Economy by tyndale


									Statement on Wales 2010
Adopted at SPW Annual Conference 31-1-10
The prospects for the Welsh economy are inextricably linked to the world capitalist crisis and the
special crisis of the British economy. The British economy has followed the rest of the world economy
and officially moved out of recession by growing at a paltry rate of 0.1% in the last quarter. But the
hopes of some capitalist commentators for a sustained recovery will prove to be wishful thinking.
World capitalism is heavily weighed under by the fallout from the financial crash and another dip back
into recession is entirely possible. At best the British economy faces a long period of slow, anaemic
growth with chronically high unemployment.
The initial claims of Welsh ministers that Wales was escaping the worst effects of the British recession
have proved to be false as unemployment in Wales continues to climb. 121,000 or 8.5% of the
workforce are officially unemployed as what is left of manufacturing sheds factories and jobs, and the
small financial services sector is, according to the Western Mail, “decimated”.
Wales has entered the “Great Recession” still suffering the effects of the previous recessions. The
decline of manufacturing and mining in Britain particularly affected Wales. Although official
unemployment was not as high as in some regions of England, economic inactivity is the highest in
the United Kingdom .
The destruction of mining and traditional manufacturing has not been replaced by the inward
investment extolled by the Tories and New Labour in the 1980s and 90s. Traditional employers like
Ford, Hotpoint, Hoover, Cadbury‟s, Anglesey Aluminium have closed factories or „downsized‟ in the
recession or under the cover of the recession have moved production to eastern Europe or other
sources of cheap labour.
As we have warned in past perspective documents the inward investment celebrated by the Tories,
New Labour and „Welsh Labour‟ has consisted mainly of „screwdriver‟ factories acting as satellites to
the main production centres. Attracted by the relatively cheap and skilled labour in Wales and
generous grants from the Welsh Development Agency and then the Assembly they have been cheap
to open and very easy to close. This is partly because, in the recession the foreign-based trans-
national companies have tended to concentrate production in their home countries, but above all they
have been attracted to move production to where there is even cheaper labour in the so-called
emerging economies in Eastern Europe, Asia and Latin America.
In 1999 the Assembly government set the target of raising Welsh GDP from 80% of UK gross valued
added (GVA) per head to 90%. Instead in 2009 it had declined further to 74.3% of UK GVA per head.
At root the failure to increase GVA is because of the failure to protect and develop high value
manufacturing industry .
Employment in manufacturing has fallen by over 16% between 2001 and 2008 and the finance
industry grew at a slower rate than the rest of the UK. The greatest growth was in the public sector
which now accounts for over 30% of employment. So Welsh employment has been protected
somewhat in the recession by the high proportion of workers in the public sector.
But the cushioning effect of public sector jobs would turn into its opposite if the capitalist class
succeeds in its desire to slash UK public spending. The attack threatened by both parties on the
public sector after the general election would hit employment in Wales particularly hard.
Whichever party wins the general election it will attempt to make working class people pay for the
crisis of capitalism with a big cut in spending on public services. Wales would pay a very heavy price
with its greater reliance on public services and public sector jobs, and there could be a serious
struggle to protect them.

Barnett Formula
The funding of public services controlled by the Welsh Assembly, health, education, local
government, housing, transport, the environment, agriculture etc., is determined by the Barnett
formula. The formula provides funds to the devolved nations in proportions that were set over 30
years ago. Since the decline of industry and the development of mass unemployment it is generally
accepted that this formula has become outdated and does not take into account the relative needs of
the four nations, under-funding the Welsh and Northern Ireland Assemblies.
However neither New Labour nor a Tory government is likely to change the funding arrangements,
(except to cut spending across the board for all public services in the UK) for fear of opening up a
Pandora‟s Box of national antagonisms especially a new rift between a Westminster government and
the Scottish government.
So the relative under-funding of the Welsh Assembly will continue. This issue could assume a
significance even greater than the Objective 1 match-funding controversy in 1999-2000. It has the
capacity to break the Labour/Plaid coalition, although if there is a Tory government Welsh Labour
might also take it up.
The attack on public services in Wales after the General Election will make a significant impact on the
devolution settlement. Already the existing arrangements have been strained. The Assembly
government has been prevented from carrying out many basic measures by the limits of the
Assembly‟s powers and its inability to pass primary or even some secondary legislation.
A compromise which enabled the Assembly to promote primary legislation to Westminster through a
complex process of Legislative Competence Orders (LCOs) has been slow and cumbersome and
many LCOs have been buried or watered down in Whitehall . For example, despite housing being an
area devolved to the Assembly, a proposal to restrict the right to buy council homes in areas of
extreme housing pressure was rejected on the grounds that the Assembly might extend the measure
to the whole of Wales. It has only been agreed with the right of veto by the Secretary of State for
Wales of whichever Westminster government is in power.
To delay a vote on the issue of further powers the last Labour Assembly government set up the
Richards Commission which recommended in 2004 that the Assembly‟s powers be expanded to allow
law-making powers by 2011. One of the agreements of the Labour/Plaid coalition to form the One
Wales government in 2007 was to hold a referendum to give the Assembly full legislative powers by
May 2011.
One of Carwyn Jones‟s first actions on succeeding Rhodri Morgan as First Minister has been to begin
the process of moving to a referendum on the issue by raising the issue in the Assembly. First the
Assembly has to request a referendum with a two-thirds majority (the so-called „trigger vote‟) and then
the referendum has to be agreed by the Westminster parliament which could take months. So to
move a referendum before the general election the Welsh Assembly government has to begin the
procedure at the beginning of February at the latest if there is to be a referendum in the autumn. But
Jones is reflecting the pressures the Welsh Labour leadership is under by moving as slowly as
possible towards a trigger vote on February 9 .
One of Plaid Cymru‟s conditions for participating in the One Wales coalition was “a successful
outcome of a referendum for full lawmaking powers…at or before the end of the Assembly term”.
Failure to move to a referendum would break the coalition government in Cardiff.
Under pressure from his Plaid Cymru partners in the government Carwyn Jones claims that he is
sounding out other parties before moving to a trigger vote. But he is moving very slowly because of
the pressure from Welsh Labour MPs who do not want a referendum that might diminish their
influence at Westminster. A Welsh assembly with law-making powers would intensify the posing of

