The idea that independence for Wales or Scotland must be mandated by a referendum has gained currency and become most people’s assumption, but there’s no legal or historical basis for it. If we want independence, growing the economy matters far more than winning a referendum.
In 1956, Malta voted for full integration into the UK by a margin of 77% to 23%; eight years later it voted for full independence by 54% to 46%. We can’t guarantee the same outcome in Scotland.
The role of a referendum
There was no referendum in the case of Irish independence in 1922, nor in the cases of Canada, South Africa, Australia, or New Zealand, the latter being in 1947. In fact, of the 62 countries that became independent from the UK since the second world war, Malta was the only one to vote on it.
More recently, there were no referenda when the Baltic states left the Soviet Union in 1991, nor when Slovakia separated from Czechoslovakia in 1993. According to House of Commons research, “as a matter of law, a referendum is not required for Scotland to become independent”.
The normal process for a country to become independent is that a negotiated settlement is reached between a recognised entity (a government or other legitimate representative) from the new country and the government of the former ruler. Occasionally – as was the case with Norway’s independence from Sweden in 1905 – a referendum is held after the agreement of independence terms in order to validate the outcome. But even this is the exception rather than the rule.
The important elements are:
- The applicant country has an entity to represent it with sufficient authority, moral and legislative, to be regarded as speaking legitimately on its behalf.
- That entity has a sufficiently strong negotiating position that it can obtain a settlement on all the relevant matters – such as debt, currency, trade, and security – so the new country can function practically once independence is obtained.
Wales catching up
In Scotland’s case, the first is clearly fulfilled. No one can seriously argue against the assertion that the SNP government, whatever its failings, is the legitimate elected government of Scotland. In the case of both countries, however, the second is clearly lacking. Under current circumstances, both countries have a large fiscal deficit which leaves them dependent on subsidies from English taxpayers in order to cover public sector expenditures.
Therefore, the real requirement for Scotland and Wales to achieve independence has nothing to do with winning a referendum. It is for Wales to overthrow Labour and elect a pro-independence government, and for both countries to achieve a level of economic growth – exceeding that of their expenditures – that will close their fiscal deficits.
Scotland has the advantage over Wales so far, having already overthrown Labour. Opportunities like 2007 don’t come along often. Plaid Cymru’s caving-in to Labour, then doubling down after the 2021 election, has left Wales playing catch-up.
It’s been shown that Labour can be beaten in Wales by an insurgent right-of-centre party. In the Euro elections of May 2019, the Brexit Party were clear winners and Labour was pushed back into a distant third place.
However, this came about due to a very specific set of circumstances. The Conservative Party was in disarray and not seen as a serious threat by those who’d normally vote Labour just to keep them out. Labour itself was in disarray, over Brexit. Unlike in 2007, there was a widely known right-of-centre party that wasn’t the Conservatives and had an upbeat, positive message. Who’s to say when similar conditions may arise again?
Wales has the edge
If a pro-independence government is to have legitimacy, it should endure for more than a single electoral term and be seen to improve conditions during that time. The best way to ensure that is to have more than one pro-independence party, and for at least one to have a clear centre-right pro-business attitude. Then, even if public opinion shifts between left and right as economic conditions change, voters aren’t forced to choose between a single independence party that may not suit their economic aspirations, and one or more Unionist parties that might be a better economic fit.
In this respect, Wales has a clear advantage over Scotland. We’ve already developed a multi-party independence movement, with clear distinctions between party policies. Both of the main ones are grassroots parties with elected representatives.
I’ve written about the essential difference between ‘grassroots’ parties, formed from the ground up to occupy part of the political landscape that was previously unserved, and ‘top down’ parties formed around established politicians who fall out with previous parties and form a new movement around themselves. The latter almost never succeed; even when they do, they seldom take on a life of their own separate from the founding personality. New parties that become established over the long term are almost always ‘grassroots’.
In Wales, Plaid Cymru and Gwlad are classic grassroots parties, yet appeal to very different voters: Plaid to the left, Gwlad the centre-right. Scotland lacks this degree of roundedness. While there are other registered pro-independence parties, they are of the top-down variety like Alex Salmond’s vehicle Alba, whose differences with the SNP are more personal than political, or micro-parties like the Independence For Scotland Party and Scottish Libertarian Party (who have yet to win an election).
Grasping the nettle
Despite Scotland’s head start, Wales is in a better position to build an enduring independence movement, which will succeed if it can grasp the economic nettle. Any aspiration for independence that doesn’t address economic independence – for the country to pay its own way in the world – is pie in the sky. Any independence party that doesn’t place this front and centre within its policy platform isn’t worth the name.
