Project Hope v Project Fear: Why Mike Hedges is wrong about Welsh independence
Rob Hughes, director YesCymru
It was with great interest recently, that we read Mike Hedges’ take on independence in his article for Nation.Cymru.
Mike has historically been averse to the further transfer of powers to the Senedd and has been vocal about his opposition to the transfer of the Crown Estates to Wales, claiming that any transfer will automatically directly affect the Block Grant.
In the case of Scotland, contrary to what Mike has said, this is not true. In Scotland a separate fiscal arrangement has been agreed with Scotland contributing a set figure per annum, rather than having a reduction in the block grant.
So, when Mike questions whether Wales should be independent, it is worth questioning his motives. But better still, let’s take him on over the reasons he has given for deciding independence is not in Wales’ interests.
Currency
Mike asks what currency an independent Wales would use. The answer to that is the currency that we, as a nation, want to use. There are numerous examples. Currently there are 180 different currencies used in the world, it is completely feasible for Wales to create and use its own currency, giving us full fiscal control and allow us to set interest rates and manage inflation.
A good example of how effective this can be is looking at economic recovery in Iceland after the banking crisis of 2008. This could be pegged to another currency, as in the case of Ireland after independence. We could also use currency substitution. A number of countries use other countries’ currencies, with El Salvador, Ecuador, Timor-Leste, Marshall Islands, Palau and Micronesia using the US Dollar, and Kosovo, Montenegro, Andorra, San Marino, Vatican City and Monaco using the Euro. So, the question of currency is not an obstacle to independence, rather an opportunity to follow a path that best suits an independent Wales.
A Central Bank
Mike asks what the central bank would be to act as Lender of Last Resort and set interest rates. Regardless of which currently path we choose, Wales will need a Central Bank. Its role will be dependent on the choice of currency path we choose. With our own currency, our Central Bank will be the lender of last resort. If we don’t have our own currency, our Lender of Last Resort will be the bank that issues the currency we use, for example the ECB (European Central Bank) or the Bank of England. Again, these are established practices across the world, with each having their own advantages and limitations.
Civil Service
An independent Wales will still require a Civil Service. We may decide to outsource some of our requirements. It is possible that the Remaining UK (rUK) will also outsource some of its requirements. UK Passports are currently produced in Poland. The Royal Mint, until recently has been supplying over 60 countries’ coin currencies. The rUK, as will Wales, will continue to require DVLA and Royal Mint, with the expertise and infrastructure already in place. If not, the transfer of English-based agencies to Wales will compensate for any loss. However, we do need to build our private sector to support our public sector. It is worth noting that, if currently, our Private Sector needs strengthening, that is a result of UK membership which has failed to develop the economy in Wales and will continue to do so. Full control of our Civil Service will be a benefit to Wales, as Mike seems to recognise.
Armed Forces
The Armed Forces in Wales have a proud history. As Mike points out, Wales is over-represented in the British Armed Forces, with 7% of personnel for 5% of the population.
One of the most important functions of government is to protect its citizens. Defence goes beyond fighter jets and warships – it also involves safeguarding people from harm in all its forms, whether from military threats, natural disasters, or cyberattacks. What Does Wales Need Defending From? On paper, Wales is situated in one of the safest regions in the world. While we do not face a high risk of attack, the global security landscape is more uncertain now than at any time since the 1930s. It is unclear whether NATO can still depend on the United States to play a full role, and the implications of this for the alliance remain uncertain. Reducing reliance on the US will require making defence a higher priority than it has been in the past.
Old threats have also resurfaced, such as an expansionist and aggressive Russia, while new risks are becoming increasingly significant. These include: Climate change – leading to flooding, coastal erosion, wildfires, and extreme weather events, cyberattacks – targeting critical infrastructure, businesses, and public services and Online misinformation campaigns – designed to destabilise democracies and influence elections. Some nations operate without a standing military.
