not comment on the Commissions work, give answers to questions regarding the Commissions work, or relay comments back to the Commission. They could pass your email address on.

Their role was restricted to a five question survey of under ten seconds with questions such as 

‘ do think it necessary to have a good relationship with England ‘. No discussion, no context and no debate.

The Commission praises the interest taken in some areas.

That must be the free pens, key rings and packets of wild flowers on offer, although the flower seeds were out of season by the time the roadshow reached Blaenau Gwent. That may explain the lesser interest there.

As this was an exercise to involve the people of Wales it has fallen somewhat short.

Errors of reasoning. Misleading and contradictory.

There are a number of statements in the report, that are meant to support points the Commission is making, that are contradictory and misleading.

For the purpose of our take on the report, a few illustrative examples.

The Commission admonishes some contributors who, illustrating that border problems can be overcome, gave examples of countries, where border issues were less problematic.

The Commission took issue that these respondents had not explained how their examples related to Wales.

Yet the Commission, when giving examples how federalism can be ordered, cited  countries, namely Australia and Canada, without any explanation on how that system can be transferred to the UK.

Indeed both countries are far removed from the UK position.

Federalism there was formed by the states, independent and powerful, voluntarily ceding some of those powers to a central government. 

The opposite of the situation of the UK where power rests with the central government, with the nations and regions subservient.

The Commission wax lyrical that these countries have well established structures for relations between tiers of government. Typically these are respected by all parties as necessary to the effective operation of the state and are underpinned by a culture of cooperation or ‘ federal spirit ‘ acceptance of the place and legitimacy of the sub state institutions in the governance of the state as a whole.

A commitment for governing institutions at all levels to work together for the greater good. Respect for the underpinning machinery which facilitates such collaboration.

In fact the system in Australia leans heavily, not on respect by all parties or ‘ federal spirit ‘, but increasingly on the Supreme Court, which is the arbiter in disputes between the States and the Federal government. A system regularly criticised by the States for its bias to the Federal government.

Further, the federal system is attracting growing public criticism for its costs and duplication of functions.

Canada's federal system is internally widely regarded as not functioning as intended and protecting Canada's indigenous people and for fair distribution of wealth.

The system is questioned not only by the perennial Quebec threat, but also by Canada’s Western Coast who are themselves considering the benefits of going on their own..

In both these cases the federal system has survived due the wealth and benefits its people enjoy, however as the system comes under strain, more are arguing that it is not the system of government providing this, but the fact that both countries are wealthy due to their vast natural resources.

So perhaps the ‘ experts ‘ should have advised the Commission, a little more wisely on this particular example.

The Commission criticised Professor Doyle regarding his suggestion that Wales' UK debt ‘ obligation ‘ could be treated in the same way as the Republic of Ireland on secession.

The Commission's stance was it was not a sensible or practical suggestion, as the Irish example was so long ago and not applicable to modern economies.

Yet in its concern at the fact that Wales' economy would be problematic in the short/medium term, it cited the example that it took the Republic of Ireland 50 years to become on par with the UK.

They too are guilty of using an example of an event a hundred years ago.

Ireland started its  journey as an Independent country, starting from a divisive and bloody conflict, with a largely rural economy that  bears no relationship to a modern mixed economy.

Wales might at present have an economy that's not firing on all cylinders, but to compare its potential progress with the first 50 years of the Irish experience.

A major error of reasoning and totally inconsistent

Where are those ‘ experts ‘ when you need them?

There are more examples, but must get on.

The options

Enhanced devolution.

This option was originally titled Embedded devolution,but no one outside the Commission seemed to understand what that meant.

Enhanced Devolution. Whereas it was argued that the status quo was unsustainable. This is meant to be an improved version. 

The Commission states that this is the option that people felt most comfortable with.

Understandable as it is, this system is closest to that people in Wales have lived under. It means the least change and disruption to their lives.

It also means however, the least change equates to the least improvement from the status quo.

The Commission, quite correctly, points out that this option requires consent from the UK government  and additional resources.

The viability of this option rests entirely on whether sufficient additional powers and resources are gained.

The Commission advocates additional powers such as policing and justice be devolved.