There’s no denying this is a conundrum. Although it’s hard to find an independent country that hasn’t performed better economically after independence than before, in most cases this involved short-term economic pain.
Regarding independent countries in central and eastern Europe, the overriding lesson is that those which grasped the nettle and went for full structural reform quickly, such as Poland and Estonia, performed much better than those with a slower approach, like Romania and Bulgaria. Yet even the latter grew much more quickly than Wales over the last 30 years.
The only way to avoid economic pain after independence, however short-term, is to ensure the country’s budget is as balanced as possible, with public expenditure closely matched to tax receipts. Without this, the country has two equally unpalatable options:
- Borrow from international markets in recognised currency – pounds, dollars, euros – by issuing bonds. If the country can’t provide evidence it has enough tax receipts to repay, lenders will demand punitively high interest rates to guard themselves against the risk of default. If these prove unaffordable, bankruptcy results.
- Introduce a new currency and trade with it, the government effectively borrowing from itself (via its central bank) by printing extra currency as needed. If the amount printed exceeds the value of goods and services generated by the economy, the currency’s value will crash, leading to hyperinflation and an inability to import essentials like food and medicine.
Red herrings
The second option at least has the virtue of making the country’s exports more competitive, stimulating investment and helping the economy to recover. But it’s still a painful way of doing it.
The headline fiscal deficit Wales has at present is around £14bn per annum, or 20% of GDP. When this uncomfortable fact is raised, responses are often unconvincing.
“Every country in the world runs a deficit.” True, but most countries only have deficits of a couple of percent. The EU requires newly-joining countries to adopt the Euro as their currency, which in turn requires a deficit of <3%. Even EU countries with the highest deficits at present (Malta, Latvia, Greece, Italy) don’t exceed 8%.
“We’ll get a fair price for selling our water to England.” True, but this will raise at most £400mn per annum, leaving another £13.6bn to find from somewhere else.
“We won’t have to pay pensions to English retirees living in Wales.” Also true, but we would have to pay the pensions of Welsh retirees living in England and, when you do the maths, savings would be of the order of £100mn (£0.1bn) per annum or less.
Middle column policies
Really and truly, then, there’s nothing for it: the deficit has to be closed by old-fashioned economic growth: producing more than we do at present, and ultimately producing more than we consume. An impossible task? There are important things to remember.
Wales hasn’t always had a deficit. While proper figures aren’t available for all past years, we know for sure that Wales heavily subsidised the rest of the UK until at least the 1960s, and was still close to breaking even when devolution began in the late 1990s. The current deficit is the result of deliberate Labour Party policy since that time, at least in part motivated by a desire to tie Wales closer to the UK.
The miracle of compound interest means that, once an economy starts growing, large deficits can close surprisingly quickly. Welsh economic growth since Labour took control in 1999 has been, in real terms, around 0% per annum. Over the same period, independent countries of similar size with free-market economies have tended to grow at rates between 2% (Finland) and 7% (Ireland and Malta). It’s surprising, but if we could grow tax revenues 2% faster than we increased expenditure, it would only take 8–9 years to close the gap – far less than the 25 years it’s been growing for.
Which is easy to say, but … how? This is where we come to what we in Gwlad call the ‘middle column policies’, since our Manifesto is laid out in three columns. On the left, the problems that need to be addressed; on the right, our aspirations for post-independence; but in the middle, the nitty-gritty things to be done in the meantime.
What we can do
The last thing Wales needs is detailed top-down economic plans for micromanaging every aspect of the economy: they don’t work. But we can:
- Shift the focus for investment support from overseas firms who’ll be here today and gone tomorrow, concentrating resources into home-grown Welsh businesses who’ll stay and grow for the long term.
- Lower the barriers for people who want to become self-employed or employ other people for the first time.
- Address the fact that one of the biggest difficulties facing high-value Welsh businesses is the recruitment and retention of qualified staff. Expanding travel-to-work areas as far as possible, rather than starving road and rail of investment, is vital.
- Place the emphasis on encouraging long-term, well paid jobs in skilled manufacturing or white-collar industries.
- Most importantly, remember that often the best thing a government can do to promote growth is get the heck out of the way and leave it to people who know what they’re doing.
And frankly, if we’re not doing these things, we’ll be in deep trouble even if Scotland votes ‘Yes’ in a referendum, let alone ‘No’. So the sooner we start the better.
