Welsh imperative to be an on-shore Jersey

What follows is based on the assumption that, as a result of the decision taken in 1997, Wales is on the path to some form of independence, or at least a substantial amount of autonomy – absolute independence being a meaningless concept in the global economy. This assumption is based on the observations that (i) the Assembly, like all political organisations, will tend to augment its own power and status; and (ii) there is no seriously organised opposition to it doing so either in Wales or Westminster.

On the Right of Welsh Politics   This is the third in a three-part series in which a former activist provides an insider’s account of the fortunes of Conservatism in Wales.

Many support this because they make a further assumption, that an independent or autonomous Wales is more likely to adopt leftist policies than the rest of the United Kingdom. Many oppose it because they make exactly the same assumption, and fear Wales will come to resemble one of the less reconstructed former Soviet Republics, complete with one-party state.

Yet there are two scenarios in which the first assumption proves accurate but the second might not.

In the first scenario, the notion that with greater power comes greater responsibility prevails. That is to say, as Wales gets closer to independence, socialist fantasising gives way to a more realistic attitude.

The second scenario, unhappily the more likely, is that a newly independent or autonomous Welsh Government attempts to establish a socialist fantasy, However, that quickly proves a disastrous failure, and external and internal pressures force a complete change of direction.

In both cases, the reality is that you cannot have an independent state, or anything like it, in which a private sector consisting of one third of the economy has to generate the wealth to support a public sector consisting of two thirds.

So the great irony of Wales’ move towards greater independence is that it increases the need for policies to develop the private sector – policies some in Wales like to characterise as ‘right wing.’

This leads to an even greater irony. An independent or autonomous Wales would have a greater need of input from what is commonly considered the political ‘right’ an influence that is currently confined to an alienated minority in Wales. The truth is their influence would increase alongside the growth of Welsh autonomy. Those currently labelling themselves as Welsh Nationalists and as Conservatives might come to need each other more than either would currently care to admit.

The greatest irony of all is that if Welsh nationalism and the political ‘right’ could become more open to each other, then the whole cost-benefit analysis of Welsh independence or autonomy might change completely.

As far as nation-states go, big is no longer beautiful – if it ever was. Large populations are no longer required to fight wars or provide industrial workforces. On the contrary, a glance at GDP per head figures shows that small nations in Europe can do very well for themselves when they adopt free market policies. There is no reason why an independent Wales has to be Moldova. Why not become Switzerland?

The greatest obstacle is the hysterical reaction from many parts of Wales’ political class to the very mention of the words ‘free market’. Hyperbole cuts in immediately – sweat shops, strip mining, people starving to death under bridges, and so on.

This ignores the basic fact that the ‘free market’ is not an ideology but nothing more and nothing less than a description of the most efficient method of generating wealth ever discovered. It should go without saying that it can only exist within a moral, social, political, and environmental context.

The business community are not made up of anarchists. Far from opposing any legal restrictions on markets, they tend to be strong supporters of the principles of law and order. What they do ask is that laws should only be applied for honourable purposes, that they should be as un-intrusive as is consistent with those purposes, that they should be clear and simple and as few in number as possible, and that they should be enforced consistently, fairly and sensibly. The same should be true of all laws, not just those relating to business.

If an independent or autonomous Wales could do no more than follow those principles, we would have an immediate competitive advantage.

One cannot, of course, ignore the fact that tax policy is a key element in the success of small nations. High taxes establish a vicious circle, driving out entrepreneurs and businesses, and reducing the tax base, so that taxes remain high or public services are cut or both. Low taxes generate a virtuous circle, attracting entrepreneurs and businesses, and increasing the tax base, so that there is more for tax cuts or public spending or both. The economic potential of an onshore Isle of Man or Jersey only two hours by train from the City of London is too obvious to ignore.

Yet Wales should aspire to be more than a tax haven. One of the lessons of Ireland is that low business taxes can bring impressive short-term benefits, but they are not enough on their own. The opportunity should be taken to build a comprehensive enterprise culture that involves the whole population.

A simple flat-rate tax system, linked directly to a similarly simplified benefits system, would be the most effective way of encouraging risk and initiative at all levels of income. But it would be especially important for those caught in the ‘poverty trap’, wanting to work or work more hours, but currently discouraged by the possibility that loss of benefits and additional tax would be greater than any additional income.

On a broader level, it is very regrettable that more has not been done to implement some of the measures recommended almost twenty years ago in the Institute of Welsh Affairs’ own Wales 2010 report to develop enterprise culture in both private and public sectors. It is typical of Wales that the announcement of the Williams Commission on public service delivery, where reform is long overdue, made a point of excluding ‘market’ solutions. Most countries find that cooperation between the public sector and local businesses benefits both. Places with underdeveloped business sectors tend to have poor public services. Wales needs to catch up with modern thinking.

In principle, there is no reason why an independent Wales could not survive and thrive. In practice, our great problems are our lack of a strong business leadership class and the blind dogmatism of our political class. If we could overcome those problems, many who are today unionists today might tomorrow become the most fanatical of Welsh nationalists.