Sunday 25 February 2007

Debt Reduction through Independence

In 2006, the National Debt of the UK was £461.5 Billion, equivalent to £7,692 per head of population, or more realistically £16,193 per working population. As Wales is effectively a 5% shareholder in the UK, we would become liable for our fair share of this debt following independence, but what constitutes ‘fair’ ?

There is a piece of international law called the Vienna Convention on Succession of States in respect of State Property, Archives and Debts 1983

This is effectively a piece of international divorce law which lays down guidelines for who gets what in the event of a countries breakup, and would be directly applicable to Wales.

The first part of this Convention says that an independent Wales would receive any immovable UK assets on Welsh soil, together with related movable assets, for example the DVLA building in Swansea, together with its computers, desks, cars etc.

Wales would also be entitled to receive a proportion of the movable assets of the UK, in proportion to Wales’s contributions. If Wales has paid say 4% of the UK’s tax revenues, then we would be entitled to receive 4% of UK Gold Reserves, 4% of the British Army’s tanks etc.

The Convention states explicitly that these assets are transferred without compensation – we have already paid for them.

Now for practical and political reasons, the UK is not going to give Wales 4% of the Trident submarine fleet (currently valued at £76 Billion) even though we would be entitled to our share, so it would need to come up with some form of alternative compensation.

The Convention then goes on to say that

The state debt of the predecessor state (UK) shall pass to the successor state (Wales) in an equitable proportion, taking into account in particular the property, rights & interests which pass to the successor state in relation to that state debt.

In practice this means that if the UK was only to transfer say 3% of state assets to Wales, then we could expect to only take over a corresponding amount of debt. This would result in an overall reduction in the National Debt per head of population for Wales, with a small increase for England. This is only a statistic, but the real benefit would be in the reduced interest payments on this debt, which will have to be funded from the Welsh budget.

There would obviously be a huge amount of negotiations and horse trading to arrive at the final settlement, and anybody who has been through a divorce will now how protracted and acrimonious this can get – but one thing is clear – Wales would be financially better off following independence

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