Wales’s fiscal deficit: the gap between tax and spend

24 March 2017
What was claimed

Wales has a fiscal deficit worth just under 25% of its GDP, compared to the UK deficit of 5%.

Our verdict

That was correct in 2014/15, according to estimates from Cardiff University. This is the most recent year we’ve seen estimates for. The scale of the difference seems likely to be similar now, even if the figures are smaller.

“Wales has a fiscal deficit currently of just under 25% compared to the UK deficit of 5%.”

BBC Question Time audience member, 24 March 2017

This probably gives a fair sense of the scale of the difference, even though the latest figures we’ve found are slightly out-of-date.

A “fiscal deficit” is the gap between what the government earns and spends.

There isn’t an official government estimate for the size of the gap in Wales and it’s not simple to work out.

You need to combine estimates for how much public money is spent on Welsh people with how much they pay in taxes.

It’s not always obvious. Things like income tax, for example, are collected at the UK level by HMRC. Some government spending benefits the UK as a whole, rather than specific regions.

Wales’ fiscal deficit was about £13 billion in 2014/15, according to the Wales Governance Centre at Cardiff University. This equalled about 24% of Welsh GDP, the value of goods and services produced in Wales.

The UK had a fiscal deficit worth about 5% of GDP in the same year (that’s the whole of the UK, including Wales).

Wales’s fiscal deficit has fallen in the past few years, as has the UK’s as a whole. Its deficit will have been smaller last year if it continued to fall in line with the rest of the UK.

We’ve asked the report’s authors when a comparison for 2015/16 and 2016/17 will be available.

Since the quality of Scottish GDP estimates has been questioned recently we’re also looking into whether similar criticisms would apply to this report, which takes a similar approach. For now these estimates seem to be the best available.

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