Thursday, 5 July 2018

Tidal lagoon - What's that got to do with Wrexham?

Why the Swansea decision matters to everyone in Wrexham

Guest Post by Phil Rees

Anyone who’s ever driven from Wrexham to Swansea will be very aware of the distance between us, and the decision last week by the UK government not to fund the £1.3 billion Swansea Barrage Project may not seem that relevant to us locally. But it’s symptomatic of a problem that should be of concern to us all in Wales.

The barrage scheme (to create electricity from wave power) is one the most exciting, innovative and forward-looking projects we’ve seen for a long time, not just here but in the UK, and not surprisingly it was supported by all the political parties in Wales. That though doesn’t count for much in Westminster, and it failed because the UK government didn’t see it as value for money.

The decision wasn’t an isolated one. It comes on top of last year’s decision to cancel electrification of the Great Western line to Swansea despite a strong 2015 election manifesto promise from the Tories. 

Wales will remain one of just three countries in Europe (along with Albania and Moldova) without a mile of electrified railway (although the cables on the Great Orme Railway are powered by electric, if you want to include that!)

The £5bn rail electrification project was ditched supposedly because costs had risen, but for the HS2 project (£56 billion and rising) linking Leeds and Manchester to London, and Crossrail in London and the Home Counties (£14.8 billion and rising) that doesn’t seem to be an issue.

We do get some investment here in Wales of course. We get prisons, and we get nuclear power stations - the sorts of projects the UK needs, but that nobody else wants.

But money from the UK government for projects that will improve the infrastructure and economy in Wales but that are too large for the Welsh Government’s relatively small budget (like the road from here to Swansea perhaps)? Nope. Not going to happen.

And that leaves in a bit of a hole, because those big projects are vital to the health of the economy, due to their knock-on effect. It's not just about the original investment, it’s about the way that the injection of capital filters through the local economy and re-circulates, as sub-contractors and employees of the original project spend their money in the area, and others in turn do the same down the line.

Economists argue about how much that multiplier effect is worth but it can be anything from double the original amount up to five times. It tends to be higher in a rural economy, and where an economy is not yet at capacity. So in Wales, it's likely to have a big impact. And beyond that, there can be other benefits too, because a healthy economy is then more likely to attract investment from private investors too, who want in on the action. That initial project can be the seed-corn from which everything else grows; the spark that starts a flame.

How badly do we need that sort of kick-start at the moment? Well the strength of an economy, and the standard of living of its population, is usually measured in Gross Domestic Product or GDP, per head of population. (Actually there are two measures - GDP and GVA, but let’s not go there!). And in Wales GDP per capita is just £16000 (ranging from £11,000 in Ynys Mon to £22,000 in Cardiff). 

Every region of England beats that; in South East England it reaches £25,000, and in London £39,000. Scotland is on £21,000.

Outside the UK, Ireland, similar in so many ways to Wales, but independent since 1937 has a GDP per head of around £46,000. And Iceland, with a population just the size of Leicester, is roughly the same (You may remember that Iceland was one of the countries that struggled during the banking crisis, but it was also the country that recovered quickest too). 

And every country in Western Europe, whatever their size, is performing more strongly than Wales. We need investment desperately.

So if you were managing the UK economy, and London and the South East is already the strongest region, and Wales is the weakest, where would you invest first?

The UK government clearly thinks the right answer to that is London. It has no policy to correct the huge disparity in wealth by investing in its weakest areas, and hasn't had for many years (whoever’s been in power). 

It knows, of course, that the Swansea Barrage had the potential to add around £1000 to those GDP figures just on its own (how is that not value for money?), but it chooses to use that benefit elsewhere.

Incidentally, the EU in contrast does have a policy of trying to spread wealth around. Wales has received roughly £500 million per annum from Europe (we’re a net beneficiary, after allowing for what we put in). But not only is the Conservative UK government failing to invest here, it even refuses to give a commitment that, post-Brexit, it will replace the EU money we’ll lose. It seems that’s just another opportunity for the Tories in Westminster to look after its own at our expense, and widen the gap even more.

If the United Kingdom is going to starve us of that seed-corn investment to this extent, what is the benefit of Wales remaining a member? Why continue to pay our taxes to Westminster, for them to spend on areas of the UK that are already the richest? Isn’t that like giving our pay cheque to our richer neighbour next door to manage for us, and not minding that they spend it all on themselves instead?

And here’s the thing - if our economy is already so weak, and just ticking over at a subsistence level (a kind of ‘minimum wage’) then anything we do will improve it. If we were independent from the UK, and kept our taxes here, then whatever we were able to re-invest will have a positive impact, and our standard living can only go one way. 

We can still trade with the rest of the UK, and co-operate with them in other ways, but the potential for us, when you see what other small independent countries are achieving, is enormous. The UK government are actually creating the strongest argument yet for independence. Put simply, we have nothing to lose, and everything to gain. Probably as much as £10,000 each.

• GDP figures : International Monetary Fund 2017 figures and 2015 Eurostat figures (converted at 2017 & 2015 average rates)

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