Saturday, 4 October 2014

Power to the People?


  A decision to consider closure by the operator of Scotland’s largest power station tells us much about the way the so-called “National Grid” is designed to serve the needs of the big English cities, rather than the thinly populated “Celtic periphery”.
  Scottish Power, the operator of Longannet power station, has announced it will not be bidding to connect to the grid in 2018. The reason? Even though Scotland exports a large proportion of its electricity to the big centres of demand down south, it also pays the highest transmission fees. Consequently, Scotland suffers a double whammy – it loses the benefit of being able to profit from the export of a valuable 21st century resource. And Scottish consumers pay higher bills because they sit at the tail end of a network built to serve the needs of over-populated, over-built England.
  But as a story highlighted in the “Western Mail” last year shows, the same dynamic applies to Wales, too. For in October of last year, the Mule pointed out that Welsh consumers pay the highest electricity bills in the whole of the UK. Even higher than Scotland, in fact.
  This is despite the fact that Wales, much like its Celtic cousin up north, also exports electricity. But this simple fact however obscures a more complex picture than Scotland. Whereas history has bequeathed on our northern brethren a network that treats them as a discrete entity, in Wales the network splits our country in two. This split is readily acknowledged even by English companies with a major stake in Wales, but the consequence is that whereas North Wales is a net exporter of electricity - by a pretty comfy margin too - up until recently South Wales actually had to import electricity from England. Hence the higher bills.
  For Wales, much like Scotland, this has a number of consequences. In the first instance, Welsh consumers have less spending power because a greater proportion of income is eaten up by fuel bills. In Wales, a country that exports electricity, a staggering 41% of households are now classed as in fuel poverty. And of course high bills have consequences for business as well. As Miller Argent pointed out in their submission above, high electricity prices hold back the Welsh economy in other ways, as they affect Welsh competitiveness, particularly the manufacturing sector.
  Since Miller Argent’s submission, things have changed a little bit in South Wales. With the construction of the massive Pembroke 1 power station, South Wales is now a net exporter of electricity to England too. Yet as National Grid’s own tariff charges show, RWE, owners of the station, will be paying something on the order of £35 million a year to export all that electricity down the line to Gloucester. Because of the iniquitous way the Grid works, much of that cost will be shouldered by struggling Welsh families, who are effectively subsidising their wealthier neighbours next door through their higher electricity bills.

  Better Together, I hear you say?

  Of course, Devolution of power consents came under the purview of the Silk Commission, set up by the Tory Government to look at more powers for the Welsh. But as Gareth Clubb, Director of Friends of the Earth, pointed out in a post earlier this year, there was never really any intention to give Wales substantive powers over consenting for large power stations. Wales has always had a slightly unruly relationship with our bigger neighbour next door. We’re just too unreliable to be trusted to plug England’s yawning energy gap.

  As the Commission itself put it:

“Wales is a net exporter of electricity, and an energy strategy that focused on Wales would not perhaps fulfil the needs of the wider United Kingdom, and England in particular” (translation of Welsh language version of the Silk Commission Part II report, section 8.2.13).

  Say no more...

Saturday, 27 September 2014

Towards an Independent Welsh Currency

  Leanne Wood is fond of saying nowadays that “Independence won’t happen tomorrow”. And probably with good reason. For those of us who support Welsh Independence, the harsh reality is that if by some act of constitutional magic, Wales did become Independent tomorrow, we’d have a hell of a budget deficit. The Holtham Report, commissioned under the “One Wales” agreement, identified a difference of £6 billion between tax raised in Wales, and total public spending. Many senior figures in Plaid are well probably well aware of this figure, which is why the Independence genie, having popped out of the bottle, refuses to grant us the wish closest to our hearts. Independence has become a distant oasis in the economic desert.
  Except that it’s not quite that simple. For the surprising and somewhat perverse reality is that although our public finances would be in a pretty dire state, an Independent Wales would also start life with quite a tidy trade surplus, something on the order of £5billion if the most recent figures are anything to go by. Why? Because after decades of globalisation and de-industrialisation, Wales still has something that many Western countries at the start of the 21st century now lack – a good manufacturing base, in our case accounting for something like 16% of Welsh GDP.
  So even though the UK as a whole runs a trade deficit, taking Wales out of the UK equation means that, as Neil Kinnock once put it so eloquently, we’re alright.
  In fact, taking Welsh manufacturing out of the strait-jacket of the Union takes us on an interesting journey, but it also raises questions about what kind of meaningful industrial policy Plaid Cymru in particular can formulate while it’s still sucking on the comfort blanket of Devolution. For power devolved, as Enoch Powell once put it, is power retained, and Devolved economics is still economics that works in a Unionist framework. 
  From a manufacturing perspective, few companies illustrate the nature of the strait-jacket posed by the Union as well as the operations of TATA Steel in Wales. If we wanted a clearer illustration of how the UK economy is designed to benefit the banksters running the City of London, while militating against what could well evolve into the engine of Welsh Independence, look no further.
  Let’s look at a few facts.
  TATA is Wales’ largest manufacturer. The Jewel in its crown is the massive works at Port Talbot - hosting the UK’s largest integrated steel plant, and accounting for anything up to half of all UK production of Steel. TATA in Wales employs around 8000 staff directly and is estimated to contribute around £2.5 billion to the Welsh economy.
  Yet like all manufacturers, its export focus makes it vulnerable to fluctuations in the UK Pound. Given that manufacturing accounts for a bigger proportion of the Welsh economy than other parts of the UK, it’s reasonable to conclude that a strong Pound is going to hurt the Welsh economy disproportionately, or as one despairing Welsh steel worker put it a long time ago “Why does it always happen to us?”
  Which all begs the question – if the strong Pound is such a problem for Welsh manufacturers – why bother with it?
  Of course, the virtues of retaining the Pound as a currency has been more of a preoccupation for our Scottish cousins north of the Border. But given the fact that Wales’ manufacturing sector is still such a meaningful element of our economy, maybe we should start thinking outside of the box and start asking whether we too would be well served by a currency of our own.
  In Scotland, the SNP’s strategy to reassure “swithering” undecided voters was to propose a currency union with England. There are those who argue, however, that this strategy does no favours to Scottish manufacturers as it continues to shackle them to the strong Pound. This has a two-fold impact on Scottish and by extension Welsh industries – firstly, it helps destroy our manufacturing bases by rendering them uncompetitive internationally. And secondly, and more insidiously, it feeds dependency on the one market that can conveniently still afford to buy Scottish and Welsh goods because they are denominated in the same currency – England.
  Funny how it works out like that, eh?
   We’re all well aware of the SNP’s riposte to the Treasury’s bluster and threats not to “share” the pound. “If you’re not prepared to share the assets, we won’t share in the liabilities”. An Independent Scotland would simply walk away from its share of the UK debt. From a Welsh point of view, walking away from the pound and walking away from the massive debt burden that the UK’s out-of-control financial system has lumbered us with doesn’t look like a bad call.
  Similar threats by the UK Treasury to Wales can then be met by the simple reply: fine by us!