The Welsh Draft Budget for 2026–27 published last week sets out
plans which would increase all departments' core budgets by
around 0.3% to 0.5% above forecast whole-economy inflation. The
Welsh Finance Secretary has previously described this as a
‘business as usual' approach that would give whoever is in
government after the upcoming Welsh elections more freedom over
how to spend approximately £380 million in as-yet unallocated
funding. That would enable a further 1% boost in day-to-day
spending on services plus a further 4% boost to capital
investment spending.
But small above-inflation increases for all departments is not
consistent with ‘business-as-usual' service delivery. Rising
costs and demands mean that services such as health and social
care would need most, if not all of the as-yet unallocated
funding just to deliver ‘business as usual' provision.
If the Budget is passed in its current form it would increase
risks to Wales's public services and public finances. With
service providers and councils having to wait until after the May
election for final and more realistic budgets for a financial
year starting in April, they may find it more difficult to plan
their activities. And with an election looming, political parties
may also be tempted to claim currently unallocated funding could
be easily utilised to pay for new policies – when in reality much
if not all would be needed to meet ‘business as usual' pressures.
There are over three months until the Budget bill will be voted
on in the Senedd. This provides time for the Welsh Government to
negotiate with other parties for a more realistic set of
allocations across services. It is therefore welcome that there
is openness to such negotiations both in government and among the
other parties.
David Phillips, an Associate Director at the Institute
for Fiscal Studies said:
“With a smaller increase in overall funding than recent years,
its lack of a majority, and a highly competitive election
looming, setting a Budget for 2026–27 is undoubtedly a
challenging task for the Welsh Government. However, the approach
taken in the Draft Budget – effectively inflation plus a little
bit extra for all services – is not ‘business as usual' as has
previously been claimed by the Welsh Finance Secretary. In
reality, some services such as the health and social care would
need much bigger increases just to maintain services in the face
of increases in demand and costs, implying difficult decisions
for other services. Leaving it until after the elections to make
clear those trade-offs would create both practical and political
risks.”
“With over three months until a vote on the Budget in the Senedd
in January, there is scope – and it seems appetite – for
negotiations between the Welsh Government and opposition parties.
The fact that more money than usual has yet to be allocated to
particular services gives the other parties more opportunity to
shape the Budget than usual – and potentially also to be more
accountable for tricky Budget decisions too.”
The briefing is available to read HERE
