Lies, damned lies and the Welsh economy
Dr John Ball
Much has been written about the Welsh economy. Wales is poor runs one view, Wales is not poor, runs the other.
Despite growing evidence that the former is simply not the case, there remain those who insist that Wales is poor, and independence will make things worse.
I have been a nationalist all my life and it seems the recurring “poor nation” theme has always been a part of it.
Two recent articles in Nation Cymru provided a positive picture of the present-day Welsh economy, but it occurred to me that this may well be the case now, but what about the past? Were we really a poor nation all the years of my life?
Then I remembered a pamphlet written by the late Professor Phil Williams as part of the Cyfres y Cynulliad series published by Y Lolfa to mark the establishment of the Assembly in 1999. It makes interesting reading.
Income and expenditure
It synthesised research on the Welsh economy that had taken place since the end of World War two up until 1995. The first of these was by the late Professor Ted Nevin (no nationalist he) who examined income and expenditure for the Welsh economy between 1948 and 1956 and found a surplus of £40million, easily more than £2billion or more today.
He later revised and extended the research for the period 1948 to 1962 and again found a surplus, of £50million.
Williams writes “…this confirms that in the 15 years after the war, …Wales accounts were in the black.” What is even more remarkable is at this time almost all countries, including the UK were running significant deficits. Wales was not.
This further work was significant in that it also looked at the wider economy and predicted that without an appropriate policy response, there would be extremely high unemployment between 1964 and 1970.
Sadly, this proved to be the case, the Labour government of the time dismissed the findings as “a product of the ivory tower.” Surprise, surprise.
In 1970 together with Dafydd Wigley, Williams went on to produce accounts for the Welsh economy for the period 1967-68 and once more found a surplus in this case, £36 million.
This work is of interest because it was based on accounts as applied to an independent, sovereign state.
Bangor University
Interestingly, at the same time, the government through the (then) Welsh Council commissioned Bangor University to undertake an independent examination of Wales accounts for 1968. A surplus of £33 million was reported.
This of course did not fit the narrative. Enter George Thomas and the infamous television broadcast “…don’t let the English know how much they are paying for our health service …and roads.”
This from a Labour Secretary of State, a party to which the people of Wales had given unquestioning support.
There was little further research until the late 1990s when, with devolution on the horizon and questions again being asked about the economy, the government swung into action.
In 1997 = the year being no coincidence – the then Welsh Office under the leadership of William Hague published research showing Wales in the period 1994 -95 had a deficit of £5.7 billion.
However, as Williams notes the document was “…so full of omissions, errors and absurdities that it could not be taken seriously” and that in allowing the publication of a document that was so faulty the civil servants involved “…had seriously damaged their professional reputation.”
The response was further research by Williams, this time for the period 1994-95.
Although the research clearly showed that the Welsh Office figures for this period were wide of the mark, Wales had moved into deficit of £2.4billion.
Recession
However, there are caveats. The first is that during this time the UK had incurred its greatest ever deficit, the inflation of the 1970s, Thatcher’s disastrous economic polices and the recession of the early nineties had resulted in the UK economy becoming the sick man of Europe – and Wales was dragged along.
The second illustrates the on-going dilemma of allocation and interpretation.
In this research Williams included notional expenditure allocated to Wales which was not a direct cost to Wales but to the UK: defence, debt interest and a contribution to the National Debt. With these reduced or removed, the deficit moves into surplus.
This dilemma underpins the current debate on the Welsh economy.
The Office for National Statistics publishes income and expenditure accounts for the Welsh economy.
Deficient
However, to develop a picture of the contemporary Welsh economy, the ONS accounts are deficient in two important ways.
Revenue is unclear, not least because of the many externally owned organisations operating in Wales which declare taxation at their home, non-Welsh address.
Expenditure is the most challenging and misleading, further costs are added to actual expenditure to reflect the fact that Wales ‘benefits’ from UK activities: defence, debt interest, overseas activities and sundry other endeavours. These alone amount to £9 billion,12% of GDP or a ludicrous 30% of tax revenue.
