Wales and the Disunited Kingdom. Part 2

Wales and the Disunited Kingdom. 

Part 2.

The first part of this commentary questioned whether Brexit and the COVID crisis are hastening the break-up of Britain. The views of Gordon Brown and Tom Nairn were employed in a Welsh setting to examine longer structural weaknesses. It also studied the emergence of two opposing political tendencies in Wales; devo-scepticism and pro-independence. The conclusion examined whether Labour, as the only devolved government fully committed to the union, can sustain its pre-eminence as Welsh politics fractures and the cracks deepen across the UK state. 

One Nation?

At present, many in the unionist camp appear to have lost faith in their cause. From the Spectator to the Financial Times articles speculate on the end of the UK and pessimism deepens. The task of holding together the battered husk of the UK rests in England but it looks increasingly disinterested. As the IPPR once noted it appears to be trumped by “an Anglo-British identity in which the English component is increasingly the primary attachment for the English people”. 

The immediate battleground is Scotland and Gordon Brown is once again playing a role. In 2019 he set up “Our Scottish Future” a think-tank dedicated to promoting a solution for the union based on Devo-Max or federalism. These have equal resonance in Wales with Carwyn Jones and Mark Drakeford advocating a quasi-federal reformed and reimagined Union. This would reserve only specified powers at the centre and devolve the rest, including to a reconfigured England.

Devo-Max.

Within its parameters, Devo-Max would see Wales control everything except macro-economics, defence and foreign affairs. Currently, reserved matters such as the justice system, the police, social security etc, would be devolved. The principle of fiscal federalism could also apply. This would grant Wales a high degree of fiscal autonomy in terms of tax-raising and certainty on its spending powers. This is vital as currently a small Welsh council has more borrowing powers than the Welsh Government. In 2014 Scottish opinion polls consistently showed people more predisposed to this as a compromise solution. It is the option to date supported by Welsh Labour and would have the advantage of continuity rather than the rupture of independence.

The core problem with Devo-Max is that it ignores the English “elephant in the room”. For 85% of the UK’s population living in England, the devolved experience is a raw deal of underpowered regional partnerships led by Metro Mayors. With the possible exception of the Northern powerhouse based around Greater Manchester, the nine other combined authorities are held back by the corroding impact of austerity on local government services and lack of powers. Furthermore, the lacklustre debate on “English votes for English Laws” (EVEL) begun by David Cameron after 2014 has gone missing in action. In its absence, the English have no coherent pattern of self-government at the local, regional or national level. The English Local Government Association (LGA) can barely disguise its perception of unequal treatment, especially over the Barnett formula. Space precludes detailed discussion of this suffice it say that Barnett has a “swings and roundabouts” impact. There is an element of revenue “protection”, yet when it comes to infrastructure spending Wales does badly.

If Devo-Max was to be embraced in Wales, it creates a “West Lothian Question” on steroids. This is Tam Dayall’s provocation why MPs in devolved nations have the same right to vote on English only laws now that large areas of policy sit outside the remit of Westminster. Any recalibration of the Union creates tension within Conservative ranks. Devo-Max is an issue that could push the Conservatives into adopting a more overtly English, rather than Unionist stance. Writing on Conservative Home, John Redwood MP’s tone speaks volumes when he urges believers in the Union “to end appeasement of separatist movements by offering additional special powers to the parts of the country”. This sentiment chimes with the Conservative narrative for a Global Britain to break with its membership of the European Union has been exclusively centred on returning sovereignty to the Mother of Parliaments. 

A Federal UK?

Some have sensed that Brexit offers up a different prospect. Sir Keir Starmer argues that only a federal structure can repair the shattered trust in politics. This has been embraced by a number of Labour Senedd members and is also the long-held position of the Liberal Democrats. Federalism has an impressive track record in countries like the USA, Germany and Canada. It is often seen as the meeting point between unionism and nationalism. Federalism follows as a mode of political organization that unites separate states within an overarching political system in a way that allows each to maintain its integrity. Federalism has significant advantages over a Devo-Max approach. Under the current system, the primacy of the UK Parliament means that it retains the theoretical sovereign power to dissolve any of the devolved institutions it has created. Loud alarm bells are currently ringing across Wales and Scotland on the proposals from Westminster to secure a UK internal market. The Welsh Counsel General describes this “as an iron fist which threatens to smash devolution apart – and with it the United Kingdom itself”. A federalist structure would lock in key safeguards against such encroachment. 

