FS researchers will be presenting a summary of their Welsh
election analysis at midday today in conjunction with researchers
from the Welsh Election Study at an online event, funded by the
Nuffield Foundation. This comment highlights IFS researchers' key
conclusions. Read the full analysis
here.
David Phillips, head of devolved and local government
finance at IFS and one of the speakers at the online event,
said:
‘The outcome of the Senedd election on 7 May is both more
uncertain and potentially more consequential than any other in
devolution's 27-year history.
‘The major parties' manifestos do have some things in common. All
pledge significant improvements in the NHS, both in hospitals and
through a focus on prevention and primary care, but with
virtually no detail on how much they would spend. Schools are
another focus, with standards, discipline and well-being
highlighted by several parties. Housing is another battleground,
with most parties targeting substantial increases in
housebuilding, and some of those on the left planning caps on
rents – a policy that experience suggests would help some
tenants, but have undesirable consequences too. And, more
generally, the cost of living looms large, with parties framing
both tax cuts and new entitlements as helping with families'
budgets.
‘But the parties also differ in important ways both in terms of
broad vision and in terms of specific policy proposals.
‘Reform UK and the Welsh Conservatives offer a vision of a
lower-tax Wales, with cuts to income tax, business rates and, in
the Conservatives' case, land transaction tax too. Council tax
increases above 5% would be subject to local referendums, like in
England – although unlike any other tax. And on the spending side
of the budget, they would boost investment in roads, with Reform
UK saying they would help fund this by reducing investment in
cycling and net zero schemes.
‘In contrast, Plaid Cymru, the Green Party and the Liberal
Democrats propose a significant expansion in the welfare state,
with universal free childcare provision from 9 months until age
5. Plaid Cymru would hope to roll out a weekly top-up payment for
families with children on universal credit. The Green Party says
it would make bus travel free for children and young people, and
cap fares at £1 for adults aged 22 to 59 – and it pledges big
expansions and improvements to nearly all areas of health and
social care.
‘Welsh Labour's proposals clearly align most with the other
left-wing and centre-left parties, but are pared back by
comparison. It would expand childcare, but to a lesser extent. It
would cap bus fares, but at £2 for working-age adults. That would
leave more money for existing services than under the other
parties' plans.
‘Unfortunately, while differing in their proposals, the major
parties have one thing in common: a need to be more upfront about
the fiscal challenges facing the next Welsh Government.
‘The combination of a slowdown in increases in UK government
funding, and growing demands and costs for health and social
care, will mean a Welsh budget under significant pressure. The
fact that the current Welsh Government has not published spending
plans beyond 2026–27 – unlike either the UK or Scottish
governments – means that it is not yet clear which services will
face cuts. But some will, especially in the first full Welsh
budget of the next Senedd term covering 2027–28 – when overall
funding will not increase at all, implying particularly deep cuts
to other services if the next government wants to boost health
spending.
‘In this context, neither expansions of the Welsh welfare
state without commensurate tax rises, nor definite tax cuts
without similarly definite reductions in spending, are fiscally
credible. In reality, there would need to be difficult decisions
elsewhere in the Welsh budget to square the circle.
‘The fiscal holes the parties would need to fill differ: the
Greens' expansive vision of the welfare state would require the
most additional revenue or cuts elsewhere; Labour's more
pared-back vision for new entitlements would create the least
additional pressure on the budget. The other parties lie
somewhere in between. But all parties' plans would add to the
fiscal challenges facing the next Welsh Government, to some
extent.
‘One can have sympathy with the predicament Wales's political
parties find themselves in. Politics is easier when fiscal
conditions allow for spending increases or tax cuts without
difficult choices elsewhere. Voters, already unhappy after years
of only slow economic growth, a rising cost of living, and public
services that have failed to recover from the COVID-19 pandemic,
may not warm to a dose of cold, hard fiscal reality. But the next
Welsh Government will have to face up to it. And as the current UK government
has found out, not preparing the public for difficult choices
prior to an election can come back to bite you politically when
the electoral dust has settled.'
Read the full analysis
here.