The two reports published by Cardiff University on the Welsh economy in 2016 and 2019 which proclaimed that Wales had a deficit of over £13 billion made absolutely no allowance for these notional costs.
Interpretation
As with any research and published data there remains the question of relevance and interpretation.
No more so perhaps than in discussing the Welsh economy.
Nevertheless, although the reports published by Cardiff University – and which began the ongoing debate – were accurate in presenting the data as it stood, there was no meaningful questioning of the assumptions that underpinned the data.
I calculate that, after making reasonable adjustments to allocated notional expenditure, the Welsh budget is in surplus by £350million. Frankly, this is not a lot and there are no extras or allowances, but the fact remains, there is a surplus.
The upshot of all this? Such data that has been available and research undertaken has shown that Wales is not a poor country and certainly for most of the twentieth century and much of the twenty first, we have paid our way.
Wales is poor.
Leon Trotsky sums it up.
A lie told once remains a lie but a lie told a thousand times becomes the truth.
Dr John Ball is a former lecturer in economics at Swansea University and currently working on a book Free to Choose: New Economics for a New Wales
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How much would it cost to become independent?
How much would it cost to repair a home with hole in its a roof?
You can present the public with as much hard evidence, peer reviewed papers and solid accounting data all you want to.
The harsh truth is that the majority have been programmed since birth that “Wales poor” ” Britain only way” and media sponsored cognitive dissonance will hold steadfastly like an invisible force field of blissful ignorance.
Until the propaganda from the failing empire is stopped, meaningful debate will not be allowed.
Gary. We’ve got enough naysayers without our supporters helping.
The point of this article and indeed all the other articles and talks I have given is that we are not poor – we never were!!
We have an exciting future as a member of the world’s nations.
What you’ve got to do is NOT respond in such a defeatist way,take on the empire and its propaganda, Shout from the rooftops!!
Apologies for the unclear wording, I was in complete agreement with your piece.
As I find myself in complete agreement with your reply.
If your conclusions are correct? And I am unable to dispute them!
It surely must be that if we are NOT poor, then it must be that the blame must lie with those who handle the economy…for 26 years it has been the Assembly/Senedd who have wasted the money on projects that have not seen fruition and into pockets of environgrifters and companies who rent a cupboard in Cardiff and stick Cymru on the name…and hey presto the Development Bank of Wales fill their pockets?
Find it hard to disagree.
Great article John, exposing once again the tired old ‘on the bones of our arses’ narrative that Labour love to pump out. I look forward to reading your book. The Welsh Government should place a copy of it in every classroom and ten copies in every library across Cymru (more chance, I know, of Eluned, Huw ID, Milesey and the gang declaring war on Singapore).
Crowdfund and community volunteers pack and send out copies.
How interesting and for me and all my age who were nurtured through the worst of rationing post war but in a ‘land of plenty’ of rabbits, pigeons and trout with chickens a veg garden and fruit trees. Nuts and berries in profusion up and down the lanes and a bay teeming with fish…
Those were the days in the poorest county in Cymru…
With nearly every square inch taken up by military training and airfield construction during the war the money flowing in must have added up…
The military were replaced by the newly liberated workers of the Midlands and the North West who would bring their caravans and tents for the summer while for six weeks the prom would be full. How many ferry boats and fishing boats worked out of Barmouth Harbour, a fleet.The money spent on deck chairs, ice cream, rock and donkeys. Hotels and guest houses galore, a town full of shops selling all sorts… 70% worked for the council or so it was said…Traws Power Station and the pump storage were being built, several industries in the area like Cooke’s had kept… Read more »
Where did the bulk of this ‘war chest’ money finish up ? Could it be the landowners, and who were they…
Where can we read these reports? Any references would be much appreciated as I find this fascinating. My worry is we never see anything detailing figures of private / public sector income and a breakdown of Wales’ expenditure. I want an independent Wales more than anything, but what I see and hear is that we are a low wage, big public sector employer. However, we don’t seem to spend very much on the country, as can be seen by the fact that it’s falling apart, so maybe it could be calculated that we would have a surplus. I think concrete… Read more »
You’ve reminded me that I omitted from the article the reference to the work by Phil Willams:
Williams, Phil (1998) The Welsh Budget. Talybont, Y Lolfa
Much detail on the Welsh economy is available through the Office for National Statistics publications Country and Regional Public Sector Finances and Total Managed Expenditure.
