Welsh independence: Does new research support the idea?

An independent Wales could negotiate a much smaller gap in its public finances than previous estimates suggest, according to new research.

A £13.5bn gap between tax receipts and public spending was estimated in 2019.

But the new research suggests it could initially be much lower in an independent Wales, depending on the outcome of separation negotiations.

Plaid Cymru said it "debunks" claims "Wales is too small and too poor to thrive as an independent nation".

But the Welsh Conservatives said the report made some "wild predictions".

The research has been published ahead of a pro-independence march in Cardiff on Saturday.

In 2018-19, Cardiff University calculated Wales' net fiscal deficit - the gap between revenues received in taxes and spending on public services - amounted to £13.5bn.

The figure was based on Wales' current situation within the United Kingdom, including, for example, spending on some projects outside of Wales.

But in his paper, commissioned by Plaid Cymru, Prof John Doyle of Dublin City University estimated the gap in the first days of an independent Wales could be as low as £2.6bn.

On taxation, Prof Doyle argues some of Wales' tax receipts, such as corporation tax, may be underestimated because many companies operating in Wales are headquartered outside the country.

He also suggests an independent Wales could also make savings by spending much less on defence.

Pensions spending currently represents the largest part of UK government spending for Wales, amounting to £5.9bn in 2018-19.

Prof Doyle argues the UK government would continue to pay the pensions of people in Wales who have contributed to the public purse in taxes and social insurance contributions.

On pensions, the report said: "As negotiations will cover a wide range of issues, it may well be overly optimistic to expect the UK to fully honour these [pension] costs, even though it would be fully logical for a future government of Wales to insist that they should."

It is an argument currently being made by the SNP government in Scotland, despite saying in the 2014 Scottish independence referendum that responsibility would transfer to the Scottish government.

Earlier this year, a UK government minister accused the SNP of "misleading Scots" over who would pay their state pensions under independence.

On the question of whether an independent Wales would take over a share of UK public debt, Prof Doyle says Wales would not necessarily have any obligations but the issue would need to be "agreed voluntarily, as part of wider negotiations".

But in their analysis published in March 2020, Cardiff University researchers said there was "no consensus" in legal circles over how "state debts get divided in the event of dissolution or secession".

They added that "while the inherited fiscal position of an independent Wales may be different" independence "would likely require wide-ranging changes to current tax and spend policies".

Following the publication of his paper, Prof Doyle said: "The economic impact of an independent Wales is therefore not hugely constrained by the existing fiscal situation.

"The classic cautious approach has been to argue that the Welsh economy, Welsh productivity, and Welsh incomes need to grow in order to close the fiscal gap and to make independence more practical.

"But this is a classic 'chicken and egg' argument. What if it is not possible to grow Welsh productivity and the economy without the policy levers available to an independent state?

"For 50 years Welsh GDP per capita [the size of the economy] , has remained relatively fixed at 75% of UK average GDP per capita, with little sign of the type of convergence seen in Europe between the income levels of EU member states," he added.

Plaid Cymru leader Adam Price said the study "further debunks the argument that Wales is too small and too poor to thrive as an independent nation".

"Not only does Prof Doyle's work further build the body of evidence that supports the case for an independent Wales, it is also a game-changer in the debate surrounding its viability," he said.

"Time and again, we have heard wild estimates about the likely fiscal gap that would exist if we were to become independent that bear no relation to reality."

He added: "This shows once and for all that fantasy economics are peddled by those against, not for, independence."

But Welsh Conservative leader Andrew RT Davies said the report "makes some wild predictions on what a future Welsh government would do if Wales became independent".

"In this scenario the Welsh government would forgo any responsibility in keeping us safe - abandoning defence spending and ending the current style of UK aid to developing nations.

"And apparently the Welsh state would be able to negotiate a deal with the UK government to avoid debt coming our way.

"This report is nothing but back of the envelope fantasy figures to justify Plaid's obsession."

During the last Senedd election campaign in 2021, Plaid Cymru offered an independence referendum within five years if it was returned to power.

But the party finished third in the election, behind the UK-backing Labour and the Conservatives parties.

Adam Price said earlier this year that Welsh independence will take "longer than we would hope".

In the most recent Welsh opinion poll, 24% of people said they would back an independent Wales in a hypothetical referendum.

Over half (52%) said they would vote "No" to Welsh independence, whilst 14% did not know how they would vote.

On a hypothetical referendum to abolish the Senedd, 26% said they would vote "Yes", with 46% backing "No" and 17% saying they did not know how they would vote.

YouGov polled 1,014 Welsh voters, aged 16 and over, between September 20-22 for ITV Cymru Wales and Cardiff University