The upcoming Welsh budget, valued at £25 billion, is pivotal for the economic trajectory and fiscal policy of Wales as it prepares for the next few years leading into 2026. Finance Secretary Mark Drakeford is set to unveil the budget on a forthcoming Tuesday afternoon. This budget is not merely a reflection of current finances but also addresses a multitude of economic factors, potentially influencing the taxes levied on both individuals and businesses. Given that Labour does not hold a majority in the Senedd, securing support from another political party will be necessary for the budget to progress.
One major item on the agenda is the growing crisis surrounding the National Health Service (NHS) and its waiting lists. First Minister Eluned Morgan has recently acknowledged the distressing situation of record-long wait times, declaring it a “crisis.” Since the pandemic, there has been a significant backlog of operations, positioning health care as the predominant concern for the Welsh government. This upcoming budget allocates approximately half of its funds for health care services, with expectations for urgent improvements. However, experts warn that rectifying waiting times typically requires sustained efforts over a prolonged period—dramatic changes in the average waiting time often take years, as noted by Mark Dayan from the Nuffield Trust.
In a turn of advantageous events, Chancellor Rachel Reeves recently allocated an additional £1 billion to the Welsh government in this budget. Drakeford emphasized that this funding provides new possibilities after enduring prolonged fiscal constraints, often exacerbated by high inflation rates. Experts at Cardiff University view this boost as an opportunity for increased investment in the NHS without compromising funding for other departments. Nonetheless, projections beyond 2026 raise concerns about maintaining this level of support, foreshadowing difficult decisions ahead for public services.
As local authorities, which manage a host of vital services, face growing financial stresses, the future of social care is called into question. Wales is divided into 22 local authorities that oversee essential services like schools, waste management, and recreational facilities. Many authorities are currently grappling with alarming budget shortfalls, raising apprehension about financial sustainability. Local authority leaders argue that the challenges within NHS cannot be alleviated without first addressing gaps in social care.
Additionally, the broader cost of living crisis looms over these budget discussions. Although Drakeford welcomes the additional funding from Westminster, he faces substantial criticism regarding other decisions made within the UK government. These include means-testing pensions for winter fuel payments and the contentious two-child benefits cap. Although the Welsh government lacks the expansive powers over the benefits system that Scotland holds, there will nonetheless be mounting pressure to provide support for residents contending with rising living costs.
Taxation remains a leverage point for the Welsh government, with controls over income tax and the land transaction tax. This budget could potentially enable additional funds to fulfil public service commitments; nonetheless, raising income tax would be a significant undertaking, especially since the Welsh tax rates have remained unchanged since their devolution in 2019.
Despite these challenges, the question of whether the proposed budget will pass through the Senedd remains uncertain. Given Labour’s minority status, they require support from at least one other party member to move forward. There is sure to be intense negotiation among parties in the forthcoming weeks. Failure to pass the budget could lead not only to significant funding losses but might also necessitate cuts that would further strain Wales’ public services and the stability of the Labour administration itself.
Overall, the implications of the Welsh budget are far-reaching. While it is designed to usher in new funding and address pressing crises, the outcome rests heavily on the collaborative political dynamics at play, particularly with opposition parties with their distinct interests and requested reforms that must be deliberated and potentially negotiated before reaching a consensus. Drakeford’s assertion of a “bright future for Wales” hinges on navigating these complex political landscapes while effectively addressing the pressing needs of the Welsh populace.