However, remember the caveats noted in the article.
In the Industrial Revolution and since Wales has been a major source of carbon emmissions what liabilities would lie in the carbon accounts of an independent Wales?
I think the phrase here is “has been.”
Remembering the significant pollution generated for over two centuries by heavy industry in Wales and all to the benefit of England, the liability for carbon accounts lies with England.
Welsh capital participated in the coal and shipping industries. We cannot pass all the responsibility to England.
I am well aware of that, the Bevans of Neath for example, but these were very much in the minority.
I’m not rabidly anti-English but the truth is that coal,iron, steel and slate that we produced over generations benefitted businesses and their owners who were invariably English.
Interestingly, the notable exception was Scottish – the third Marquis of Bute who at one time was the richest man in the world.
We have given so much and received very little in return.
‘Invariably English’ is true for the iron industry. But not for coal. English capital played a very large role but Welsh coal barons like David Davies or William Lewis were just as exploitative.
We were all then part of the “British Empire”,there was then no Welsh state or English state,if “the polluter pays” the bill should be sent to the Empire and an independent Wales should pay its part.
The Bruces…Lord Aberdare…?
What about Scotland ?
I can not and will not believe, that the English establishment, will allow millions of its own people to live in abject poverty and be homeless, begging on the streets, watch thousand die every month due to lack of funding of the health service, oversee a crumbling infrastructure and economy, while diverting billions towards 3 smaller devolved nations, just to keep them afloat, out of the goodness of their hearts. That they keep us, while running a huge deficit for nothing in return, while they suffer in silence is not credible. This is what we are being lead to believe.
Come on! Clearly, they are holding onto us out of the goodness of their hearts.
Oh.
Interesting but how relevant is it to the position that a possible Welsh state would find itself in post separation from England? There is a lot to be said for the argument that Wales has ‘paid its way’ historically, at least as regards our balance with England. [The global balance is less clear given Welsh participation in the profits of Empire.] But we need to think about the present and future rather than the past. Many of the assets that allowed Wales to pay its way have gone, notably industry with Port Talbot the latest example. We would have to… Read more »
You’ve missed the point. I am an optimist and look forward to a bright future as an independent state. However, the intention of the article was simply to put the record straight, that those who have spent literally decades telling us that we are poor were wrong. I deliberately titled the article “liars.” You’ve raised two other issues. First, any residual debt such as the National Debt will be a matter for negotiation, my view is that the vast majority of that debt has been for England’s benefit and this must be reflected. Wales relative poverty is due to the… Read more »
Does the term ‘liars’ help? As you acknowledge, allocation and interpretation is a dilemma. Both sides of the argument about Welsh poverty tend to prefer definitions and assumptions that support their case. I suggest it is inconsistent to assert both that England has impoverished Wales and that Wales is not poor. An independent Wales would inherit a legacy of economic domination, not so much by ‘England’ as much of the north has similar issues, as by capitalist interests predominantly based around the City of London. Lack of foresight has certainly been a factor but there are deeper structural issues. We… Read more »
Lyn E, the Westminster Government advised Scotland around 2014 that they would not be permitted any part of the so-called National Debt (more correctly termed the National Surplus – when ONS discovers double column accounting they might change its name). It is too valuable to them and they wouldn’t let Cymru have any part of it either. What might be contestable is the interest paid on it (itself a scandal) – currently ~£8b/y. Who owns the ‘national debt’? Banks, pension funds, life assurance companies, individuals, foreign governments…even the UK Government (£800b). It provides them with invaluable liquidity and safe (as… Read more »
National Debt is an asset for those who hold it but a liability to the state that issues it. Dividing up liabilities and assets would, as I think up recognise, leave Wales with significant interest to pay.