For example, Costa Rica (population 5.2 million) has not had a military since 1949, and Iceland has been without one since 1869. However, if Wales were to establish its own defence force, what might it look like? What Would the Welsh Defence Forces Do? While the military would have a combat role, it would also play a key role in supporting foreign policy.
Decades of UK foreign policy failures – from the Iraq War to the chaotic withdrawal from Afghanistan – have damaged Wales by association. Independence would allow Wales to take a different approach, focusing on peacekeeping and disaster relief. Wales could follow Ireland’s example by becoming a centre of excellence for humanitarian military training, while also supporting domestic priorities.
It is worth noting that the UK ranks 12th in the world for military spending per capita.41 Despite no regiments being based in Wales, the UK Government spends a proportional £2.7 billion per year on defence in Wales42 – more than annual spending on education (£2.2 billion in 2023/24) and over six times the policing budget in Wales (£434 million in 2023/24). The Irish Defence Forces budget is approximately €1.3 billion per year.
If Wales were to join NATO and meet the alliance’s 2% of GDP target, its defence budget would be around £1.7 billion per year.44 An independent Wales could also introduce constitutional safeguards limiting politicians’ powers to send troops into combat. In the UK, the Prime Minister can deploy forces without parliamentary approval. A Welsh constitution could ensure that the Senedd must approve any use of war powers.
National Debt
How Much of the UK’s National Debt Would Wales Inherit? A common question about independence is whether Wales would be burdened with a share of the UK’s national debt. As of 2023, the UK’s national debt stands at over £2.7 trillion, much of which has been built up over many years due to decisions made by successive UK governments.
This argument has been used in the context of Scottish independence as the UK has not signed or ratified a treaty called the Vienna Convention on the Succession of States with respect to State Property, Archives and Debts. 50 J Fitzgerald, S. Kenny, “Till debt do us part”: financial implications of the divorce of the Irish Free State from the United Kingdom, 1922–1926, European Review of Economic History, Volume 24, Issue 4, November 2020, Pages 818–842.
There is no rule saying Wales must take on any of this debt – it would be part of negotiations. Some nations, like Ireland after 1922, took on little or no UK debt when they became independent to smooth the creation of Northern Ireland.50 Some nations have agreed to take on a share, but this was often balanced by receiving assets such as foreign reserves, infrastructure, or state-owned institutions. Independence would give Wales control over our own borrowing based on our needs. This means we could decide where to invest, whether in infrastructure, public services, or growing our economy.
A question that Mike seems to have missed is that is we take a share of national debt, we would entitled to 5% of national assets, which would be of great net value to an independent Wales.
Customs Union
An independent Wales would be an outward looking nation and would look to create customs unions which work for the people of Wales, not only with rUK but also with the EU. Although membership of customs unions will ultimate be in the hands of the Welsh electorate, we foresee a constructive and open approach to seamless daily cross-border for travel and work, such as the Nordic Passport Control Agreement between Norway, Finland, Sweden and Denmark and agreements Czechia and Slovakia.
Pensions and other benefits
Mike asks how payments will be made for people who have paid NI contributions when living in both Wales and rUK. Right now, benefits and disability support are controlled by Westminster. This includes payments like Universal Credit, Personal Independence Payment (PIP), Carer’s Allowance, and Jobseeker’s Allowance. The Welsh Government has no power to change these systems. Many people believe the UK benefits system is slow, unfair, and difficult to access, especially for disabled people. Some policies, such as benefit sanctions and strict assessments, push vulnerable people into hardship. An independent Wales could design a system based on fairness, dignity, and efficiency.
For example, we could: Improve support for carers and give GPs more power to assess disability benefits. If resources allow, introduce a universal basic income or a guaranteed minimum income.
Many people worry about whether pensions would still be paid after independence. State pensions would be a key part of independence negotiations. According to Legal & General (24th October 2024, website), State pensions are based on National Insurance contributions. Anyone who has paid into the system should be entitled to their state pension, regardless of where they live. Over one million UK state pensions are paid to people living abroad already.