Federalism sets out the central principle of a formal division of sovereignty between two levels of government. This goes beyond contested guarantees on reserve powers to a system of a legislative authority that rests with an institution unless it is not explicitly stated otherwise. Also, it lays down that the agreed division of powers between the federal government and sub-state governments cannot be altered without the latter’s permission. Federalism’s strength is that it delivers permanence, underpinned by a written constitution and subsidiarity with decisions taken at the appropriate level of governance. Comparative Federalism has a pedigree to suggest it either as a staging post or a possible destination in tackling the UK’s constitutional crisis. Writing for the IWA, Glyndwr Cennydd Jones asks, “whether the more constructive elements of the political spectrum from nationalism to unionism, (can) find some common ground, if not a strategic compromise, in the broad principles of confederal-federalism”? 

While the appeal of federalism is obvious so are its many problems. The geography, identity and size of England is again the Gordian knot. In her book “Acts of Union and Disunion” historian Linda Colley contends “the lack of an (English) organisation fuels resentment and makes Westminster appear by default as the English Parliament”. So how do you create balanced federalism within the UK? Would you have a single English Parliament, regional assemblies or empower an emaciated local government. Some have proposed using the House of Lords as a regional chamber or setting up an English Grand Committee. Perhaps the biggest problem is to detect any real appetite for such political institutions amongst sceptical English voters. John Prescott’s plan for regional assemblies starting in north East England in 2004 led to a 78% rejection of devolution. As a political rallying cry, the demand for federalism scarcely sets voters pulses racing. The think tank “Our Scottish Future” accepts that “Labour’s preferred constitutional option of federalism has limited cut-through with the population or buy-in from either side of the debate.” Why would it be any more popular in Wales with an electorate already indifferent to the mechanics of the devolution journey to date? 

The real weakness of Federalism is when it collides with political reality. For the Conservatives, the commitment to Euro-scepticism and a sovereign parliament has become an article of faith. Embracing a federalist model intrinsically linked to the European continent is a complete anathema. David Melding’s enthusiasm in Wales finds few supporters in his own party. At the other end of the spectrum is the position of Nationalist parties in Scotland, Wales and Ireland. Especially for the Scots, in touching distance of their historical objective of independence, this option is a sideshow. One Scot MSP has mockingly derided federalism as “Brown-hog day” an insult sure to resonate. For these parties, the embrace of an option that relies on Labour winning a general election at some unspecified point in the future would be a form of political altruism. If that was to occur why would Welsh Labour MPs, notoriously ill-disposed to devolving further powers to Wales, embrace an option that travels further down the “slippery slope” to secession? 

Former First Minister, Carwyn Jones has accepted that “there was no future in “England and Wales” if Scotland and Northern Ireland leave the UK”. Thus, while federalism could be an option for four nations when applied in two nations it is essentially a political wooden spoon. It creates a minnow of three million people swimming with a whale of fifty-six million. The idea that in a Wales and England confederation, the smaller nation could temper the disproportionate effects of decisions made in the larger nation is political naivety. In “Empire and Union”, Tom Nairn observes that “English domination of the British Isles was a mixture of commanding geography, overwhelming demography and economic power”. Remove Scotland and Northern Ireland, then Wales becomes the rump nation of a lesser Britain.

The Act of Disunion – Welsh Independence.

The idea that an advanced nation such as Wales could not be independent is illogical. For example, the last thirty years have seen the break-up of Yugoslavia and the leviathan of the Soviet Union. Numerous small independent states have emerged. Some like Croatia, Slovenia, Estonia and Latvia have been hugely successful. Others like the Ukraine and Belarus have been racked with conflict. The point, however, is that they exist as sovereign states. 