This would certainly add to the enhanced powers, but would add nothing to increased resources. Indeed it could become a further drain on Wales financial resources, for while the financial support for these powers would also be expected to be transferred, improvements to these services that the Welsh people would surely expect [ otherwise what is the point ] would be borne by the Welsh government.

It should have also been explained by the Commission, that both major parties in Westminster, have shown little enthusiasm for such a transfer of powers. Even the friendly Labour Party has only been sympathetic to a youth justice transfer to Wales.

With regard to additional resources, it is difficult to see where it is to come from.

The Office for Budget Responsibility has projected a UK budget deficit of £110 billion in the year 2024/25 and that the deficit will remain at almost £50 billion in the year 2027/28 and by which time the UK national debt will have reached £3 trillion.

The  future constitution papers by both major Westminster parties see no additional powers to the UK nations. Any further powers are concentrated at enhancing the English regions as is any finance they can magic.

The Commission argues that Wales' powers should be on a par with Scotland.

Whatever the merits of that argument, no Westminster government has felt the need to engage with that argument. It isn't a priority and there is little sign of that changing.

Viable, but only in theory

Federalism.

Little time needs to be spent on this option. The Commission itself, although presenting it as viable, seems to have given up on it.

They cite, almost enthusiastically, the complexities, how to implement, the cost of implementation, the cost of running a federal system, the lack of enthusiasm by others in the UK [ it is a Wales led initiative ]

And what to do about England, or rather England's dominance.

The Commission does paint a picture that makes federalism as a viable option difficult to accept.

They do attempt to sweeten the issues by examples of ‘ successful ‘ federal states, but as shown above, no explanation on how they relate to the UK.

Even the experts would be hard pushed to sell this option as viable [ it has to be said that the Commission does have some support for federalism in Plaid Cymru’s own Constitution Commission report ], although how do you explain the Commission seemingly moving away from federalism and Plaid Cymru towards it?

Independence.

So here we are, the Commission's view on the viability of the Independence option.

First the good news.

Independence.

Offers more clarity of accountability for decision making.

Citizens have more direct influence over more decisions.

All government power exercised in Wales.

A constitution in Independence could embed equality and inclusion rights.

Opportunity to design different structures and systems specific to Wales.

Opportunity to form appropriate economic policies.

Offer the fullest scope for integration of government services within Wales.

Wales would have the opportunity to form agreements and pacts and trading arrangements internationally.

It could devise policies which reflect the priorities of the people of Wales in all aspects of life.

To achieve greater control by the people of Wales over the widest range of policy areas and the opportunity to shape our future as a nation and change the economic trajectory.

You would think that the Commission would stop there and give the nod to Independence as the only real viable way forward,

But no.

independence, the Commission says, could come up against a whole raft of problems.i

It is widely accepted, they say, that Wales will have a fiscal deficit, it will also have to address the structural problems of a low tax take.

This is accompanied by the uncertainties that arise from constitutional change together with currency uncertainties. that could scare the financial markets.

It would also depend on the share of the UK debt that Wales inherits.

This could lead to Wales having to make hard choices of higher taxes and cuts to services in the short/medium term and

Negotiations on secession  could also be a problem as Brexit has shown. With difficulties reaching agreements on border issues.In

A  hostile negotiations period could have a negative impact on economic stability for the future. Wales might struggle to gain International recognition. 

A hostile separation would benefit neither party, though Wales would be more substantially harmed.

As with Brexit, the Commission states, Wales will be negotiating with a much larger, wealthier and more powerful party.

If negotiations were to be acrimonious Wales could find itself facing a choice of an inferior deal or international isolation.

The Commission also states that Wales as a small country would be more vulnerable to global crisis.

Wales would need to weather the crisis as a small country unless it benefited from the protection of a wider economic alliance.

So the Commission, after showing us all the benefits of Independence, then puts a damper on it.

Except that this list of issues contains an lot of assumptions.

Also as the Commission asserts they have created ‘ an evidence based debate’ there is little actual evidence in support of their Independence critique.

Their assertions.

The Commission states. It is widely accepted that Wales will have a fiscal deficit, it will have to address the structural problems of a low tax take.

This is accompanied by the uncertainties that arise from constitutional change together with currency uncertainties that could scare the financial markets.