Private and workplace pensions are also legally protected, meaning they must pay out what members have earned. In the future, Wales could make retirement security a national priority. This could include creating a Welsh state pension, possibly supported by new funding sources like a sovereign wealth fund.
Security and National Bodies
Mike seems to answer the question himself on the basis of border agencies. We agree that they would need to be split up or we co-operate with the UK to provide a cross-border agency.
VAT and Duties
Mike notes that a method will be needed to align these duties in order to stop large-scale cross-border movement of goods. Again, this creates job opportunities in Wales with the added benefit of VAT being paid in Wales will stay in Wales, giving a boost to the Welsh economy.
Mike talks about Project Fear and Brexit. YesCymru look at independence more as Project Hope, offering a real chance for Wales to create positive futures for our citizens, and creates an economy which starts to lift our children pout of poverty.
As for Brexit, an independent Wales is the antithesis of Brexit, with an open and engaging Wales looking to venture out into the wider world, rather than retreating into a corner. So, Mike, we are ready for the challenge, and we are ready for the debate. And let’s make Wales work for everyone in Wales.
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We can talk all day about economic arguments for independence. Unfortunately the British Welsh are amongst the most gutless people on earth. No courage to leave their beloved England and become a prosperous, forward looking independent country.
A perfect response to a plastic Welshman
Remarkable! Concise, detailed & logical. I certainly could not have put it better myself!
Excellent article blowing the unionist arguments out of the water. It will be interesting to see to see if they try to respond with any valid defence of their position
Since reading his article i’ve had an email discussion with Mike about it. To be fair to him he engaged fully and quickly with the points I made. We didn’t agree as you may guess. I told him i’ve taken as my basis for my opinions a booklet named ‘The Welsh Budget’ written by Professor Phil Williams in the late 90’s (still perfectly relevant today), along with various articles by Dr John Ball. Also the report commissioned by Plaid from Professor John Doyle who is Vice President for Research in Dublin City University. His report came to the conclusion that… Read more »
I’ve read both of John Doyle’s papers. He makes some good points to show why the fiscal deficit of an independent Wales would be lower than that calculated by ONS as the Welsh share of the UK deficit. That calculation can be criticised both as resting on questionable methodology and as assuming Wales would spend as much as the UK in areas such as the military. But Doyle also makes some implausible assumptions about English willingness to carry debt and contribute to our pensions. The eventual figure would lie somewhere between the high and low estimates. Critically, it would depend… Read more »
Hi Lyn, I hope others read the documents as well. It’s pointless making arguments when you haven’t looked at the other s ide.
Re the pensions point. I’m receiving the State Pension now. As all my NIC’s went to the Westminster government they will continue to pay that pension to me. The fact that i’d be living in a ‘foreign’ country after Independence wouldn’t matter. It would be the same as the million or so British people (including Welsh people) who are living in Spain.
John, thanks. I agree it is always a good idea to read or watch before commenting. Like you, I am now in receipt of a UK state pension. I certainly expect that pension would continue to be paid if Wales ever became independent but which state would carry that responsibility is uncertain. The analogy with Spain (on which Doyle relies) does not convince me, as both the UK and Spain were existing states throughout the working life of the British individual who has now retired to Spain. That analogy does not carry through to the break-up of a single state.… Read more »
Please note that they won’t uprate that pension… that pension remains fixed until you return to the UK.
And this is the case because the separation agreement has already been agreed ? You must have some very interesting contacts to know that will happen probably at least ten years before the break up is agreed.
The size of the deficit is important but there appears to be a consensus that there is one? The question (never answered) is how it is going to be bridged short to medium term until the sunlit uplands of the Welsh economy are realised.