In their book “Why Nations Fail’ authors Daron Acemoglu and James A. Robinson highlight the example of Botswana (pop 2.3m) which won its independence in 1966. At the time it had just 22 university graduates, seven miles of paved roads and lived in the dark shadow of the apartheid regime in South Africa. Today Botswana has “the highest per capita income in sub-Saharan Africa”. Contrast it with the Congo made independent in 1960. A state historically burdened with a corrupt political class, mass ethnic conflict and exploitative economic class relationships. What explains this disparity? The authors’ answer is the presence of a sophisticated societal backdrop displaying political, social and economic maturity. At the heart of this are “institutions, institutions, institutions.” Botswana holds regular elections, enforces property rights and the rule of law. Inclusive governments and institutions mean prosperity.

Wales is a modern democracy and economy, comprising a sophisticated electorate, a complex level of public services and a resource-rich natural environment. The oft-quoted indictment against Scotland that it is “Too wee, too poor, too stupid” to be independent also reverberates this side of Offa’s Dyke. Equally the fundamental question how to account for the Welsh economy’s persistent failure to improve its relative economic performance within the UK structures. Far to often the primary unionist narrative is of the condescending “be thankful for what you get” variety. But does the fact that Wales could be independent means it should be independent? 

With growing supportive opinion poll numbers varying from 25% to 32%, the cause of independence has achieved political lift off. The dismissal of independence as a fringe cause is no longer justifiable with the centre of gravity discernably shifting. However, majority support for the UK settlement remains vigorous. A Panel Base poll in August 2020 showed Wales as the most unionist of the four “home” nations with 68% opposed to independence. Certainly, with the vibrancy of Yes Cymru significantly impacting on hearts and minds this could change over time. But as the Peoples Vote campaign showed demonstrations and social media campaigning rarely capture the wider mood of the electorate. This may materially change if Scotland gets #indyref2 plus Ireland moves towards a border poll in the next decade. 

Whilst there’s much more to nationhood than money inevitably the arguments for independence centre on economics. There is a propensity from some supporters to attempt to cast this process as cost-neutral. For instance, trade-offs between reducing defence spending as opposed to additional costs on public expenditure. The honest position is that the economics of independence is a known unknown. Baselines are crucial in this respect. Nearly all statistical data shows that the Welsh economy and tax base is far weaker than that of the UK. As a whole redistribution within the Union does produce an economic benefit. A report for the Cardiff Governance Centre shows that in 2016, the gap between tax revenue and public spending has decreased in Wales, from £14.7bn, which is 24% of GDP, to the current figure of £13.7bn, which is 19.4% of GDP (it is worth noting that the reduction in the deficit comes from spending cuts). This figure compares with a deficit of 2% of GDP for the UK as a whole although this is pre-COVID. Latest OBR figures show the UK’s budget deficit spiking at almost 19% of GDP in 2020-21, or £372 billion in cash terms. It would be surprising if the current Welsh deficit does not follow a similar upward path. 

The Fundamentals.

None of this means that Welsh independence is unworkable. What it recognises is that an independent nation would face multiple and complex challenges in closing the deficit gap. It also entails being upfront on cost-benefit analysis. For example, if Wales wishes to deepen its social democratic culture it will come at a cost. Modelling itself on the Scandinavian countries would mean that tax levels will have to rise. These countries are well-known for their broad social safety net and their public funding of services. Their tax to GDP ratio is much higher than the UK’s 33.5% to pay for this. Alternatively, Denmark is 44.9%, and Sweden 43.9%. This is a key measure of a nation’s tax revenue relative to the size of its economy.

Different paths to independence could be followed and as Neil Davidson argues “there is nothing intrinsically progressive about statehood”. Ireland is often quoted as a model for Wales but the birth of Ireland’s “low-tax” model means its tax to GDP ratio is a lowly 30.8%. The emergence of so-called “Leprechaun economics’ is another factor. Ireland relies on a neo-liberal model of low corporation tax and aggressive “tax haven” schemes for economic growth. This is not a million miles away from the vision of Brexiteers for a deregulated “Singapore on the Thames” laissez-faire economy.

