Want to make Wales rich? Just follow the Basque Country’s lead

Abraham Alexander Oliver Somers

Wales and the Basque Country have a lot in common.  Both are ‘stateless nations’ with their own once-suppressed languages and both have a history of mining and heavy industry.

Both are also about a similar size –  that is, if you include the French Basque Country along with the Spanish portion. And both have a lot of mountains.

They even had direct links in the past – iron ore from the Basque Country was once exported to the foundries and factories of South Wales.

Yet today the economic difference between them is stark.

The northern Spanish region of the Basque country has Spain’s highest GDP per capita, richer than even Catalonia.

Meanwhile, Wales is the poorest nation in the British Isles, and in northwestern Europe.

Indeed, watching Visual Politik’s video on the subject informed me that the Basque Country is regarded by many as a ‘little Germany’ inside Spain.

It has a thriving Mittlestand of companies manufacturing high quality 21^st century products and with a notable number competing worldwide.

As in Wales, the old heavy industries have largely gone, but they’ve been replaced with something much better – and unlike the Welsh, the Basques just haven’t looked back.

Decentralised

How did the Basques manage this?

Perhaps the biggest difference is how the two nations are run politically.  Yes, both have autonomy from the Central government in London/Madrid but that aside, there is no comparison.

In the Basque Country and in neighbouring Navarre, tax rates and spending aren’t controlled by the autonomous government, the equivalent of the Welsh Assembly.

They’re controlled by the provincial governments – the equivalent of county councils!

This makes the Basque Country, and Navarre too, unique among the Spanish ACs in the way they are run, and in this way, the Basque Country is perhaps more like a little Switzerland than a little Germany!

Why is Switzerland so rich? Because its different local Cantons there decide their own tax rates. The subsequent tax competition makes them all lower their taxes, and thus become very attractive to both outside investors and local entrepreneurs. The same is thus true of the Basque Country.

The result isn’t just that the Basque Country as a whole is rich, but that the wealth is nicely spread around. Each province has done a good job at making their own home turf attractive.

Each province has a strong incentive to maintain a strong local economy so that they can spend their own tax revenue to benefit themselves.

Model

This isn’t true in Wales. Cardiff does now have a few tax-raising powers, over stamp duty and landfill sites, which are unlikely to make any difference to how wealthy Wales is.

Raising tax from London and giving the money to Cardiff Bay to dole out just hasn’t encouraged the same economic competitiveness.

Also, the wealth is less evenly spread around, with places other than Cardiff and Swansea feeling left behind.

So, the solution to Wales’s impoverishment is this – be more like the Basque Country. Give local authorities tax-raising powers. Have Rhondda Cynon Taff compete against Caerphilly, and Gwynedd against Anglesey.

In the Basque Country, a majority of people live in towns of less than 40,00 inhabitants, and the decentralised economy greatly supports this state of affairs.

In Wales too, a greater percentage of people live in smaller and medium-sized towns than in England, and so I would argue, that, if anything, Wales’s existing urbanisation patterns make it best suited to a Basque-style economic and political model.

So yes, strengthen the Welsh Assembly, but also devolve fiscal responsibility a step further to the local authorities.

Do that, and there would be no reason for the valleys of the Rhondda and slopes of Ffestiniog to be any worse off than the valleys and slopes of the Swiss Alps and Basque Pyrenees.

It’s time that Plaid Cymru started campaigning for this, after 20 years of ‘Centralised Devolution’ being such a failure.