It would also depend on the share of the UK debt that Wales inherited

This could lead to Wales having to make hard choices of higher taxes and cuts to services in the short/medium term.

So, It is widely accepted that Wales will have a fiscal deficit.. That it raises less revenue than it spends.

In a response to the Commission some Independent supporters argued that Wales paid more in taxes than it received in services.

The Commission criticised this as being ‘ factually incorrect ‘. The Commission offered no evidence in support.

As to whether Wales has a fiscal deficit and specifically the size of a deficit.

 No one really knows

A quote from another Commission The Silk Commission on Devolution.

Central government taxes are collected by HMRC in Wales and pooled centrally in a UK Consolidated Fund. [ alongside income from all other sources, fees , fines , income from investment and so on ] Money is then drawn down to finance public spending across the UK including Wales.

So there is currently no direct relationship between the amount of Central government taxes raised in Wales and the amount of money spent in Wales.

For accuracy. The comment in brackets is not part of the Silk quote.

There are no widespread studies of Wale's financial position. No authoritative government statements.

There is however a constant parroting of the single report carried out by the Wales Governance Centre. That identifies a fiscal deficit.

The authors of the report concede shortcomings such as lack of  Wales specific data, the use of estimates and that taxes disaggregated to Wales by HMRC, was done so on the basis of assumptions and adjustments.

There is also criticism by Professor Williams of the same university, of some of the methodology and that a different methodology could lead to different outcomes.

The authors also stress that it was a financial statement relative to the present constitutional arrangements and not applicable to an Independent Wales.

In spite of these provisos  it hasn't prevented the use of the report to raise the fiscal doubts regarding Independence for Wales.

The Wales Governance Report is based on the Government Expenditure and Revenue Wales [ GERW ] data.

GERW together with the Scottish version GERS is an uncertain measure of the nation's fiscal positions.

GERW is not subject to conventional accounting convention.

There is no probative audit trail for 90% of the numbers in GERW 

As pointed out by Professor Murphy of Tax Research UK, the fact that governments argue that it is an approved methodology, it fails to consider the accuracy of the data or whether the results make rational sense.

With such uncertain data,, it would appear wise to ensure the conclusions from such data makes rational sense.

However, it appears that such wisdom is absent.

The conclusion of the Wales Government Centre report and GERW, leads to figures showing that Wales had a budget deficit of £13.7 billion.

Over the same period, a UK budget deficit of £39.7 billion was published.

This would lead to  Wales, with a UK population share of 4.8%, being responsible for 35% of the UK deficit.

It makes no sense.

Further, The GER for Wales, Scotland and N. Ireland shows a combined deficit of over 100% of the UK deficit.

These facts alone question  the credibility of any analysis arrived at from these sources..

The most recent analysis of Wales financial position in Independence by Professor Doyle of Dublin University concluded a deficit of approximately £3 billion and he hadn't  considered the underestimate of Wales tax revenues as conceded by HMRC. And like most others, failed in any examination of Wales potential on Independence.

The next raising of the economic bar to Independence is the assertion that Wales will need to make hard choices in the short/medium term ,of raising taxes and cutting services.

It would appear inevitable that Wales will enter the Independent world without spare finance.

Even if we deny the fiscal deficit, there will be no spare cash

.

So are the hard choices of tax increases or service cuts inevitable, as argued.

It is certainly surprising,  with its expert advice  and the Wales Governance Centre seemingly always at hand, that such certainty should be voiced by the Commission, for they should know that economically and financially there are choices.

Choices moreover that do not impact in the way described on the people of Wales.

• The most prominent omission in the Commissions work and indeed of its advisers, is the complete lack of attention to Wales economic potential and the resources that will realise that potential. 

Nor is there attention to the fact that Independence and only Independence can fully control this potential and  resources.

The Commission is heavy on the costs of Independence, which are material obstacles, but not balanced by an examination of material benefits

So the alternatives to the hairshirt choices.

Wales on startup would, as alluded to in the report,  require new and enhanced institutions.

It would also require new IT systems for taxation and benefit payments

.

It would need short term finance to kick start its economy..

The exact cost of startup is presently unknown, however we have the means to make a pretty accurate estimate.

Much work was done by the Scottish and UK governments regarding the Scottish referendum, although these figures will need updating.

