The economy of an Independent Wales

Wales wealth. How to get and how to use it,

A Wales Plan.

A major contribution to the SNP losing the 2014 referendum, was confusion in its future plans.

In the face of coordinated attack from the Westminster government, the media and vested commercial interests, it often showed a lack of clarity.

While a majority of the SNP membership wanted Scotland to have its own currency, the leadership, particularly Alex Salmond, argued for Scotland to retain the pound.

This uncertainty was unhelpful in a close campaign, it caused some in the financial sector to threaten to move from their Scottish bases and it handed the negotiating initiative to the UK Treasury.

The other problem was the Scottish government placing oil at the centre of its economic plan

The opposition to Independence made issues of the ownership and revenues from North Sea oil, the volatility of prices and the future of supplies and the future demise of fossil fuels.

All playing into the anti Independence narrative. 

 

Recently another ‘ academic study ‘, this time into the costs of Ireland unification.

The costs, they say, would be between £7 billion and £17 billion, although with such a variance you would think any respectable  academic wouldn't want it published

It is arrived at using the same unreliable and implausible  data that puts  N.Ireland, with 2.9% of the UK population, responsible for 23.7%  of the UK budget deficit.

£9.4 billion against £39.7 billion [ 2020 Government Expenditure and Revenue figures ]

The study also failed to take into account the savings of one united government, no border costs, a single financial and taxation system and the ability of the N.Ireland economy to grow in line with the Republic, rather than being restricted by a failed UK system.

No matter the veracity of the headlines, these are the forces coming Wales way as it nears its bid for Independence.

So ignore the doubters, the hesitaters and the users of dodgy data. Wales has a plan, a credible plan, a considered plan and a transparent plan.

A Plan to benefit Wales.

The Plan. Costs of Independence..

These are the direct costs of start up.

The transaction costs of the currency.

Border and trade costs. 

Startup costs.

Analysis conducted by Scottish and UK governments relative to the 2014 Scottish Independence referendum, led to startup costs ranging between £200 million and £2,5 billion.

This included additional government departments and IT systems for tax and benefits.

The Association of Scottish Chartered Accountants eventually arrived at an estimate of £1.5 billion.

This figure was generally accepted.

Although these figures are somewhat outdated, this is balanced by the costs to Wales being lower due to a smaller population, no significant financial sector to unravel and no complications of separating the ownership and administration of oil revenues.

The figure of £1,5 billion would seem a reasonable template for Wales to adopt.

In the absence of reliable data, it would appear reasonable to make a provision for any residual budget deficit that may or may not exist,

It is not until Wales collects its own data and closes the loopholes of Wales based business taxes going elsewhere, that it will become clear.

Wales presently pays a population share of servicing the UK national debt. It is argued that Wales should continue that payment share after Independence.

This is a contentious and complex argument and will be the subject of another post.

For the purpose of an economic examination on an Independent Wales we set aside a contingency for this purpose.

Wales presently pays £2.5 billion pa and we will set that aside.

Wales' economic plan must be enacted at once, showing confidence and purpose. It must start growing its economy.

Investment in energy.

Wales is rich in renewable, green energy.

One of the UKs leading engineering publications, The Engineer, stated.

The Celtic Sea and the coastal waters around Wales, have a higher concentration of renewable energy resources than perhaps anywhere else on the planet……….

Wales' geography, particularly tidal resources, mean that every form of marine energy is abundant.

So a good place to start.

This view is confirmed by recent projections by Carbon Trust, Marine Energy Wales and the Crown Estates.

In initial investigations , between them, 14 GigaWatts of capacity by respectively offshore wind turbine [ 2 GW ], tidal and marine projects [ 8GW ] and floating turbines [4GW ].

To maximise the benefits and security of supply, energy must be publicly owned, This means public investment.

Generally such energy projects take between 3 and 10 years, however these already identified can be accelerated by government 

The cost of the developments are estimated as £1 billion per GigaWatt by Carbon Trust, for the turbines and £7.4 billion by Marine Energy Wales, for the 8 GigaWatt of marine and tidal generation.

A total investment of £14 billion over 10 years.

The next target is the historical low productivity in Welsh industry and lower than[ UK ] average earnings of Welsh workers.

Both these issues have been identified as caused by generations of lack of investment.

In the case of productivity, failure to properly invest in research, development and innovation.

The lower than average earnings [ approximately 87% of the UK average ] caused, according to studies by the Wales Governance Centre, by the historical lack of investment in skills and technology.

