Wales fall further behind UK economy

Trade union action needed to defend living standards and the Welsh economy

Just as we are absorbing the shock of the job losses at Peacocks and Lloyds/TSB bank as a result of the financial crisis, a report has placed Swansea and Newport in the bottom five cities in the UK worst hit by the economic crisis. Cardiff is also struggling according to a study released today by the Centre for Cities think tank.

Swansea has the lowest level of employment of the 63 cities in the UK while Newport is expected to be worst hit by the drop in public sector jobs. Despite being one of only 14 cities in the UK to experience a growth in private sector jobs last year the huge fall in public sector jobs in Newport is expected to more than offset the rise.

The report identifies the level of skills as being the key motor for economic success. Both Swansea and Newport have had very high levels of skills in manufacturing. But the decline of British manufacturing accelerated by the policies of Tory and Labour governments has hit Welsh cities proportionately very hard. It is the failure of manufacturing in Britain, once "the workshop of the world", and the short-termism of the British capitalist class which has thrown the Welsh economy back.

Public sector employment partially filled the fall in manufacturing in the 1980s and 1990s. The policies of the current Con-Dem government – now openly supported by Labour - of cutting public services to plug the deficit caused by the capitalist crisis are hitting the Welsh economy hard. According to the Financial Times Wales’s GDP (measured by GVA per capita) has slipped further behind the rest of the UK with GVA standing at just 74% of the UK average – less than half that of London (Financial Times 3/01/12).

While Welsh cities are at the bottom of economic affluence in the UK, it is the areas outside the cities that are the poorest in Wales. The Gwent valleys were placed the bottom area of the output per head league with one tenth of the GVA per head of Inner West London!

Wales will fall even further behind if UK government policies are carried through. The cuts to public services will accentuate the gap. But if regional pay rates are adopted in the public sector, linking pay to the relative affluence of the area, then pay rates would fall dramatically in Wales intensifying the income gap even further with the rest of the UK.

Already public sector workers could lose a fifth of their wages in real terms through the pay freeze and another 3% if increased pension contributions were to be forced through. Some Tories are calling for an extra cut of 18% in the pay of public sector workers in Wales to bring them in line with "market rates". If these backwoodsmen have their way these accumulated cuts would see a fall in pay in real terms of about 40% approaching the IMF-imposed cut of 40% in public sector pay in bankrupt Greece! Even an extra cut of 10% to the pay of Welsh public sector workers would further widen the GVA gap with the rest of the UK.

Welsh Labour’s policy of ploughing its own furrow in Wales while supporting the Blairite policies of UK Labour will become increasingly contradictory as the Welsh economy comes under attack by the Tories and Miliband and Balls acquiesce to the cuts.

Plaid has no real alternative. It calls merely for a lower corporation tax for Wales. On a capitalist basis Welsh independence would be further impoverished. With a tiny indigenous capitalist class Wales could only compete by dropping wage and tax rates throwing the Welsh economy back even further. Tied to the euro, the Welsh monetary policy would be tailored to the levels of the powerful German economy and would suffer a similar fate to Greece or Ireland. Tied to pound sterling, the Welsh economy would suffer all the current problems without the benefit of UK levels of public spending.

Under capitalism Wales is moving towards third world-type conditions. It is up to the Welsh workers' movement to stand up to this offensive. Clearly the Welsh Labour government, now associated with the cuts policies of Miliband and Balls, will not defy the capitalist offensive on Welsh society. It is up to the most combatative sections of the trade union movement to find a way around the lack of leadership of the Wales TUC and return to the militant, socialist traditions of the Welsh working class to lead the struggle to defend not just working class living standards but Welsh society as a whole. It will need a new workers' party to put forward a programme to achieve that.

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