Although the estimate of these costs varied between £200 million and £2.7 billion, members of the Scottish Chartered Accountants Association intervened with an estimate that £1.5 billion was a more realistic figure.  

Wales' figure would be expected to be less with a smaller population, no complications of an oil industry and unlike Scotland, no significant financial sector to untangle.

With that in mind but with regard to updating for timescale,  it would seem a reasonable figure for Wales to use.

 It would be prudent to have a contingency.

Wales on Independence would be able at once to implement a new tax system. It would introduce a new benefit system. No one would wish to continue the present UK system.

These however would not bring quick enough improvements to satisfy the immediate need for finance.

Wales however, will have immediate control of its resources, energy being one.

Taxes and fees from energy generation that presently go outside Wales, would be collected by the Wales exchequer.

Similarly all corporate tax revenues from business in Wales would now be collected in Wales and be added to Wales revenue income..

HMRC has conceded that some taxes from businesses in Wales are presently allocated to the HQs outside Wales, rather than Wales revenue stream.

Presently HMRC loses £43 billion of tax revenues due to tax avoidance, tax evasion and mismanagement.

Wales population share is £1.8 billion pa. 

Resolving that would be a priority for Wales' own tax collection body and would increase Wales tax income.

Wales would now own its energy resources.

It could, as Norway does, have a publicly owned energy company to control all things energy in Wales.

Not only would the company regulate the present contracts, but would be the lead generator for new projects.

This would provide maximum benefits to Wales.

Recent findings by Carbon Trust, Marine Energy Wales and the Crown Estates have respectively, through, offshore wind turbines, marine and tidal energy and floating turbines, identified 14 Gigawatts of installed capacity collectively.

This would, at today's wholesale energy prices, realise between £12 billion and £16 billion per year, allowing for price fluctuation.

Experience has indicated that it takes between 3 to 10 years to expedite these projects, that is  to generation. So significant in- flows of finance in the short/medium term. This is contrary to the projections of the Commission.

Alternatively, Wales could use these energy resources, all or in part, to supply a cheap and secure energy supply within Wales.

To its citizens, business and public services.

With regard to the citizen would assist with cost of living and give additional disposable income to spend in the economy.

It would lower business energy costs, allow greater predictability and make business and commerce more profitable [ and pay more taxes ] and allow more for investment.[ growth ]

For public services, it would lower their costs and allow the financial savings to be diverted to frontline services.

Such a policy would have an added advantage of allowing this internal energy policy to avoid  restrictions of the energy market.

It would also demonstrate to the international financial community the prudence of policy that improves individual finances, improves public services and makes business in Wales more attractive, without increasing public spending.

The Commission have argued in their report that an Independent Wales can be likened to the Republic of Ireland in its economic development. In that case they argued that it took Ireland 50 years to reach an economy on par with the UK.

The above shows that comparison to be misguided. 

It is also misleading as they are comparing an Ireland of 100 years ago, emerging from conflict, with a largely rural economy and lacking in many of the basic institutions.

Wales on the other hand, although far from firing on all cylinders, has a developed modern mixed economy.

It will also within a short period, have the necessary institutions to support such development.

The comparison would seem to be a further error of reasoning.

There is another option.

The priority for the new nation is short term finance.

During the negotiations between Wales and the remaining UK [UKr ] one of the issues would be state pensions.

It would be difficult for the UKr to deny its responsibility to those receiving or entitled to state pension, wherever they choose to live. That would include those residing in Wales after Independence.

The UKr retaining that responsibility would not be a situation that would suit either party.

The UK Treasury estimates that the diminishing responsibility of  the UK for state pensions would be at 5% per annum, taking mortality rates and new claimants, among other actuary measures into account.

Given that calculation, UKr would retain the responsibility for state pensions in Wales for 20 years, albeit at a reducing rate.

The cost of that responsibility over that period with the present starting point of £6 billion, would be £33 billion.

A clever negotiation would resolve the problem and relieve the UKr of its responsibility by a compensation payment.

Wales would take legal and financial responsibility from the onset for a payment of £30 billion.

The gain to Wales would be to improve its  short term financial position.

The gain for UKr would be release of long term responsibilities, long term administrative costs and long term state pension cost of living rises.