The other salient point is that England directs the UK currency union. Setting monetary policy is controlled through the Bank of England as the central bank with the UK Treasury setting the direction and managing public spending. Wales and Scotland currently have none of these mechanisms. Establishing them comes at a cost particularly if Wales determined to create a dedicated currency and a financial reserve. Alternatively, Wales could follow the controversial “Sterlingisation” policy supported by the SNP and seek to retain the pound subject to the agreement of the Treasury. There is also the question of whether Wales would seek to rejoin the EU and the single market. These are first-order technical/fiscal decisions requiring high levels of monetary policy expertise. Likewise, ensuring that tax revenues flow and credibility is established with money markets to allow for borrowing. Scotland has a long, rich history in the financial sector, Wales has minimal institutional experience in this respect although the establishment of a Welsh Revenue Authority is a pointer for the future. Whatever the case the prospects of the devolved Welsh Civil Service negotiating with the UK Treasury on their fiscal territory will require those in Cathays Park to punch well above their weight.

This shows the complexity involved in disengaging from a multifaceted modern state build on integrative ties stretching back over hundreds of years. Similar impacts cut across the gamut of systems architecture required for nation-building. This includes legal, welfare/social security, defence, pension liabilities, national debt etc. There is also the issue of the future of Welsh based UK institutions like the DVLA, Royal Mint and National Statistics Office. Work undertaken on transition costs for the SNP Sustainable Growth Commission by Professor Patrick Dunleavy suggests that setting up an independent Scottish state would be about £450m. Older 2014 estimates from Oxford Professor Ian Mclean are much higher at £1.5bn to £2bn. This accounting for the large set-up costs that would incur after independence in the areas of tax collection and benefits distribution. The UK Treasury estimate comes in at £2.7billion but is contested by the SNP. In Wales, more detailed work is needed on these issues, especially the range of disentangling costs e.g. new central departments, new IT systems, asset transfers, disaggregation of “Welsh” employees etc. 

While none of this is insurmountable it should sound a note of caution to those calling for the dissolution of the union as a form of instant political gratification. It is not “Project Fear Cymru” to recognise that Welsh Independence could take years and require a protracted transition period. Shrewdly, Yes Cymru as a campaigning movement places its primary focus on the emotional and patriotic dimensions of independence. However, the economy of an independent Wales will be the central battleground for pro-unionists. In Scotland, the SNP recognises that it is on the terrain of economics that independence will be won or lost. As a result, they have published a “Growth Commission” report on the economics of an Independent Scotland running to 354-pages and with 50 recommendations. Plaid has recently announced its own Independence Commission to perform a similar role.

Conclusion.

Ultimately it is for the Welsh people to decide whether an independent Wales or remaining in the Union can provide a safe, secure and economically prosperous way forward for this small nation. Albeit after two decades a sizeable minority of Welsh people are yet to be persuaded of the value of the existing devolution settlement. Welsh politicians should reflect long and hard at this, for it is a significant failing. 

If the Welsh people are lured by the Anti-Assembly narrative and seek to revert to direct rule, then Wales would finally disappear into a bowdlerized Britain. The thought of a historic nation repudiating its democratic rebirth would be a crippling setback and an almost unique rejection of political modernity. Following the 1979 referendum devolution defeat, Gwyn Alf Williams puzzled how “the majority of the inhabitants of Wales are choosing a British identity which seems to require the elimination of a Welsh one”. This sentiment would spiral into historical farce if the current curtilage of Britain ceases to exist. Bleakly trying to preserve a singular union of England and Wales would fracture the Welsh nation irredeemably. 

Historian Martin Johnes writing in the Western Mail is surely right that “unless we debate both the principle and the practicalities of independence, then we could find ourselves having to play a very rapid game of catch-up”. The statistics of opinion polls are always interesting, but they are not the gospel truth. Only one poll will ever matter and that still looks a distant prospect. At the same time, the dislocation of the union goes beyond the pandemic and Brexit. In his book “After Britain”, Tom Nairn nailed this for “it is not devolution which is the famous “slippery slope” – it is the defective constitutional support structures of the United Kingdom identity and state themselves. These structures were not timeless wonders”. Because of this, the task ahead is a strategic one dominated by an overriding objective. Wales must work out what sovereignty in all its dimensions means for a small country in the 21st century.

Steve Thomas

@stevethomas100

Disclaimer: All views/opinions set out in this commentary are solely those of the author and are written in a personal capacity. 


This is a companion discussion topic for the original entry at https://resetcymru.wordpress.com/2020/09/13/wales-and-the-disunited-kingdom-part-2/