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GERALD HOLTHAM WARNS WELSH ECONOMY FACES BREXIT ‘PNEUMONIA’

GERALD Holtham – who led the influential Independent Commission on Funding and Finance for Wales – has launched a devastating attack on Vote Leave claims that funding for Wales could be guaranteed in the event of a Brexit vote.

Prof Holtham warns that even a small blip in the UK economy would see government spending hammered, saying that “if the UK sneezes, Wales will get pneumonia”. He writes:

“Today’s press release gives the game away. It says money for Wales would be spent “more efficiently” freeing funds to be spent on other things.

“Translation: you are going to get less money because some of it will be diverted elsewhere. That bit you can believe. Because the Leavers have used the figure for the UK’s gross payments to Brussels, ignoring what we get back. 

“If they were really going to maintain all the EU’s regional and farming spending in the UK, they would not be able to fulfill all their promises to spend more money on the NHS, defence and other things.”

He goes on to warn that claims by austerity-minded Conservatives claiming to suddenly be champions of government spending is “as believable as an alcoholic’s promise that the next drink would be his last”.

/ends

 

NOTES FOR EDITORS

The complete statement from Professor Gerald Holtham reads as follows:

Whatever the situation of the U.K. as a whole, I cannot believe that Wales would be better off outside the EU. Cardiff University research has demonstrated that Wales is a net beneficiary of EU funds, getting hundreds of millions of pounds out each year more than we contribute via our share of UK payments.

The claim that the UK government would maintain this net transfer to Wales is incredible. The whole thrust of UK government policy over the past decades, particularly under Conservative governments, has been to reduce industrial intervention, abolish regional development bodies and reduce regional assistance. Regional policy has been left to the EU. Regional assistance in the EU, from which Wales benefits, is part of the range of European social programmes encompassing work conditions and workers rights.  These are all based on the principle of social solidarity – looking after each other – but are routinely described by the Leave campaign and Tory ministers as red tape.  Their deathbed conversion to the principles of solidarity which underlie regional assistance programmes is as believable as an alcoholic’s promise that the next drink would be his last.   

In fact today’s press release gives the game away. It says money for Wales would be spent “more efficiently” freeing funds to be spent on other things. Translation: you are going to get less money because some of it will be diverted elsewhere. That bit you can believe. Because the Leavers have used the figure for the UK’s gross payments to Brussels, ignoring what we get back.  If they were really going to maintain all the EU’s regional and farming spending in the UK, they would not be able to fulfill all their promises to spend more money on the NHS, defence and other things.

If there are savings in government spending from leaving the EU, ask yourself the following question: how high up the government’s priorities do you think Wales comes? If you think the answer is near the top, I have got bad news for you about Father Christmas.

But anyway, this whole argument is proceeding as if UK government revenues would be unaffected by leaving the EU so there would be a “saving” to spend somewhere. A relatively small hiccup in economic growth would reduce tax revenues by more than the hypothesized saving.  Net spending on the EU is £8.5 billion a year of total government revenues around £700 billion, i.e. just 1.2 per cent of the total. If GDP is only 1 per cent lower after Brexit than it would otherwise have been, government revenue will fall more than the “saving”.  If we had a recession there would be a net loss running into billions. The uncertainty and reductions in business investment in the event of Brexit will surely be more than enough to eliminate all savings and leave the UK as a whole in a worse budgetary position for a number of years at least. That is more than supposition because we are already seeing anemia in business investment at the mere risk of Brexit. And if the UK sneezes, Wales will get pneumonia.