Plaid Cymru would bankrupt an independent Wales on day one
The local elections will likely see Labour lose the grip it has held on Wales since the inception of the Senedd. If Plaid Cymru does indeed form the next government, the UK might usefully acclimatise them to what life would be like under independence, says Paul Ormerod
The swathe of local elections which are due in early May move inexorably closer. Much of the commentary around them concerns the question of whether they will be so bad for Labour that Keir Starmer will be defenestrated as Prime Minister.
Much of the focus will be on London and the other English metropolitan areas such as Greater Manchester. It is even being trailed that Labour, currently the dominant party, may even finish fourth overall in London as its vote is squeezed left, right and every which way.
Such an outcome would indeed be a humiliation. But not as great as the one which the polls are currently suggesting for Labour in Wales.
Labour has controlled the Senedd, the Welsh Parliament, ever since its inception in 1999. But this amount of time is a mere blink of the eye compared to the length of Labour’s control in the Principality. The party has essentially been the dominant force in Welsh politics for a century.
All this seems about to end in dramatic fashion. This is despite Keir Starmer eulogising the government of Wales at the Welsh Labour Party conference in 2022 as “a blueprint for what Labour can do across the UK”.
At the moment, the Senedd has 60 elected members, 40 of whom are directly elected by individual constituencies and 20 from regional areas.
Jobs for the boyos
In a nice touch of jobs for the boyos, the number will be increased to 96 in May.
The polling suggests that Plaid Cymru will easily eclipse Labour in terms of the number of seats won. Plaid will form the next government, either alone or in conjunction with the Greens. Reform is polling strongly, but not enough to win in this traditionally left-leaning country.
We are accustomed to demands for independence from Scotland. It certainly looks like Wales is going down that route as well.
To be fair, Plaid Cymru maintain that this is a long-term goal and that a referendum will be held on the issue when the people of Wales are ready. It is not an immediate, first-term priority.
It is easy to see why. An independent Wales would be bankrupt from day one.
The Welsh government is the beneficiary of great largesse courtesy of the English taxpayer. The fiscal deficit in Wales – the amount by which government spending exceeds government receipts from taxation – is over 20 per cent of GDP.
It has been around this figure for at least 15 years. The bond markets are currently nervous about the fact that public sector debt in the UK has reached 100 per cent of GDP. Simple arithmetic tells us that in Wales the figure would be at least 300 per cent.
If a magic wand were waved and Wales became independent overnight, its government would face enormous pressure from financial markets to make major cuts to public expenditure. It is even conceivable that Wales might even be forced to default on its debts given that they would be so enormous relative to the size of the economy.
If Plaid Cymru does indeed form the next government, the UK might usefully acclimatise them to what life would be like under independence.
The UK government should announce that subsidies will be withdrawn over a period of, say, three years so that by then the public sector deficit in Wales is the same as in the UK as a whole.
At the same time, the Welsh government should be given new powers to raise taxes if they wanted to sustain the current levels of expenditure.
It would be an interesting experiment, one in which we would readily discover whether the Welsh electorate felt ready for independence.
Paul Ormerod is an Honorary Professor at the Alliance Business School at the University of Manchester. You can follow him on Instagram @profpaulormerod