What AI says about the finances of an independent Wales

Martin Shipton

A supporter of Welsh independence has shared what he got back when he asked an AI channel to provide a budget for the first year of an independent Wales.

Posting the results on X, Jeremy Brookman stated: “After a conversation on here which included the deficit, I asked ChatGpt: ‘Would it be possible for you to do an illustrative budget for an independent Wales?’

“What would the finances of an independent Wales actually look like? I’ve tried to build an illustrative first year budget for an independent Wales using the latest available Welsh UK fiscal data.

“The conclusion is more nuanced than either side of the independence debate usually suggests.

First, the uncomfortable bit: Wales currently has a substantial fiscal deficit. The latest figures put the gap between revenue raised in Wales and public spending attributable to Wales at roughly £22-23bn a year. That doesn’t disappear on Independence Day, but calling that a £ 23bn cost of independence is misleading.

“An independent Wales would take responsibility for things currently paid for by Westminster: pensions. benefits, defence, foreign affairs, tax administration, debt interest, other UK functions.

“It would also collect the associated revenues. So let’s build a hypothetical budget. I’m assuming around 3.2 million people and broadly current tax rates.

“Initially a sovereign wealth state negotiated share of UK assets. Debt. No fantasy economic boom. Substantial investment in growth. This is an illustration, not a forecast.

“Revenue: my central estimate is around £37.5bn of annual revenue. Income tax £8bn; NI social contributions £8.5bn; VAT £8bn; Corporation tax £3bn; Consumption duties £2.5bn; Other taxes £7.5bn.

“The income tax figure is particularly interesting. Welsh taxpayers already generated around £7.8bn of income tax in 2024-25. So independence wouldn’t require inventing a huge new income tax. The main change would be that the entire tax stream would accrue to a Welsh Treasury.

“Spending. Now the other side. I’d budget approximately £48bn of expenditure. NHS and public health £12.5bn; Pensions 8.5bn; Benefits/: Disability £5.5bn; Education £5.5bn; Social care £3bn; Local government £3bn; Transport/infrastructure £2.5bn; Police/ courts/ prisons £1.8bn; Defence £1.5bn; Agriculture/ Environment £1bn; Housing £1bn. Everything else around £2.2bn.

“That gives us Revenue £37.5bn and Spending £48bn. Deficit around £10.5bn.

“So no – my model doesn’t pretend an independent Wales would magically balance the books on day one. It wouldn’t.

“But notice something important. The current Welsh fiscal gap is roughly £22-23 billion. My illustrative sovereign budget gets that down to around £10.5bn without assuming huge tax increases. Why? Because an independent Wales would control revenues and functions currently sitting with Westminster.

Debt

“The debt question. This could make or break the numbers. Suppose Wales inherited £100bn of UK debt. At a 3.5% average interest rate, that’s £3.5bn a year in interest. £75bn would be about £2.6bn. So the UK-Wales asset/ debt settlement would be absolutely crucial.

“I’d want Wales to negotiate not just liabilities but assets too: government property; financial assets; overseas assets; pension liabilities; military assets; infrastructure; reserves.

“The settlement could change the Welsh budget by billions a year. “Defence: Wales wouldn’t necessarily need to recreate the UK’s military. I’d initially budget around £1.5bn: territorial defence; reserves; coastguard; maritime surveillance; air surveillance; cyber security; NATO/ international commitments.

“That’s roughly £470 per person.

“So how do we close the £10bn gap?

“Not with one giant tax rise.

“The long term answer has to be economic growth.

“More productive businesses. More employment. More investment. More energy generation. More high-value manufacturing. More R&D. Better infrastructure.

Higher employment

“For illustration, I could see a 10-year programme aiming to generate: £1.5bn – higher employment; £1.5bn – productivity; £1bn – larger corporate tax base; £1bn – lower benefit dependency; £1bn – spending efficiencies; £1.5bn – moderate tax changes; £2bn – broader economic growth.

“Again: targets, not forecasts.

“Energy is the wildcard. Wales has enormous potential in: offshore wind; onshore renewables; hydro; tidal energy; ports; electricity infrastructure.

“A Welsh state-owned energy company could potentially turn some of that resource into public revenue and cheaper energy for Welsh industry.

“My long term target. By roughly 2035 to 40, I’d aim for: GDP £115-£125bn; Revenue £48-52bn; Spending £50-53bn. Deficit £1-3bn. “That would give Wales something much closer to a normal small European state’s fiscal position.

The conclusion. So can Wales afford independence? I’d put it this way. Probably, but not painlessly and not automatically. Independence wouldn’t magically fix Wales’s fiscal deficit. It would give Wales the tools to try to fix it.

“The real economic question isn’t: ‘Can Wales survive without the UK?’ It’s ‘Can Wales use sovereignty to build a larger, more productive economy? “That’s the gamble.”

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