Monday 22 January 2007

The Price of Independence - 5

and finally

Capital Settlement
When simply considering current finances, Welsh independence looks feasible, but it is when you consider the settlement of capital assets that things start to look interesting.

There is an international law called the Vienna Convention on Successor States which to summarize states that:

Wales is entitled to receive, at no cost:
  • all immovable UK assets (eg buildings) on Welsh soil (at no cost)
  • an equitable share of all movable UK assets (eg gold reserves, military hardware etc) in line with its contributions towards them (ie taxes paid)
  • an equitable share of all UK assets overseas (eg embassies)
But on the downside, Wales would be responsible for:
  • an equitable share of national debt,but taking into account the transfer of assets and its associated debt
To put it more simply, Wales is a 5% “shareholder” in the UK and as such is entitled to 5% of government assets (and also 5% of national debt). But for practical purposes, not all assets can be transferred – eg Channel Tunnel, Windscale Nuclear facility etc and Wales would not be responsible for any debt associated with these assets. Similarly, where assets could be transferred but are not, eg Trident Submarines, then there would need to be an equivalent reduction in debt.

There would need to be some horse-trading of assets and debt, and it is likely that Wales will only take possession of say 3% of UK assets, but also only 3% of debt. This is very significant, as it would not only reduce national debt repayments but would have a direct impact on current expenditure, as it would reduce depreciation and interest payments.

UK budget depreciation was £15.7 billion in 2003/04, which would represent a cost to the Welsh budget of £0.8 billion if 5% of assets were transferred, but only £0.5 billion if 3% of assets were transferred. There would also be a corresponding reduction in interest payments across all departments, which would reduce projected expenditure by around £0.5 billion, to £20.0 Billion

Final Figures
Ok, if you are still following these threads, I predict that the Current budget for an Independent Wales (based on 2003/2004 figures) would look something like this:

Revenue - £20.4 Billion
Expenditure - £20.0 Billion
Nett Revenue - £0.4 Billion
Less Depreciation - £0.5 Billion
Surplus(Deficit) - (£0.1 Billion)

OK, these figures do not quite break even, but the deficit of only £0.1 Billion has to be compared with the current UK deficit of £21 Billion which is equivalent to £1.0 Billion for Wales.

To those of you who question whether we could afford an independent Wales - I respond how can we afford not to!!

1 comment:

Peter D Cox said...

This is a fascinating and thoughtful series of notes. I don't quite understand why it hasn't been subject to gallons of vitriol .... perhaps the anti-nationalists are a sleep, or can't add up.
The numbers seem convincing, but of course they wouldn't stand up to the efforts of a legion of Treasury number crunchers determined to prove the opposite. And that's the point: numbers are there to prove a thesis, not to help make political decisions on a rational basis. Sad, but true I feel.
If an independent Wales is a good idea, then there's plenty of evidence that in a federal Europe it could manage its own affairs. What's needed, IMHO, before working out the numbers in detail, is a clear set of principles about what independence really means - and as yet no politicians in Wales want to tackle that simple issue.