There is another option.

If, as the Commission states, the problem for Wales is the short/medium term, then Wales can do as every other country does.

They borrow the money.

Even as a newly formed nation Wales can borrow the money and they will have a  Central Bank to help.

The purpose, for start up and investment. Investment in increasing Wales' wealth. This borrowing policy will not cause any great flutters in the international markets, particularly when supported by resources and a prudent plan.

So there are alternatives beside the increasing of taxes and cutting of services, that the Commission believe is inevitable.

I am surprised that their advisers have not alerted them to these. 

Negotiations, borders, currency and international approval.

Negotiations.

The Commission implies that Wales will experience significant difficulties in the negotiations around secession.

From facing an inferior deal or international isolation, in the case of hostile negotiations. Difficulties in dealing with a wealthier and more powerful nation. Pressure on the Wales finances, if agreements are difficult..

Such implied problems misrepresent the realities.

Such an analysis ignores the fact that UKr too will be under international scrutiny. 

It must be seen to be to be acting fairly and reasonably in these discussion

Wales on Independence can become self-sufficient in energy and natural resources such as water supply.

Not so UKr, or rather England, who would constitute the major part, or even the sole part of the remaining UK.

England depends on water from Wales and while it presently flows without impediment, after Independence that is not the case.

England/UKr will have to negotiate with Wales for the continued supply. The water supply from Wales is not easily replaced, indeed in the short term almost impossible.

It is said that Birmingham, which receives its water from Wales, would last less than one day without that supply.

There have been alternatives suggested, such as desalination plants. None are practical. All are expensive and environmentally undesirable. None can provide a short/medium term alternative.

Similarly with energy. The surplus energy from Wales resources is  presently controlled by the UK government.

After Independence this will transfer to Wales.

England/UKr cannot produce sufficient energy for its needs, particularly green renewables.

Wales can.

Wealthier and powerful perhaps,  but dependent and would be mindful of that dependency in discussions.

It may be David and Goliath, but we know what happened there.

Hostile negotiations would, the Commission says, would impact on Wales finances.

This is misleading to say the least..

The negotiations would take place in a transition period, the time between a positive referendum result and the actual declaration of Independence.

Two years were agreed in the case of the 2014 Scottish referendum.

During the period of negotiations, Wales would carry on as at present. There is no independent Wales economy.

The international market's reaction to any so-called, hostile negotiations, would impact on the UK economy and finances.

It is the UK that has the greater incentive to ensure negotiations are reasonable and amicable.

The Commission quotes examples of Catalonia and Quebec as examples of the consequences of ‘ hostile secession ‘, with businesses and population fleeing the regions.

But nothing is as straightforward as the Commission would have us believe.

The two carefully chosen example have very specific circumstances,

Catalonia

Catalonia, a wealthy and productive region of Spain, with a distinctive language and culture.

Following Franco's regime, Catalonia was given greater powers and referred to as a nation.

Two years later these decisions were reversed.

This was the start of the modern day conflict between the two.

In 2014 Catalonia called a symbolic referendum, which was overturned by Spain.

A year later separatists won a majority in the regional elections.

Catalonia called a full referendum, also declared illegal by Spain

The separatists declared Independence.

Spain retaliated and dissolved parliament.

However when Spain called the next elections,the separatists again won a majority.

The exodus of business cited by the Commission is against a background of the ever present fear of another unilateral declaration of independence.

There are also special circumstances.

Businesses in Catalonia are aligned to the EU and Euro.

The EU made it clear, on Spain's insistence, that Catalonia would not be allowed to join the EU or the Euro.

Hence many businesses moved their HQs into the Eurozone, although the business activities remained.

Indeed Catalonia remains a wealthy and productive region, being 20% of Spain's GDP.

Quebec.

Quebec too is a large, wealthy and productive province of Canada.

It too has a distinctive language and culture.

It was built by French settlers and is protective of its first language being French.

With Quebec there is an ever present Independence issue, however that was not the prime cause of the exodus of businesses that the Commissions alludes to.

Unlike the Catalonia example, the Quebec example was almost fifty years ago and although the referendum of the time almost led to separatism, it was the issue of language that led to business insecurity.

