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YesCymru Milford Haven - Welsh share of UK debt

Last week, we discussed the Welsh economy and alluded to the subject of UK debt. 

This week, we will elaborate on these points and briefly examine how our share of the UK debt may – or may not – impact Wales own hopes for independence in the future.

According to the Office for National Statistics, it was recently reported that UK public sector net debt (excluding public sector banks) was £2.387 trillion at the end of June 2022, amounting to 96.1% of GDP. 

While this is a fall of nearly 8% compared with November 2021, it has previously been reported that UK national debt has been rising at a rate of over £5,000 per second. 

While the Covid-19 pandemic has certainly contributed towards the deficit, it is worth noting that UK National debt had already reached £1.838 trillion by the end of 2018. 

While UK debt levels are dwarfed by the likes of the United States (which has a GDP of more than five times the size of the UK), Spain and France; UK national debt is higher than that of Germany at £2.291 trillion, which accounts for 59.81% of German GDP. 

Opponents of independence cite Wales’ fiscal deficit of £25.9bn (around -18% as a percentage of GDP) as obstacles to independence, however they fail to acknowledge that some of the world’s major economies run large deficits. Few countries run a surplus, and the UK has not done so since 2001. 

Moreover, Welsh revenue (which includes NET VAT, income tax and National Insurance contributions) is collected on a UK level. 

According to Professor John Ball, estimates are used to calculate the final figures may also be impacted by time lags in the collection and reporting of taxes. Furthermore, an independent Wales could plug some of the deficit with taxation powers. 

We might also consider that taxes raised from the proceeds of water and renewable energy extracted from Wales, go straight from private companies to the UK treasury. 

The argument therefore, that Wales cannot “afford” to be independent is a misleading one. 

However, what of Wales’ share of the UK national debt, and would Wales be expected to take some of this on post-independence? 

This very argument was cited by opponents to independence in the run-up to the 2014 Scottish independence referendum. 

Indeed, only this year it was reported that an independent Scotland could face a £181bn bill for its share of national UK debt. 

However, this has been disputed by Professor Matt Qvortrup – a global expert on referendums, who has cited a UN convention on the matter which has never been ratified. 

The likelier scenario is that this would be a point of negotiation. 

One factor in such a negotiation should take account of the fact that the UK has full taxation powers – Wales and Scotland do not. 

Debts have historically been – and continue to be – incurred on behalf of the devolved nations by the UK Government.  

Furthermore, Wales and Scotland have not directly profited from the revenues of coal, water, renewable energy and North Sea oil. The UK treasury has. Any such considerations would likely be raised in discussions surrounding a post-independence settlement. 

As shown in our columns in recent weeks, Wales is not too small or too poor to become independent, and supporters of independence must continue to sell the potential economic benefits and opportunities that Wales could reap with independence. 

This is an article written by Maria Pritchard of Yes Milford Haven and published in the Pembrokeshire Herald newspaper on 02.09.2022

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