A sovereign currency is not a silver bullet.
I think there is a case for us not paying any interest. It was BoE foolishness, again, that chose to pay interest (on some, not all). We are not complicit.
It would depend how a sovereign currency was managed, really. Given the lack of knowledge, let alone understanding of macroeconomic issues here, it is a huge risk.
But not taking that risk will ensure we remain a colony. And there are potential mitigations…
There is certainly a very strong case for the BoE reverting to its pre-2009 position of not paying interest to commercial banks. The New Economics foundation had estimated that the UK Treasury will pay out over £150bn from 2023 to 2028 to fund this.
But this is a question of monetary policy. It’s not about independence.
I’m pleased we agree on that.
But then are you saying there won’t be monetary policy post-independence?
That would certainly be the case if we stuck with the pound as our currency. But that wouldn’t be independence, would it?
That raises the question of what exactly is ‘independence’, and what it could it mean for Wales. I find it very hard to get straightforward answers on that.
Are France, Germany and other eurozone countries no longer independent because they have adopted the Euro?
Exactly right, Lyn E. Good question. It is a deliberate fudge, not helped by the remit that YesCymru gave itself. There are alternative approaches. The northern European countries have done very well out of the Euro. Greece, Spain and Portugal, not so much. Their agreement on the Euro was a case where their sovereignty was pooled, purportedly for the greater good. Their monetary sovereignty has been compromised for this, but the only the dominant players gain. Were Cymru to continue with the pound (pre- and post-independence), we would continue to be bullied by the BoE and the English Establishment as… Read more »
PS the national debt will never be repaid. And it would be a disaster if it were.
The grid needs to be upgraded if we are to replace fossil fuels with renewable energy. This is a technical requirement not colonialist exploitation. Grid upgrades will further be needed to distribute energy within Wales (Cardiff’s Local Area Energy Plan shows it will need to import 78% of its energy from outside its boundaries) and to export energy, potentially a significant revenue earner.
The extent to which the upgrade requires pylons, less obtrusive overground techniques, or underground distribution poses cost/benefit challenges whether or not Wales is independent.
I favour microgrids and reduced, more efficient energy use.
We must think less about the Age of More and more about a sustainable Age of Better. Probably a wood and hemp-based economy without gross transportation networks and other aspects of excessive consumption. Educational, cultural and personal development offers much.
We certainly need to use energy more efficiently and microgrids have potential although they are unlikely to meet the energy needs of cities or industries.
There will not be much support for independence if it means reverting to wood and hemp.
Alas, not enough chrome or gold in it for most people, at present…
Cymru is too insignificant to be an independent country but at the same time is destined to play a crucial part in creating a socialist Britain, which will further international socialism and so change the world. That tune was played to us by the Labour party for generations. Now we’re getting a variation of that. Another grand ambition of taking on “capitalist interests predominantly based around the City of London.” together with our comrades in England. Sorry but we’ve been doing that for a hundred years, electing dozens of Labour MPs at each election and look where it’s got us… Read more »
You’ve completely missed the point. England will not disappear if Cymru becomes independent. Nor will the City of London or global capital. We would still have to deal with all this.
“We would still have to deal with all this.” As every other small democratic nation state does, on as much of it’s own terms, directed by its electorates, as they are able. What I discern from your comments is that the financial system itself is where your interest lies and not the issue of independence or not for Cymru. England will never vote in the left wing government that might confront this global capital however by binding Cymru and Scotland to England in a UK there might be a glimmer of hope. I think this glimmer of hope is what… Read more »
Quite right, formal independence for Cymru is a secondary question for me. It could create opportunities for us to exercise more control over our lives but it could also be a veneer for a neo-colonialism that becomes even more impoverishing and oppressive than what is experienced today.