the „West Lothian question‟ that asks why Welsh and Scottish MPs vote on English public services in
Westminster while the same decisions for Wales and Scotland are decided in Cardiff and Edinburgh.
Welsh MPs would be less likely to receive ministerial positions and perks in Westminster if the
Assembly powers are expanded and a Tory government might even reduce the number of Welsh and
Scottish MPs.
In addition the Welsh Labour leadership and Peter Hain, secretary of state for Wales, are not sure
they would win the referendum. While the biggest proportion of Welsh voters have always supported
the option of an assembly with law-making powers there is not a consistently clear majority on the
issue . And there is a possibility of a protest against the establishment politicians increasing the „no‟
vote sufficiently to defeat the referendum.

Marxists and the national question
Marxists have always supported the democratic right of national self-determination, including the right
of Wales to secede from Britain if a majority vote in favour and the right of the Welsh assembly to call
a referendum on Wales‟s relationship with Britain. Our party has always supported a Welsh
parliament with law-making powers and the power to carry through socialist policies to benefit the
working class like a decent minimum wage, the abolition of the anti-union laws and the nationalisation
of firms threatening large scale redundancies such as Bosch and Anglesey Aluminium.
We therefore support the calling of a multi-option referendum including the options of the status quo,
full legislative powers for the Welsh assembly or independence. We would call for a vote for the
second option in such a referendum and a „Yes‟ vote in a referendum on the question of more powers
for the Assembly, linking it to the question of socialist policies to improve the lives of working people.
Marxism‟s support for the democratic rights of nationalities within larger states in no way contradicts
support for workers‟ internationalism and solidarity. Lenin‟s support for the right of national
determination was crucial in uniting the working masses in the tsarist empire to overthrow capitalism
and landlordism. We support a law-making parliament as a means of mobilising the working class in
Wales to fight for socialist policies using the Assembly as a rallying point and linking with the English
and Scottish working class.
The principle issue is the unity of the working class to fight for socialism. It is for that reason that while
defending the right of Wales to secede, we do not call for an independent Wales. A small minority of
workers (between 10-15% of the population in most polls over the last decade) support independence
which is why even Plaid Cymru does not call for it . A call for independence would be a barrier to
most Welsh workers at this stage and would divide the Welsh working class. There is a greater
resistance to the idea of independence in Wales than in Scotland because there are greater
economic, social, geographical, cultural, legal and historical ties with England.
However this could change in the case of a big independence movement in Scotland and a right wing
Westminster government carrying through big attacks on the working class in Wales. Even then we
would not call for an independent capitalist Wales but call for an independent socialist Wales as part
of a socialist federation of Wales, England, Scotland and Ireland.
Consequences of a Tory victory
The most likely result of the general election at the moment is a Tory victory although a hung
parliament and coalition government is also possible. Such is the disillusionment with New Labour the
Tories are likely to make significant gains in Wales, but it is most likely it would remain a minority party
in Welsh politics. The national question was raised under the last Tory government by this „democratic
deficit‟. This is likely to be repeated with the additional factor that the Tories will be cutting the budget
of a Labour/Plaid assembly government in Cardiff.

