The Killing of Cornwall
Kevin Cahill of BusinessAge magazin investigates.
Cornwall is, by general agreement, one of the wildest and most beautiful areas in Britain. It is many people’s favourite holiday destination for that reason. However, no visitor can miss the essential poverty of a county that was once the heart of Britain’s non-coal mining industry, and that had a Parliament and a mint long before the rest of the country.
The county chief executive Peter Davies paints a stark picture of the Cornish economy on the Cornwall county website in August 2001. He says that, ‘Earning rates in Cornwall are between 17 per cent and 25 per cent below the equivalent Great Britain average. The total earnings figure for Cornwall is 24 per cent below the average. No other county in Great Britain has lower adult earnings levels than Cornwall ... And the earnings gap has increased over time. In 1981 Cornish earnings were 16 per cent below the Great Britain average, whereas they are now 24 per cent below.’
Bluntly put, Cornwall is getting poorer by the day. Why?
One very simple and easily provable answer is because the Government in London is raping the county fiscally. Out of a tiny gross domestic product of £3.6 billion, the Government takes over £1.95 billion in taxes, and puts back into the county less than £1.65 billion, a gap of over £300 million. That latter sum, by itself, all but completely explains the increasing pace of impoverishment in Cornwall. That and the banks and insurance companies.
On the back of the government take, the insurance companies absorb about £200 million of Cornwall’s capital each year and most of them put nothing at all back by way of investment. The banks and building societies soak up what is left of Cornwall’s inadequate capital and at most put back 70p for ever £1 they take in deposits. At least that’s what Nigel Blandford, a senior executive of Cornish Enterprise and former Lloyds branch manager in Cornwall thinks. The real situation is much more likely to be that of the Ghana Syndrome, described by Martin Vander Weyer in his book ‘Falling Eagle,’ about the decline of Barclays Bank, published last year.
‘In Ghana, Barclay’s Bank (DCO) held £17 million of deposits but lent only £3 million back to local customers, the balance being largely deposited with head office in London.’
Cornwall is, in effect, a disguised colony of London’s Treasury in financial terms.
Does London know this? Indeed, with over £309 million of EC investment promised over the next six years, to be matched by £428 million of investment from the UK, do Gordon Brown and his Treasury team actually have any idea what is going on in Cornwall? Do they know if this investment will work?
BusinessAge asked the Chancellor’s office for a breakdown of the tax take in Cornwall, and the Exchequer input to the county, by way of grants and other financial assistance. The Treasury spokesman told BusinessAge that they had no regional figures at all. ‘We do not have such statistics’ he said.
This may of course, explain why not only Cornwall, but much of the rest of the country outside the Home Counties is in the state it’s in. So without the Treasury’s help, BusinessAge constructed the attached table, which gives a rough idea of why the EC grant will have almost no impact, and certainly no enduring impact. Worth about £122 million a year for six years, the EC money still leaves a gap of £178m out through which is flowing the only possible source of regeneration in Cornwall, which is its own capital. Taken together with the insurance companies and banks, the capital ‘leak’ is probably around £500 million.
Despite the Treasury’s position on its deficit of regional information, BusinessAge was able to construct the attached table from figures obtained from within the Government machine, albeit with extraordinary difficulty. Most government press offices in London, such as Customs & Excise and the Inland Revenue had no idea they had regional figures, never having been asked for them, they said. Mind you, given the picture which emerges, and it clearly applies to many other counties besides Cornwall, that is what they would say, isn’t it?
The sources of the figures are explained in the notes below the table. In summary, the five largest taxes on the national tax roll, PAYE, NI, VAT, Corporation Tax and fuel duties, when applied to Cornwall yield the exchequer a total of £1.5 billion. This is 42 per cent of Cornwall’s GDP of £3.6 billion. (This figure is probably understated by at least £1 billion) The other taxes take that figure to £1.95 billion, 54 per cent of the county GDP. By themselves those figures mean nothing. They assume significance only when matched by the money sent back to Cornwall by the exchequer. This comes to around £1.651 billion. A healthy county economy might be able to stand that kind of mismatch between ‘take’ and ‘give’, but Cornwall, with the rest of its capital going out via the banks, building societies and insurance companies, and overall the victim of a total collapse of its original industrial/mining economy, simply plunges into the kind of situation so clearly shown in the recent and continued decline of the average wage.
