Negotiating prior to an Independence referendum: a reply to Dafydd Trystan

Mike Hedges AM replies to a recent article on the Welsh public’s attitude towards independence

The article titled indycurious by Dr Dafydd Trystan showed a movement in favour of considering Welsh independence by the Welsh public. I have my doubts about asking people to rank their views from 1 to 10 a poll which shows almost 3 in 10 of the Welsh population more in favour than against can be seen as a major movement in public opinion.

We have a novel way of dealing with constitutional matters, where we have the referendum first and then we set about negotiating the terms afterwards. Whilst with the withdrawal from the European union it was necessary to have the referendum first to have the mandate to start negotiating withdrawal by implementing article 50, with any future Scottish or Welsh independence referenda it is possible to negotiate first so that those voting know what they are voting for.

For Scottish or Welsh independence there are a number of key areas where agreements is necessary for independence. The below is just a flavour as opposed to a definitive list.

Firstly is the currency that each country will be using. The pound sterling will become obsolete so a Scottish pound or Welsh pound as well as the remaining British pound will need to be created. An example of an amicable split was the split up of Czechoslovakia. Following the split the two countries created new currencies but prior to that the two countries had capital controls implemented and all cross-border money transfers between them were halted to avoid any speculative flows. Stamps were glued onto 150 million federal banknotes which were then taken around the country with the help of the police and the army.

The exchange for notes stamped by Czech or Slovak stamps, at a 1:1 rate, was completed in four days subsequently the stamped notes were  replaced by new ones. People could turn a maximum of 4,000 crowns which was approximately 87 pounds into cash. The rest had to be deposited and the old money ceased to be legal tender. Whilst the initial rate was 1 to 1 this did not hold and the Slovak currency devalued by 10 percent in mid-1993 and remained weaker than the Czech crown until Slovakia’s euro entry in 2009.

Every Country needs a Central bank that can act both as a lender of last resort and also set interest rates. Currently the bank of England does that but if there is a split then new central banks will need to be formed and the assets and liabilities of the bank of England transferred, according to an agreed formula, to the new central banks.

There are also a number of government agencies such as the DVLA and national insurance that cover the whole of Britain. What will become of them, will they be split or will each country allow, what will become a foreign country to carry out these functions.

Share of national debt would need to be agreed either on a population basis or on some other agreed formula and again arbitration could be used if agreement could not be reached.

What rate and how are Pension and social security payments to be paid. People will build up National Insurance contributions from Independence in each country but who will be responsible for current pensioners. Will it be where they live now or where they lived prior to retirement? National insurance rates will have to be set and collected in each country. Corporation tax will have to be set and collected in each country. Vat rates and duties on Petrol and Tobacco will have to be set and collected in each country with the danger of substantial cross border movement if rates diverge significantly.

With the Armed forces it will be important that armed forces personnel are allocated to the correct country, and based in their own country.

The sea border would need to be defined and agreed either by negotiations or via arbitration. A hard or soft land border will depend on a number of issues such as membership or non membership of the EU and different rates of duty and VAT. Will there be a free trade agreement between the countries and free movement of people, if so that needs negotiating. A police protocol will be needed for cross border investigations and either separate national security and special branch staff or an agreement to jointly fund and share.

For the leaving date needs to be shortly after the vote, the above needs to be negotiated prior to the vote. Of course if the above are agreed then people will be voting on what the future looks like rather than taking a leap of faith into the unknown.

As said at the beginning this is not a definitive list just a flavour of what needs to be negotiated, I believe before not after, an independence referendum.


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Mike Hedges is AM for Swansea East

7 thoughts on “Negotiating prior to an Independence referendum: a reply to Dafydd Trystan

  1. Thank you, Mike, for involving yourself in the debate on independence in an open-minded and constructive manner. You may be interested in reading YesCymru’s recently published booklet, Independence in your Pocket. The first print run sold out in less than a fortnight, but you can download a PDF of it here:

    Many of the questions you raise are addressed in the booklet. But your central point, regarding the need for advance discussions, is a very important one. Couldn’t agree more.

  2. The sea border will have to be resolved during the Brexit negotiations as there is no difference between Dover and Calais and that of Rosslare and Pembroke Dock. It is also an independence issue but would an independent Wales seek EU membership

  3. Interesting background stuff. Borders and currencies have a place in the discourse, but they are not determinants. Maybe its worth turning the telescope around the other way.

    The present Westminster system is bust beyond repair, exacerbated if there is a return to an adversarial duopoly that serves no-one except politicians. How do we evolve a system that means that we never again have to suffer austerity, grammar schools, dementia tax, bedroom tax, inflated military budgets, military adventurism, privatisation, commercialisation of the public realm, etc. without resorting to a feeble ‘our country is too small and too poor’ argument?

    This is not necessarily a party political battle, and the principles are the same as with community development. The process begins with improved community confidence, and building community capacity. Independence means owning the power and deciding how to share it (whether with the UK, the EU, etc). “Yes we can!”

  4. This, and the original article raises some very interesting, indeed fundamental issues about the future of our nation.
    Where pray, are the comments from the “Party of Wales.”

  5. I’m tickled at the idea that the Welsh people might want independence to escape “austerity”. The UK is currently running a government deficit of around 3.5 per cent of GDP – not a crisis but not sustainable for ever. It had a deficit around 10 per cent after the crisis of 2008 so austerity was not a choice then but a requirement. As a result of that episode accumulated public debt of the UK has risen to 85 per cent of GDP, which is uncomfortably high. No responsible government would much increase public borrowing in those circumstances. Public services are under pressure but if the UK public want them improved they must pay more tax. How would independence change that? Well the Welsh public deficit – currently financed by the UK – is not 3.5 per cent of Welsh GDP; it is over 20 per cent of GDP! Withdraw the English subsidy and the Welsh public will find out what austerity really looks like. Now if they said we don’t care, we want autonomy anyway I would be full of admiration for their courage and optimism. But I’m not kidding myself and Huw Meredydd should not kid himself either. Tell most Welsh voters they can have independence at the cost of a 20 per cent cut in disposable income or public services and they would run a mile.

  6. I’m never sure how long these trails last, but I think a response to Tredwyn is required.
    He makes some spurious links between debt and payment; for example a budget deficit of 20% does not translate into a 20% cut in disposable income.

    Without going into the intricacies of economics, i think a few comments are needed.
    No country in the world (well, with very few exceptions) actually runs a budget surplus (i.e. current borrowing) or indeed does not have a national debt accumulated over time.
    Current borrowing is based bonds issues and the payment to the lender is the interest rate, not the capital actually lent. Although this means that interest payments have to be met, it does NOT mean that there is some instant large debt to pay, indeed careful use of borrowed funds in developing the economy would mitigate against further borrowing.
    By its very nature, borrowing requirements are dynamic, vary over time and this is really the issue. It is the case that Cardiff University’s figures suggest a CURRENT deficit of over 20%. although the researchers themselves do say that some of the data is open to interpretation and indeed some income that might accrue to a Welsh budget is not included.
    And this perhaps is the really important point. Reflecting both dynamism in borrowing and indeed the failure of the Assembly to address the economy; in 1998 the late Professor Phil Williams a Welsh budget, based on the (then) Welsh Office figures.
    Although there were – as in any estimate of this type – questions of interpretation, the calculated budget deficit for Wales at that time WOULD HAVE BEEN APPROXIMATELY THE SAME AS THE UK AS A WHOLE – some 3.4%.
    Food for thought……

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