One of the key reasons for independence is the belief that it can kick-start the Welsh economy, expand the tax base, and ultimately improve the quality of life for people in Wales. At present, we are forced to choose between cutting spending and raising taxes.

YesCymru believes independence will allow Wales to unlock its full economic potential, creating a more vibrant, diverse, and adaptable economy that is better prepared for the challenges ahead.

We wouldn’t face these challenges alone – and we wouldn’t overcome them alone either.

Too Small; Too Poor

A common argument against independence is that Wales, with its population of 3.16 million,^[7] is "too small" to be independent. But within Europe alone, there are 18 independent nations with smaller populations. Some examples include:

• Lithuania – 2.7 million
• Slovenia – 2.1 million
• Latvia – 1.8 million
• Estonia – 1.3 million
• Cyprus – 1.26 million
• Luxembourg – 672k
• Malta – 535k
• Iceland – 375k

What these nations share – and what sets them apart from Wales – is not their size or the abilities and talents of their people, it’s the fact that they are sovereign nations with full control over their economies.

Looking closer to home, the Republic of Ireland is a striking example. In 2021, the Republic of Ireland had a GVA per head of €81,573^[8] – significantly outperforming Wales, which had a GVA per head of €29,884.^[9]

Being small can also be an advantage. In their essay The Flotilla Effect, Adam Price and Ben Levinger identified several economic benefits that smaller nations enjoy. These include:

• Being more open to trade.
• Fostering greater social cohesion.
• Better democratic decision-making.
• Greater flexibility in adapting to economic shocks.

Ireland and Iceland were hit hard by the 2008 financial crash, experiencing severe economic downturns. Yet within a few years, Ireland’s growth outpaced most of Europe.^[10] Despite Iceland’s population being similar to that of Cardiff (383,536)^[11] and the collapse of its banking industry, its economy recovered within three years. Iceland’s success was partly due to its decisive response: unlike the UK, it punished reckless bankers, implemented major financial reforms, and used its own currency to stabilise the economy.^[12]

Since the end of the Soviet Union, all three Baltic States have demonstrated their ability to be nimble, effective, and outward-looking players on the world stage, outperforming many parts of Western Europe.

After regaining independence in 1991, Estonia has emerged as one of the world’s leading tech nations. This success was achieved through simplified tax laws that make it easier for companies to comply with regulations, and a strategy focused on digital innovation^[13].

What might Wales look like today if we had gained independence in 1990? The Flotilla Effect explored this question in detail and concluded that, had it happened, the Welsh economy would be 39% larger than it is today.

Control Over Our Economy

Independence wouldn’t instantly make Wales wealthier, but it would give us the economic tools we currently lack.

The Welsh Government currently has minimal powers over taxation and borrowing. The powers it does have are restricted to ensure England is not disadvantaged. For example, the UK Treasury has blocked Wales from setting its own Air Passenger Duty because it could make Cardiff Airport more competitive than Bristol Airport.^[14] 

For the most part, the UK Government provides the Senedd with an annual grant, which the Welsh Government uses to fund Welsh services. This arrangement means that Welsh economic policy is shaped by UK-wide priorities rather than Welsh needs, preventing Wales from working to our strengths.

Independence would change this. Wales would gain full control over:

• Taxation and tax collection – preventing the super-rich from avoiding tax while ordinary people pay their share.
• Simplifying the tax code – reducing loopholes exploited by large corporations.
• Regulating its own financial sector – ensuring the economy works for everyone, not just banks and those at the top.

For context, the UK tax code has 17,000 pages (of which only 6,100 are active laws)^[15]. In contrast, Hong Kong’s tax code is under 300 pages, and Norway publishes all tax returns for full transparency. None of these reforms are possible under devolution, but all would be within reach in an independent Wales.

Learning from Iceland

An independent Wales could reshape its financial system in a way that prioritises ordinary people. It can be designed to prevent reckless speculation and protect working people from another financial crisis.

When the 2008 banking crisis hit, the UK Government bailed out the banks, passing the burden onto taxpayers. No bankers were held accountable for gambling with people’s money. Iceland took a different approach. It jailed 36 bankers^[16] and corrected over-inflated mortgage debts. By 2018, Iceland’s economy had fully recovered.

Building a Stronger Economy

Independence would allow Wales to take charge of its own economic future. This includes:

• Investing in major infrastructure projects, like broadband and transport.
• Developing large-scale renewable energy, by taking control of the Crown Estate.
• Attracting high-tech industries, making Wales a hub for innovation.

Of course, independence isn’t just about money. A strong economy should reflect our national values – tackling climate change, promoting social justice, and ensuring a high quality of life for everyone in Wales.