In a recent interview with BusinessAge, Albert Reynolds, the Irish Taoiseach from February 1992 to December 1994, on whose watch the extraordinary current Irish boom began, told the magazine that the Irish boom came from ‘cheap money and lashings of it’.
Reynolds had secured a final massive grant of about £5 billion from the EC in 1992 and this is what he was talking about. But the entire sum is actually less per head than the money now being targeted at Cornwall. The EC grant to Ireland amounted to £1,385 per head of the Irish population. The Cornish input is £1,488 per head.
The core difference between Ireland and Cornwall is that, economically speaking, Ireland is a relatively closed system whereas Cornwall is not. Taxes raised in Ireland mostly stay in Ireland. Taxes raised in Cornwall go out of the county and are not replaced on a scale whose bottom line impact is visible in the poor and declining average wage in the county. Over the six-year term of the EC grant, which will deliver £737 million to the county, the exchequer will remove more than twice that sum.
For that reason, there is no chance that Cornwall will ever emulate its Celtic cousin across the Irish sea, until its capital base is rebuilt and that won’t happen until the gap between the tax ‘take’ and the exchequer ‘give’ is at least neutralised and better still, reversed.
Figures below are from Government departments as indicated. Treasury claims to have no regional figures for tax take. Estimates based on figures from various Government agencies.
Tax and Revenue taken from Cornwall by Central Government
Income tax £418m
According to table3.13 of the Inland Revenue stats (1996/1997 latest available), there are 204,000 taxpayers in Cornwall, paying an average of £2050 each in PAYE.
Corporation tax £201m
The average paid by a UK business is £13,723. This is multiplied by the 19,147 businesses in Cornwall.
CGT, Inheritance tax and stamp duties £63m
The national per capita payment is £183. Multiplied by 495,000 for Cornish population.
The average payment for each VAT registered business is £22,560 multiplied by 16,000 Cornish businesses registered for VAT.
Fuel taxes £225m
This figure is based on the average of 50p duty paid on the 450m litres of petrol and diesel sold in Cornwall each year.
Tobacco, alcohol and gaming £112m
Based on the per capita yield of these taxes which is £228, multiplied by the Cornish population of 495,000.
Air passenger tax Figures not available
Vehicle taxes £34m
Based on the national average of £155 per vehicle on the road multiplied by Cornwall’s 220,000 registered vehicles.
Business rates £121m
Based on national average of £6320 per business multiplied by Cornwall’s 19,147 businesses. Social Security contributions (NI) £307m
Crude figure based on a per capita formula supplied by the Inland Revenue. Inland Revenue cannot supply specific data.
Council tax £113m
Based on the national average payment per house of £550, multiplied by Cornwall’s 205,000 houses.
Total £1.954 billion
Returned to Cornwall by Central Government
Grant to CC £266m
The Government makes two grants, a revenue support grant of £146.7m and a £120m grant from the national non-domestic rates pool – see business rates.
Farming subsidy 66.5m
MAFF estimate of £100 per acre all subsidies direct and indirect. Cornwall has 665,516 agricultural acres and 6630 farms. Does not include BSE and F&M compensation.
Central government staff/armed services salaries £10 Estimate.
No figures available from central govt or Cornwall CC.
Heritage grants £25m (est.) Estimate.
No figures available from central govt or Cornwall CC.
NHS est. staff costs £373m Figure supplied by Dept of Health, Bristol for year 2000. Unemployment payments £22m Figure supplied by Dept of Social Security 2001.
Social Security payments £400m Figure supplied by Dept of Social Security 2001.
Includes all payments except pension and unemployment pay.
Roads £42m Estimate from Cornwall CC budget 2000/2001 and Highways Dept Railways £30m Estimate from Railtrack but no precise figures available.
State retirement pensions £417m Figure supplied by Dept of Social Security 2001.
Total £1.651 billion
You can read more from Kevin Cahill at:
Who Owns Britain and Ireland: http://www.who-owns-britain.com/
Who Owns the World: http://whoownstheworld.com/