There is a difficulty in properly assessing the amounts needed to reverse these issues, as the underinvestment has a lengthy history.

Even when Wales was an industrial powerhouse in coal and steel particularly, none of the wealth created was invested in Wales.

The greatest centres of learning in Wales, the universities, all funded by the workers and communities.

Hospitals and health and social care by financial contributions of the people.

The vast wealth created. That went elsewhere.

For Wales economy to progress and  wealth created, investment to reverse the lack of investment, present and historic, in the above is essential.

Investment in Research, Development and Innovation.

Wales present investment in research, development and innovation is woefully less than the  UK being 46% below the Uk average.

Most in Wales is carried out by Business and the Universities, with the Welsh government contributing 1.6%.

Wales has historically relied on a share of the UK and EU funding for this purpose.

This will no longer be available in Independence..

The investment needed proportionally to meet the levels of the UK and EU would be significant. Significant but essential.

The total investment to reach a UK average would be £3.4 billion with present pro rata Welsh government contribution of  £54 million.  

However it is presently only the universities in Wales who contribute close to the UK average so as to compensate for the loss of UK and EU funding and to reach the UK average. The Wales government would need to significantly increase its contribution.

Government investment in R and D is estimated to generate a 30% increase in business investment.

To generate that increase and boost research, development and innovation, an initial investment of £1 billion per year for the first three years would seem reasonable. 

Investment in Skills and Technology.

With regard to investment in skills and technology to boost the earning levels, that is equally difficult to estimate..

There presently doesn't seem to be a coherent strategy of identifying priority areas of skills that should be addressed or the technologies the government wishes to prioritise.

Much of the inward investment seems still to follow the old Welsh Development Agency strategy of job creation and headline companies rather than wealth creating.

Contrast with countries like Israel who identified the future industries of cyber security and AI.

Israel invested in centres of training and technology of cyber security and set up 80 centres around the country,

Within 5 years, Israel had become a leader in the field and in the year 2022 attracted £8 billion in investment and in the same year exported £9.3 billion relating to cyber security.

In the absence of the specifics, the alternative is to set a fund for use in skills training and technology. This to be kept in review.

£500 million a year for the first three years 

Nearly there for early investment. Just two more

Investment in affordable housing..

There is a critical lack of affordable housing in Wales.

The Welsh government has invested £1 billion over five years to promote the building of 20000 affordable homes over that period.

There is currently a waiting list in Wales of 92000 for social housing.

If the Wales government's target is met it would still take over 20 years to clear the list at current rates.

The target is not being met.

 Quality, affordable housing must be a priority for an incoming Independent Wales government.

To accelerate the process, we allocate £1 billion a year for five years to this end,

Finally in the immediate priorities.

Investment in Public Services.

The public service sector is central to the welfare and wellbeing of the people of Wales.

Health and Social Care, Education and local services have all suffered underinvestment.

It is clear that all services have to be examined.

Health for example. It cannot be a satisfactory system, where the GP service is run on an annual contract basis with private practitioners who can close a practice with no control by the NHS, leaving communities without a local service.

Similarly with dentists, who can decide arbitrarily to no longer deal with NHS patients, again leaving communities without a service.

These however are not short term issues, are structural and are not subject to economic solutions.

In the short term there is a need to deal with the chronic issues of staff shortages, staff retention and to instil some increased satisfaction across the whole public sector.

The immediate issue is pay, or lack of satisfaction regarding pay.

In order to demonstrate the positive intentions of the new nation towards its employees, let's start with a 10% pay increase across the public sector

The public sector pay bill is presently £10.5 billion. So £1 billion+  to raise.

So that's the first part of the plan.

We see what our investment will bring in those sectors in more detail, as well as to the state pension, local services, public transport, communication, culture and the arts and the business structure of the new nation.

But first. The total investment to date,

A total funding commitment for the above areas amounts to £31 billion.

An eye watering sum.

Some would say, impossible for such a small nation.

An amount that would send the present First Minister to lie down in a dark room.

An amount that would need smelling salts for the present Finance Minister,

But our new government is made of sterner stuff.

It also knows that all will not be required upfront.

It is also aware that there is a significant return on that investment, As we shall see.

Nevertheless it is a large financial commitment.

Next up.

Wales currency and how to pay for the investment.

[ currency transaction costs and costs of border and trade ]

 

 

  

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