The Quebec government enacted legislation that French was to be the language of Quebec, It was in defence of the erosion of the language by English speaking Canadians.

As a result of the legislation all business in Quebec had to be conducted in French. Hence many companies, mainly small companies, who were either unwilling or unable to comply with the legislation, moved to other parts of Canada, In the case of larger companies, mainly American, back to the USA.

And yet, while the legislation regarding the French language is presently being renewed and strengthened, Quebec is again beginning to thrive, with Quebec City becoming the fastest growing local economy in Canada.

Business is migrating to  Quebec, in spite of the language issue, due to its business environment, skills levels. Quebec has a higher than average post graduate young population, with those now remaining in the province. Quebec also has the advantage of significant natural resources.

The purpose of this little history lesson is to demonstrate that The Commission's examples bear no relationship to any Independence negotiations between Wales and the UK.

It also begs the question as to why they were quoted, being so far removed from what could possibly occur in discussions on Wales secession.

Wales buffeted by global events,

The Commission report raises the fear that Wales being a small country would be vulnerable to global crises after leaving the protection of the larger UK.

Experience shows the opposite.

The UK was the slowest to recover, than its western neighbours, small and large, from the financial crisis of 2008.

This led to prolonged suffering of UK citizens including Wales.

The UK was the longest recovering of its western neighbours, small and large,  from the economic and social consequences of Covid.

This led to prolonged suffering of UK citizens including Wales.

The UK suffered hardest from the global economic slowdown, of its western neighbours, small and large.

This has led to prolonged suffering for UK citizens including Wales.

The UK has suffered the most of its western neighbours, small and large, from the global energy crisis

This has led to prolonged suffering for UK citizens , small and large,

This has led to prolonged suffering for UK citizens including Wales.

Of the top twelve wealthiest countries, ten have populations of less than 10 million, five of 5 million.

These small counties seem to have weathered the global crisis okay.

Another error of reasoning by the Commission it would seem.

Currency.

It is beyond the scope of this response for a detailed analysis of the currency of an Independent Wales.

The Commission emphasises the problems that could be encountered, if Wales should choose the option of creating its own currency.

They argue of the costs involved and the pressures it could encounter from the money markets as a new currency.

Suffice to say that 163 of the 196 Independent countries have their own currencies and they seem to weather this financial storm that the Commission fears.

Wales and its people are, as part of the UK, subject to the financial pressures put on the pound sterling, by policies of the UK government.

The financial policy of the Truss/Karteng era, for example, saw the UK economy, including its currency, take an estimated £60 billion hit.

Wales suffered its share of the consequences of that hit.

The Commission's analysis is presented as if an Independent Wales will be some passive recipient of international finance whims..

Wales, as other nations are, will be judged on its economic plans, its resources and potential.

Wales Federal Bank will be active in the domestic and international markets in supporting, where necessary, the Wales currency.

Many businesses in Wales will continue as at present, in being active themselves in the financial futures markets as insurance against fluctuations.

As for the public, most deal regularly with foreign currency and its costs without realising it. 

Clearly on foreign holidays they make more conscious decisions.

However each purchase [ or sale ] that they make online, Amazon, Ebay etc with goods from outside the pound sterling area, is subject to currency exchange and transaction costs.

In these cases it is included generally in the end price and the exchange is conducted by the individuals bank or agencies such as Paypal

That will continue with Wales own currency 

Wales currency, as with most national issues, are subject to pros and cons.

The cons, as we have seen,  are not as worrying as the Commission would lead us to believe.

The pros are that it provides Wales with the necessary instruments to control its financial and economic policies to build its wealth.

Trade

The Commission states. We have limited information about trade flows between Wales and England.

For comparison it is estimated that Scotland's trade with the rest of the UK, is around four times larger than with the EU.

Regardless, it cannot be assumed that trade between England and Wales would remain as it is now.

The closer Wales aligns with England, the lower border friction.

The flow of goods across the border might become challenging if Wales introduced different import/export sales tax or indeed opted to become a low tax haven

The above statements seem  to show more concern about Wales retaining close unity with UKr, than it does  about an Independent Wales trade position.

It is difficult  to understand that there is a logical thread of comparison between the trade between Wales and England and the assumption that Scotland trades four times as much to the rest of the UK than it does to the EU.

