Croeso i Gymru?

THE better-than-expected third quarter Gross Domestic Product (GDP) figures released last month may have provided some small crumbs of comfort for the UK economy, but in Wales we remain in the dark over the economic picture on our side of Offa’s Dyke.

GDP is calculated on a quarterly basis at UK level.  It’s a measure which has many critics.  It is a blunt measure and it does not take into account the domestic economy (“free” work in the home or for the family), the underground economy, environmental degradation, insecurity or internal inequalities.  Furthermore, since GDP is a measure of production it does not tell us who gets the profits.

That said, GDP is undeniably a highly influential economic barometer.  It decides whether an economy is in recession or not.

There are plenty of people calling for alternative economic measures which can show a population’s wellbeing, sustainable development and progress towards equality and I would support them.  They may be unsubtle, but for the time being, GDP figures are important.

Welsh GDP figures are published, but not on a quarterly basis and very out-of-date.  The latest GDP figures for Wales, which are calculated by the statistical office of the European Union, are done on an annual basis and are three years’ old by the time they are released.  Therefore, in February of this year GDP figures for Wales were released relating to 2008.  This is not acceptable to Plaid Cymru, which is why we have called for the figures to be made available at the same time as the UK figures, as they are in Scotland. While the Welsh Government stubbornly adheres to its preference for the Gross Value Added (GVA) indicator (which does not take into account taxes on products or any subsidies going in), it is nigh on impossible to show whether or not Welsh independence is “unaffordable” as many claim.

But more importantly in the short term is the fact that we cannot tell whether Wales is in a recession or whether we were ever been lifted out of recession since the implosion of the money markets in 2008.  Given that our GVA and GDP figures are produced annually, it is impossible to officially state that Wales has ever been in recession, given that two or more consecutive quarters of negative growth are needed to come to such a conclusion.

An experienced business leader recently told me in a private conversation that he was convinced that Wales is in recession right now.  He may indeed be right, but with our current reliance on annual GVA figures, no-one knows.  There are strong suspicions that the UK is not officially in recession because the economy of London and the south east of England is out-performing every other part of the UK and that these historically affluent areas are masking the economic woes of the rest.

For the propped up, tax-payer-bailed-out banking sector which is concentrated in the London area, it has been business as usual since the 2008 financial meltdown with high wages and bonuses, but not when it comes to lending to small to medium sized businesses.  The near-freeze on borrowing to small businesses has had a huge impact on Wales where their significance, particularly in the manufacturing sector, is comparatively large.  If the suspicions are correct that London and South East has just about dragged the UK as a whole out of recession, it does not bode well for everywhere else including Wales.  Without up-to-date GDP figures, economic policies cannot be tailored to those areas which now could be helped by a stimulus package.

Higher than average unemployment rates and numbers of welfare claimants, coupled with low numbers of job vacancies, point to the need for an urgent attention.  Welsh GDP figures produced on a quarterly basis would give clarity as to the true economic picture here as well as providing an imperative for greater proactivity.  Plaid Cymru’s calls for powers over tax and other economic levers would garner wider support if it could be demonstrated just how badly Wales fares by being so closely aligned with and dependent on UK fiscal policy.  Why should Wales be treated as an economic region akin to the North East of England or the West Midlands when it comes to economic performance, and not as a country in its own right with its own primary law-making legislature? Our national status deserves to be reflected in our economic indicators.

The omission of GDP figures for Wales also leaves a gaping hole in the Welsh Government’s knowledge of its own business community.  Small businesses below the turnover limit of £73,000 do not have to register for VAT.  These small businesses slip under the radar of the Welsh Government who are not informed of their existence (even though HMRC is aware it is not required to not share that information with the Welsh Government).  This means that the Welsh Government knows nothing about an estimated one third of all businesses in Wales which fall below the VAT registration threshold.

Wales is its own country, with its own unique economic challenges.  Not only do we need the tools to deal with the challenging economic circumstances we face, but we also need the data which will give us an up-to-date picture as to exactly where we are.  Without this knowledge we will be constantly playing catch-up and that, surely, is not in the interests of anyone concerned with Wales and its future.