Yes there would be a deficit if Wales became Independent. But the size is crucial. If it did turn out to be the £2.6 billion Professor Doyle estimates then that would be easily manageable. That would be about 3% of Welsh GDP. And there are very few countries in the world that don’t run on a deficit. The Gulf states and Norway who have money literally coming out of the ground don’t for example. Apart from countries like this the deficit is never bridged.
The UK as a whole ran a deficit of 5.3% in 24/25.
Thanks for that. But is it not the case that, short term at least, the key issue is not the ratio between GDP and the fiscal deficit; but between public expenditure and the deficit. My understanding is that a mid point between Prof Doyle and the ONS (the most likely position in my opinion) produces a figure of circa 20%. A steep hill to climb.
The basis for the Wales financial deficit is based on GERW, [ Government Expenditure and Revenue Wales ] The data contained in GERW is based, as they concede, on estimates, assumptions and adjustments. Over 90% of the figures in GERW have no audit trail and cannot be confirmed. When dealing with unreliable data, the trick is to be assured that the outcome of these calculations make logical sense. In this case Wales deficit was assumed at £13.7 billion. Over the same period, the UK deficit was £39.7 billion, which means that, if correct, Wales with 4.8% of the UK population… Read more »
I am not familiar with the figures you quote and agree they make no sense. But if there is a deficit (of whatever size and it seems there would be), I am still searching for an explanation as to how it will be managed?
The figures are publicly available. They are government figures. As for the deficit. With so little Wales specific reliable data, no one really knows if or how much any budget deficit would be. Even Prof Doyle who argues that the deficit would be as low as £ 2.5 billion, used the questionable data and the present constitutional arrangement. Not taking into account the legislative and economic levers that would be available to an Independent Wales. Before any talk of Independence, a detailed economic plan must be produced. Plaid Cymru, the so-called Party of Wales and with some aspirations of Independence,… Read more »
Fair enough. I recognise that most countries run a deficit; but my point is that if the quantum is somewhere between Prof Doyle’s estimate and the ONS, then that is about a quarter of the Welsh Government’s budget to find on day 1. It seems to me that this must involve tax increases, spending cuts or probably both.
To find a quantum of approximately £7 billion is a very big assumption. As I have tried to point out, given the reliability of the data available, no one really knows and if you are looking for certainty you won’t get it. Whether there is a rise in taxes or cuts in spending will be a policy decision not an economic one. The important criteria is the potential of an Independent Wales economy, for financing, Wales with a Central Bank and a fiat currency, will not be constrained in the amount it can raise. Although the IMF [ International Monetary… Read more »
I agree that an assumption of £7 billion is a big one; but no more or less than any other figure. So I also agree that certainty is elusive and that borrowing depends on economic performance and a credible economic plan; but there is the rub. There isn’t one – and I see little prospect of one emerging. Plaid would have to drive it; but don’t show any inclination to do so. What they have said in “Making Wales Work” isn’t such a blueprint. It’s about working in and around the existing system.
I think that there may be a change when reality hits Plaid. The polls presently show the possibility of Plaid in government after May. If that happens it will because people will support them as a least worse option, rather than because of positive policies, It will also be the case that Plaid must change the economic and public service landscape with the same restrictions on resources as the previous government. Significant change is not going to happen, can’t happen under the present constitutional system. Also it will be inevitable that there won’t be a majority government. With these pressures… Read more »
I agree with most of your analysis; but I’m far from convinced Plaid can come up with the economic/fiscal plan essential to convince the majority who are either against independence or unconvinced. Adam Price didn’t do it when leader at the last election and Rhun ap Iorwerth has kicked it all into the long grass.
I am not sure of your point regarding Plaid when you say ‘ can come up with a plan’, does it mean unable or unwilling. If the first, not on their own, but there are plenty able to , given the resources. If the second, I agree that to date they are unwilling, however I do see pressures ahead that may change that.