It all depends on the circumstances and the terms of Cymru’s relationship with the external world, particularly with England. I want to know HOW it would work.
“Quite right, formal independence for Cymru is a secondary question for me. “
At last.
Wouldn’t it have been more honest to put your primary concern out in the open at the start and explore how an independent Cymru could or couldn’t address it rather than use your unmentioned primary concern to argue against independence for Cymru.
I am not arguing for or against independence. As I said, this is a secondary question for me. I want to know how it would work. In practice.
Criticising Westminster is easy but it does not suffice to make a case for independence. Formal sovereignty will not solve Cymru’s problems if we are still subject to neoliberalism imposed by Westminster as the price of free movement and access to English markets.
Do you really want to know, Lyn E: you probably wouldn’t like it…
But cordial relations, a serious commitment to peace and disarmament and fair trade with all countries would be a good start.
Yes to all that. But how will we ensure fair trade with England?
Wales, is definitely not poor, but it is poorly run, by a clueless Labour party. Unfortunately Wales is going to struggle to afford independence for a long time, with the economy in such a bad way.
Agree absolutely with the first part of your comment.
Yes, it will take time and things may indeed be tight. But look at the Baltic States, once poor economic basket cases, now their economies are booming, so much so that recent research showed that their economies had grown by more than 5%of the EU average.
The question you should be asking is can we go on as we are, or grab the challenge and excitement of building a new, successful state?
Interesting article. We need more intelligent contributions like this to move the debate on from tired rhetoric. I look forward to reading Dr Ball’s future book.
Great stuff that needs to be constantly repeated.
One question. If, as we are often reminded, an independent Wales will be required to “shoulder her share of the National Debt”, can we not reasonably expect that we are entitled to our share of the National Wealth? And if the response is that the latter is notional, why isn’t the former?
OK, two questions.
National Debt. Two things – any contribution will be subject to negotiation and I take the view that most of that debt (Currently in excess of £2trillion) was for England and the empire’s benefit. Perhaps more importantly – the only part of the debt serviced is the interest, so frighteners who argue that we’d have to pay a huge amount toward the capital are wrong. Yes, we should have some of the wealth, again subject to negotiation. Interesting that you should ask, in the often negative discussions about the future, it’s forgotten that the UK does have forms of wealth,… Read more »
John is quite right in this article. There’s a series of similar articles on Bylines Cymru. I’ve never been convinced by this “Wales is too poor” nonsense. There are two main angles on this which are comparative viewpoints. The first is taking the accusation and the notional UK deficit on spending in/on behalf of Wales at face value. IF Wales is comparitively poorer and requires a UK subsidy then we can only hold those responsible for the governance of the Welsh economy to account. The Welsh economy is currently a component of the broader UK economy which for the most… Read more »
Diolch. Moving on, please give an article on the me chanics of independence step by step. At present all I know is a history of referenda- are these necessary? They are like asking permission. Now a key principle of politics and management is it’s easier / more effective apologise afterwards than to ask permission before. So what about unilaterally declaring independence? How would that work? I can see it would result in a difficult relationship with Westminster. Ahem. We already have that. Would it be worse, the same, better? How do we rejog taxes so all payers big and small… Read more »
Shan. You raise an interesting issue about the future. I’m not a fan of referenda, mainly because much of the debate often deteriorates into nonsense. I remember during the ’97 referendum the nonsense – we couldn’t use the pound, we wouldn’t be allowed to work or travel in England, the border would be closed and of course the favourite – all the businesses would leave. Strangely enough – and I can’t believe I’m writing this – the example is Farage. He used a technique that’s become known as external leverage, driving the message anywhere and everywhere, using the media, different… Read more »
There needs to be a new and separate office of finance where all this information i readily available. How can we fix a problem if we don’t know one exists. This should be the next target of Wales I think calling the assembly, parliament and greatly expanding it has greatly improved our credibility. We should have an annual report by and independent body of all our resources and matters relating to this.