Can fracking lift the Welsh economy?

Leading Welsh politicians seem to be getting ideas above their station. Fifty years ago, Labour held all but four of the Parliamentary seats, and had over 60 per cent of the vote. Now, the Conservatives are by a large margin the second party in terms of votes, and are within hailing distance of Labour. They gained 3 seats in the 2015 general election, and hold 11 compared to Labour’s 25

Yet in the media, it is the Labour First Minister in the Welsh Assembly, Carwyn Jones, and the Plaid Cymru leader, Leanne Woods, who grab all the attention. They are highly critical of the Prime Minister over Brexit.

Jones in particular keeps insisting that Wales should not lose a “penny of subsidy”, despite the fact the Principality voted strongly for Leave. Readers in London and the South East will be only too well aware of just exactly who is meant to keep handing over the monies.

Labour and Plaid Cymru together have controlled the Welsh Assembly since its inception in 1999. But just how well have they served the interests of Britain’s poorest region?

The Welsh government is opposed to fracking, for example, despite the considerable potential which exists.

A paper in the latest American Economic Review by a team from the Ivy League Dartmouth College examines the local economic impacts of fracking in the Unites States. Using detailed data from the Bureau of Labor Statistics and the Internal Revenue Service, they assess not just the overall impact, but how much of any benefits are retained locally.

Their geographic unit of analysis is the US county, which broadly corresponds in British terms to the local authority in terms of their respective average populations. The authors, Feyrer, Mansur and Sacerdote obtain two main findings.

First, the counties where extraction occurs enjoy significant economic benefits. Second, the effects grow larger as they widen the geographic area being examined. The regional impact on jobs and income is approximately three times as large as the immediate county effect with most of the impact happening within 100 miles of the drilling sites.

Around 20 per cent of all the total value of gas and oil extracted remains within the specific county where the drilling takes place. Each million dollars of new oil and gas production is associated with a $80,000 increase in wage income and 0.85 new jobs within the county in that year. Roughly 40 percent of the income increase is in industries not directly related to oil and gas extraction such as construction, hospitality, and local government.

The academics point out that if a region is at full employment, this additional activity will simply displace rather than add to the total. But during the Great Recession, the US was far from full employment. Fracking added a total of 640,000 extra jobs.

Wales is a long way from being at full employment. Here is a real chance to boost the region economically. But the politicians put their own right-on images above the interests of the people of Wales.