The Welsh assembly government will pin the blame for the cutbacks on the Tories, or a coalition
government, even though Labour in Westminster would also cut back the budget should it win the
election. While the One Wales government is unlikely to decisively confront a Tory Westminster
government it would pose as a left alternative and attempt to deflect the blame for the cutbacks away
from itself. The „dented shield‟ argument , used under previous Tory governments, could be dusted
off and used to excuse the carrying out of cuts in public services.
Should a referendum on law-making powers for the Assembly take place just as a Tory government
starts wielding the axe in public services then there could be a decisive „yes‟ vote. However if the cuts
are delayed or have not bitten yet then there could be a much closer vote. The Assembly elections in
2011 would also be affected by the timing and the severity of the cuts in public services, and the
struggles that takes place against them.
Plaid Cymru has increased its support since 2007 by appearing to champion more progressive
policies than the New Labour government in Westminster. While unlikely to make significant gains in
the cockpit of the Westminster elections it could gain in the Assembly elections in the absence of a
significant challenge from a new workers party.
‘Welsh’ Labour
Welsh Labour could pose as left alternative to the Tories more successfully than New Labour in
Westminster. The rejection of Alun Michael, parachuted into the First Minister‟s position by Blair, and
his replacement by Rhodri Morgan and now Carwyn Jones has enabled „Welsh‟ Labour to develop a
distinct brand from New Labour especially in the course of the One Wales government.
Fundamentally Welsh Labour shares the same ideas as New Labour, accepting the primacy of the
market and neo-liberal ideas. But under pressure from the working class and after suffering a series
of bloody noses in its traditional heartlands from Blaenau Gwent People‟s Voice, Forward Wales and
Plaid Cymru it has trod a slightly different path to New Labour in Westminster.
In health the internal market is fading as the trusts and health boards are merged and foundation
hospitals rejected while prescription charges have been scrapped. In education SAT tests and
academies have also been rejected and top-up fees for Welsh students paid for until recently. Private
Finance Initiatives have generally been avoided in public building projects and there have been other
public service reforms emphasising public provision rather than private.
However it would be wrong to imply there is a fundamental difference at this stage between New
Labour and Welsh Labour. The „clear, red water‟ between the two is not very red. The tendering out of
public services to the private sector continues in Wales under „red‟ Welsh Labour and cutbacks and
privatisation have been driven through local government by the Assembly government. Welsh
Labour‟s Designed For Life health service reforms proposed dozens of hospital closures which was
only halted by its poor results in the 2007 Assembly elections and the formation of the One Wales
government. The Assembly Learning Grant that paid the top-up fees of all Welsh students has been
narrowed and concentrated only on the students from the poorest backgrounds. Welsh Labour
continues to provide a large squad of right wing Labour MPs to Westminster who have
enthusiastically voted for foundation hospitals and education academies in England, the Iraq and
Afghanistan wars and other neo-liberal policies.
The more progressive policies have been possible because by and large they have been possible
without spending extra money (in many cases they have proved cheaper than the New Labour
equivalent in England). And the two trends within Labour have been able to amicably coexist because
Welsh Labour has not threatened the Blair/Brown leadership of New Labour. A non aggression pact
between Blair and Rhodri Morgan has continued under Brown in which, after the debacle of the 1999
Assembly elections, New Labour has allowed Welsh Labour to paddle its own canoe as long as
Welsh Labour did not criticise British New Labour. Welsh Labour MPs have been amongst the most
loyal supporters of Blairism, many criticising the downgrading of privatisation by Welsh Labour and

the One Wales government. A potential source of conflict in the Welsh Labour party remains between
Labour MPs from Wales and Welsh Labour in Cardiff but this is likely to be pushed into the
background if there is a Tory government.
Need for a new workers’ party
As in the rest of Britain the situation is crying out for a real political alternative for the working class in
the form of a new workers‟ party. There have been several opportunities for new formations to move
in the direction of a new party in Wales. Forward Wales formed around the maverick Labour AM, John
Marek, in Wrexham could have drawn around it a large layer of trade unionists and potentially won
the support of the RMT, but Marek refused to develop it in this direction. Consequently Forward
Wales did not take off and has now been formally wound up. And Blaenau Gwent People‟s Voice has
gained a mass base with an MP and AM and a number of councillors but has refused to expand into a
wider movement and has not developed outside of the Gwent valleys. Some of its councillors have
voted for cuts in public services.
The initial and local electoral success of these two formations have shown the potential for a new
workers party to develop in Wales either as a Welsh formation or as part of an all-Britain party. But in
the absence of a new workers party Plaid Cymru has benefited most as posing as an alternative. In
the One Wales government they have been able to look relatively left compared to the Westminster
government. This has not been the case when in power in local councils where they have been
indistinguishable from the other parties. While appearing to be more radical than the others Plaid
Cymru is still a pro-capitalist party that does not rest for its support mainly on the working class. Its
leadership‟s support for the abolition of the Assembly Learning Grant exposed the divisions within
Plaid and the possibility of future splits.
If a new broad workers‟ formation was to develop from the Trade Unionist and Socialist Coalition then
it could provide a real alternative in the Welsh assembly elections and gain a significant vote. Such a
formation could gain significant support in the Welsh trade union movement.
The role of our party will be crucial in developing a new workers‟ party. As well as the possibility of an
initiative developing in Britain as a whole after the general election, new formations can arise from
obscure or accidental beginnings in the new epoch of capitalist crisis. The situation is slightly more
fluid in Wales than in England. Left splits from pro-capitalist Welsh Labour and Plaid Cymru could
develop into new formations as they combine with movements in the trade union movement. And
the development of our party as a large Marxist party with a deep base of support in the
workers movement in Wales can rapidly accelerate this process. We have to be alive to the
possibilities of new formations in Wales acting as a bridge to a new workers party.
Socialist Party Wales is probably now the most authoritative and largest socialist formation in
Wales with a significant base of support amongst the most active and militant trade
unionists. Most of our rivals have disappeared or are in crisis.
In the struggle at Linamar we have shown that just one revolutionary workers‟ leader working in the
correct way can win important battles. We can demonstrate that our party will lead victories in other
battles in the immediate future that can change the political landscape in Wales and provide the welsh
working class with a leadership that can open up a struggle to transform Welsh society towards a
socialist Wales leading to a socialist Britain.