They make  this comparison,  they say, due to ’ the limited information on such trade ‘.

Now that is hard to swallow.

Contrary to the usual lack of Wales specific data, this information is freely available.

The UK government Office for Internal Market issued their most recent report in August 2023 which included that the value of Wales sales to UKr, the vast majority to England was £26.7 billion. 

Wales' purchases from UKr was valued at £27.3 billion .

The value of trade between Wales and UKr has, according to the OIM,  declined by 28% over the previous five years.

Over the same period Welsh Government data shows an increase in exports outside the UK of 15,5% from pre pandemic levels, to £20.5 billions. Over 52% to the EU

These figures show that Wales exports, without any help from Independence, are falling in the UK internal market and increasing with the rest of the world.

They also show that the trade between Wales and UKr is broadly balanced and that therefore it's in neither party’s interest to erect unnecessary barriers. 

Wales is shown to have a trade deficit with the rest of the world of approximately £3 billion..

Much of this can be explained by the increase in oil prices, as Wales exports have a significant proportion of oil based products

Also Wales doesn’t make trade deals. They are carried out by the UK  Department of Trade and no particular consideration is given to Wales' needs in those agreements.

As Wales  in Independence moves to a high technology economy those products will trade in a universal market and Wales becomes less dependent on the UK than the old philosophy of making parts for finishing in England.

It is also the case that the trade that remains will be subject to World Trade Organisation [ WTO ] rules.

The UK is a member of WTO as will Wales when it becomes a sovereign nation.

The WTO forbids unfair or unjustified tariffs and cross border taxes.

So many of the issues and obstacles that seem important to the Commission can be seen to be overstated.

Borders and International approval.

Borders.

The Commission criticised the responders who gave examples of relatively problem free border arrangements elsewhere. They did not show, the Commission said, how this relates to the Wales/UK situation

The point they fail on, is that it cannot relate, as presently there is no Wale/UK situation. It can only be an hypothesis, just as many of the Commission's points are hypotheses

It is, however, perfectly legitimate. For the responders to point to examples that show border difficulties can be overcome.

Examples perhaps of best practice. Something sensible people seek to implement.

As stated before, with trade in balance, complicating commercial movement, is in no one's interest.

As the trade figures show, of the businesses that trade outside Wales, over 43% are already subject to international tariffs and taxes, trading with the rest of the world.

As the trade with the UK continues to reduce, Wales will be better able to offer support to those continuing to trade with UKr, in the event of additional costs post Independence.

Free movement of individuals already exists within the UK between countries not directly aligned. The Channel Islands, Isle of Man and Republic of Ireland.

There is no logical reason why an Independent Wales shouldn't enjoy the same freedoms.

The Commission says that such an agreement is not guaranteed, however to retain international credibility and to avoid unnecessary complications in other areas, the UK would have to present good reason to obstruct such an arrangement.

Costs to business and inconvenience to individuals are not in themselves reasons against Independence and are balanced against the benefits. Benefits  that are too readily ignored in the equation.

International recognition.

The Commission seems to indicate that Wales will have a problem with international recognition particularly in the event of a less than smooth negotiations with the UK on Independence issues.

They see that Wales will be dominated by the UK and that Wales is likely to suffer negative consequences.

The Commission warns that Wales may have to agree to an inferior deal or suffer ‘ international isolation.

It has been shown above, that it is far from the case that the UK will be dominant in these discussions.

With regard to the inferior deal argument, the Commission ignores that the UK will be expected to abide by the rules and conventions relative to secession and the internationally accepted rule that no agreement can be imposed. That they be seen to be fair.

Wales need not accept any conditions, nor indeed any deal.

All that is expected is that they enter the negotiations in  good faith.

International recognition will depend on judgements as to good faith on both sides..

Finally,

As the Commission argues. There will be costs to Independence.

There are costs to remaining with the UK.

The difference is that the costs associated with the UK, taxes, benefits, austerity, cost of living, the cost of Wales being aligned to the pound, are policies imposed by the UK government.

Wales' share of these costs do little to change that

They are negative costs

The costs associated with Independence are an investment in Wales' future.

They contribute to increasing the wealth of the nation and all the associated benefits..

 

 

.