![Net fiscal balance of Wales and UK in percent of GDP](https://upload.wikimedia.org/wikipedia/commons/7/7d/Net_fiscal_balance_of_Wales_and_UK_in_percent_of_GDP.png)
The Welsh fiscal balance is the difference between general government revenues and expenditures in Wales. From 1999 to 2022, Wales has carried a fiscal deficit as public spending in Wales exceeded tax revenue. For the 2018–19 fiscal year, the fiscal deficit is about 19.4 percent of Wales's estimated GDP, compared to 2 percent for the United Kingdom as a whole. All UK nations and regions except for East, South East England and London have a deficit. Wales' fiscal deficit per capita of £4,300 is the second highest of the economic regions, after the
Northern Ireland fiscal deficit
Northern Ireland has a fiscal deficit (also known as a subvention or subsidy) since the public expenditure in the country exceeds the tax revenue. The deficit typically runs at a rate of £10 billion ''per annum'' which is more than one thir ...
, which is nearly £5,000 per capita.
Some state that the deficit is not a Welsh deficit as Wales does not have significant powers over taxation and does not set its own budget, in that the UK Government holds many of these fiscal powers. According to political scientist John Doyle of Dublin City University, the fiscal deficit in the "early days" of an
independent Wales would be approximately £2.6bn. This equates to under 3.4% of
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
, which compares to an average of 3.2% for countries in the
Organisation for Economic Co-operation and Development in 2019.
Fiscal deficit
Wales
Wales ( cy, Cymru ) is a country that is part of the United Kingdom. It is bordered by England to the east, the Irish Sea to the north and west, the Celtic Sea to the south west and the Bristol Channel to the south. It had a population in ...
, as well as England, has a fiscal deficit since the
public expenditure
Public expenditure is spending made by the government of a country on collective needs and wants, such as pension, provisions, security, infrastructure, etc. Until the 19th century, public expenditure was limited as laissez faire philosophies ...
in both countries exceeds the
tax revenue
Tax revenue is the income that is collected by governments through taxation. Taxation is the primary source of government revenue. Revenue may be extracted from sources such as individuals, public enterprises, trade, royalties on natural resour ...
collected. Some state that the deficit is not a Welsh deficit as Wales does not have significant powers over taxation and does not set its own budget, in that the UK Government holds many of these fiscal powers.
Wales' net fiscal deficit increased from £14.4 billion in 2020 to £25.9 billion in 2021. All countries and regions in the UK had a fiscal deficit in 2021, which included the North West of England at £49.9 billion; Scotland at £36 billion; Northern Ireland at £18 billion; London at £7.2 billion.
![Net fiscal balance by UK nation and region per capita, 2017-18](https://upload.wikimedia.org/wikipedia/commons/9/9d/Net_fiscal_balance_by_UK_nation_and_region_per_capita%2C_2017-18.png)
At £4,300, Wales' fiscal deficit per capita is the second highest of the economic regions, after the
Northern Ireland fiscal deficit
Northern Ireland has a fiscal deficit (also known as a subvention or subsidy) since the public expenditure in the country exceeds the tax revenue. The deficit typically runs at a rate of £10 billion ''per annum'' which is more than one thir ...
, which is nearly £5,000 per capita.
Tax revenue per capita in Wales is 76 percent of the UK average, but spending is 108 percent, leading to a shortfall. Wales spends more on social security than other parts of the UK; capital expenditure on infrastructure such as transport (which is not devolved to Wales) is significantly less.
By comparison, the entire UK fiscal deficit was £350 billion between 2019-2020. The total UK public debt exceeds £2 trillion (which is equivalent to 85% of GDP).
In 2016, Wales spent £14.7 billion more than it was allowed to gather in local revenue, which decreased to £13.7 billion for the 2018–19 fiscal year, due to a reduction in public spending. Public spending peaked in 2011–12.
For the 2018–19 fiscal year, the fiscal deficit is about 19.4 percent of Wales's estimated GDP, compared to 2 percent for the United Kingdom as a whole.
Implications
Wales spends 11 percent more per person than England. Welsh economist Ed Gareth Poole notes that fiscal transfers between wealthier and poorer parts of a sovereign state are not unusual.
Wales's government deficit was consistently higher than that of Greece during the
Greek government-debt crisis
Greece faced a sovereign debt crisis in the aftermath of the financial crisis of 2007–2008. Widely known in the country as The Crisis ( Greek: Η Κρίση), it reached the populace as a series of sudden reforms and austerity measures that ...
but, unlike Greece, the gap was covered by transfer payments from the rest of the UK. Such transfer payments, according to the economist
Robert A. Mundell, are essential to a functional
currency union
A currency union (also known as monetary union) is an intergovernmental agreement that involves two or more states sharing the same currency. These states may not necessarily have any further integration (such as an economic and monetary union, ...
.
Figure in an independent Wales
The figure has been criticised as misrepresentative of the true financial position that an independent Wales would experience. Commentators contend that a sovereign Wales could raise additional revenues and reduce expenditure on items not directly connected to the Welsh economy; the Welsh economist John Ball suggests that an independent Welsh government could plug the budget shortfall by instituting
land value tax
A land value tax (LVT) is a levy on the value of land (economics), land without regard to buildings, personal property and other land improvement, improvements. It is also known as a location value tax, a point valuation tax, a site valuation ta ...
(possibly raising £6 billion per year),
tourist tax and "exploring some ways in which taxation revenue could be improved in a sovereign state". In his opinion,
VAT
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
revenues from businesses not owned by Welsh residents are underestimated in the current revenue data, meaning that the shortfall may not be as high as it appears.
Ball also suggests that Wales' £3bn defence cost is excessive and that at 3% of GDP is more than any other country. He also notes that incoming pensioners from England cost £2bn and a further “accounting adjustment” of another £3bn.
[ The vast number of external business ownership in Wales makes it difficult to estimate the amount of VAT actually collected in Wales and which is allocated to the business headquarters in England. An independent Welsh government would decide how much to spend on matters such as defence and could have its own currency.]
According to political scientist John Doyle of Dublin City University, the fiscal deficit in the "early days" of an independent Wales would be approximately £2.6bn. This equates to under 3.4% of GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
, which compares to an average of 3.2% for countries in the OECD in 2019.
See also
* United Kingdom national debt
The United Kingdom national debt is the total quantity of money borrowed by the Government of the United Kingdom at any time through the issue of securities by the British Treasury and other government agencies.
At the end of December 2021, UK ...
References
{{Economy of Wales
Government spending in the United Kingdom
Government of Wales
Deficit spending