 Of the top 10 Parliamentary constituencies with the highest incapacity benefit claimants in the UK,
the south Wales valleys contain five. Three regions of Wales – South West Wales, the Gwent Valleys
and Anglesey – were among the five poorest in the UK in 2005.

There has been a reduction in the GVA head in Powys from 75% of the UK average in 1999 to 70% in
2005; its GVA/head is now lower than that of Swansea or Gwynedd.

The Flintshire and Wrexham region has seen its GVA/head decline from 102% of the UK economy in
1999 to 85% in 2005. It has been growing at only a third of the rate of the Welsh economy during the
period 1999 to 2005.
  According to Dr Eurfyl ap Gwilym, Deputy Chairman of the Principality Building Society and an
economic advisor to Plaid Cymru, of the 25.7% shortfall in GVA compared to the UK 12% can be
accounted for through the low rate of pay, 6% due to the high proportion of retired people caused
largely by younger workers moving to other parts of the UK, and another factor is low level of profits in
low capitalised industry in Wales. In other words highly capitalised, highly paid industry could have
raised GVA in Wales towards the UK level.
 The Barnett formula assigns funds to Wales, Scotland and Northern Ireland according to a formula
devised by Joel Barnett, Chief Secretary to the Treasury in 1978.
  Measures supported by the Assembly government but thwarted in Westminster include
environmental protection and waste management; the prevention of physical punishment of children;
the use of the „fourth option‟ of retaining and improving council houses rather than privatising them;
and restrictions on the right to buy council homes in areas of extreme housing pressure.
 A YouGov poll published in November 2009 estimated that 51% would vote in favour of a more
powerful Assembly and 30% would vote no. The All Wales Convention poll the same month found
47% in favour and 37% against.
  Plaid Cymru‟s support for independence has been further undermined by the fate of two of their
models of independent small nations, Iceland and Ireland. Plaid leader Ieuan Wyn Jones said in 2003
“Like Ireland, we believe Wales in Europe could become a beacon of regeneration” The left Plaid
Cymru AM Leanne Wood wrote in 2007 “Take Iceland as an example. It has a population of around
300,000 and is the fifth most prosperous country in the world... If Iceland can do it; Wales can.”

Today the Icelandic economy is bankrupt with half the population considering emigration. Mired in a
huge economic crisis, Ireland has carried through massive cutbacks in public spending to remain
within the euro.
  The „dented shield‟ was the argument used by Labour‟s right wing under Neil Kinnock in the 1980s
to justify Labour councils implementing Tory cutbacks. They argued it was better for Labour councils
to be a dented shield and implement the cuts more humanely than risk being removed by the Tories if
they defied the government as Liverpool City Council did under the leadership of our party when it
was know as Militant.
  Plaid Cymru‟s support is usually not fully reflected in general elections as their supporters see little
point in sending a handful of Plaid MPs to a parliament of 653 MPs. Its vote picks up significantly in
Assembly and local government elections.

  „Pro public‟ reforms introduced by Welsh Labour or the One Wales government include the abolition
of prescription charges, free hospital car parking and museum entrance and free bus travel for
 In Gwynedd they have closed schools and introduced charges for school buses. In Rhondda Cynon
Taff they introduced cuts in the council workforce and public services when in power in 1999-2003. In
Cardiff they were dubbed “Lied Cymru” by environmental campaigners after supporting plans to build
on city parks and have given support to the schools closure programme in coalition with the Liberals.

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