This assumes that England would give Wales everything we want. I don’t have such a high opinion of Westminster. Any serious assessment of the prospects of independence for Wales has to consider all possibilities not just select those that favour its case. The article contains evasions and contradictions. Just one example, it says that it wants ‘customs unions which work for the people of Wales, not only with rUK but also with the EU’. But you can’t have both! At least not unless both Wales and the other UK nations rejoin the EU. Look at the Windsor Framework for Ireland.… Read more »
The parallel with the EU exit is quite interesting. A lot of people saying before negotiations we could have this and that. In the end the EU said ‘here’s what you can have’ and we had to take it
You can have a relationship with both depending on your red lines. If you are prepared to come to trade relationships that are not blighted by one side that will continually say that Brexit means Brexit and does not accept any compromise as treacherous of course it will be difficult. Norway has a close relationship with the EU and came to a fishing agreement in 2024 and also trades extensively with the UK. They have just signed a big deal with the UK relating to their navy.
A relationship with both the EU and England would be possible but not the seamless one the article implies. Norway benefits from free movement of goods, services, capital, and people within the EU single market but that means it has to accept EU rules in areas such as product regulations or state aid. Those rules might differ from those required by England. Wales might prefer neither. Norway is not in the EU customs union, so customs procedures are still required at its border with the EU. For its own goods to be imported tariff-free into the EU, they must satisfy… Read more »
At least the far left and far right can agree on one thing.
Arm in arm, shoulder to shoulder with their rejection of the idea of Cymru ceasing to be a part of the British nation state.
I support Welsh self-determination. In some contexts independence might work. But the constraints need to be taken seriously and addressed not skated over as this article does.
Who is this far left you speak of?
Those that feel Zack’s New Greens aren’t left enough and want another party even further to the left.
No, us on the far left who think the Greens aren’t left enough, also support Welsh Independence. Authoritarians are a special breed that believes control should be centralized as much as possible.
This article by Rob Hughes, addresses points of argument against Indy Cymru made by Mike Hedges (Nation – 17 Nov). This dialogue reminds me of The Dragon Has Two Tongues (HTV 1985). Wynford Vaughan-Thomas made the case then for the status quo, and Gwyn Alf Williams the case for viewing the history and destiny of Cymru through a more radical lens. Gwyn Alf’s political philosophy not only had more evidential heft than Vaughan-Thomas’ lack of imagination in 1985, but it has much to offer today’s political thinkers. Particularly if they’re mindful of the Well-being of Future Generations (Wales) Act 2015,… Read more »
i Keep hearing and reading this that and the other i say to the English loving Welsh bootlickers firstly England has no bloody right to rule us they invaded Wales and conquered us just like the Russians are doing now no difference even if it happened a couple of years ago.To the plastic Welshman who i would call Traitors Quislings if England was keeping us the mess the Disunited Kingdom is in they would have dumped us FACT England has robbed Wales blind they take they asset strip countries look at the time of the English Empire they have asset… Read more »
Would England be able to maintain its membership of the G7, G20, and permanent membership of the UN Security Council, if the UK ceased to exist? Would England lose some of its current international influence, power and soft power if the UK ceased to exist? Does this have any bearing on why England wants to hold on to Wales, Scotland and the north of Ireland? Would the money England could save by not propping up Wales pay for the cost of purchasing Wales’ water and energy supply? Or are there any other, better reasons for England’s apparent generous philanthropy of… Read more »
When the USSR collapsed, its UN Security Council seat was effectively inherited by Russia. By the same logic, England would likely be the successor state to the UK and therefore retain the permanent seat. Northern Ireland has been a political and security headache for London for nearly a century, and while the UK would never openly admit it, the constitutional framework now recognises that Irish reunification is possible by consent. It is no longer as strategically vital to Westminster as it once was. As for Wales, London has historically shown very little strategic interest either way. The real prize has… Read more »
Even Plaid Cymru have given up prioritising independence ahead of accumulating votes from disaffected Labour Voters. I would suggest that Yes Cymru comes back in a few years because at the moment they are an irrelevance.