With the Draft Budget published back in December 2024, the Final Budget Debate on 4 March 2025 represents the end of the process for setting the Welsh Government’s budget.
In this article we explore the changes between the Draft and Final Budget. You can read more about the Welsh Government’s Draft Budget in our article that explores five things we learnt during this year’s scrutiny.
A collaborative additional £109m Final Budget to avoid an impasse
The Welsh Government Budget is agreed by a vote in the Senedd on an Annual Budget Motion, set to take place 4 March 2025. As Welsh Labour are a minority Government, they require at least one other Member to vote in favour of the Budget for it to pass. Late last year, questions were raised in the media regarding the possibility of the Welsh Government not having its budget agreed by the Senedd for 2025-26. Our article earlier this year exploring the Draft Budget 2025-26 outlined the impact of this happening.
The likelihood of the budget motion passing has significantly increased. On 4 February, the Senedd voted in favour of the Draft Budget 2025-26, in which one Member abstained: the Leader of the Welsh Liberal Democrats, Jane Dodds MS.
Media reports highlighted a potential agreement regarding extra funding may take place between Jane Dodds MS and the Welsh Government ahead of the Final Budget being published. The collaboration was confirmed in the Final Budget 2025-26 explanatory note, which states that:
[…]the Welsh Government has worked closely with Jane Dodds MS… to agree more than £100m of additional investment, in areas we have shared priorities.
Following the publication of the Final Budget, Jane Dodds, MS, said:
I’m delighted we have secured funds needed to deliver my party’s key priorities of improving social care, increasing quality childcare, tackling water pollution, improving roads and public transport and protecting vital council run services.
The Final Budget 2025-26
Following Committee scrutiny, and debate of the Draft Budget 2025-26, the Welsh Government published the Final Budget 2025-26 on 20 February 2025.
The Final Budget includes further £30m of resource funding for social care to “target delayed hospital discharges and provide more care and support in local communities”.
Stakeholders welcomed the £30m of resource funding to fund the extensions of Flying Start childcare in all local authority areas. The Welsh Government says this funding will make childcare available to the “majority of two-year olds identified in those plans in 2025-26”. The hourly rate for childcare will also raise to £6.40, to alleviate cost pressures for providers.
Other allocations made in the Final Budget include:
- £10m resource funding to the Rural Investment Scheme and £5m to tackle water pollution;
- Over £4m resource funding for arts, culture, heritage, publishing, creative and sports sectors;
- £8m resource funding to support the introduction of £1 bus fares for 16 to 21-year-olds;
- £1.25m towards improvements on the Heart of Wales rail line between Swansea and Shrewsbury;
- £5m capital funding to improve play spaces and refurbish playgrounds;
- additional £5m capital funding to install low carbon heating systems in leisure centres.
The key allocations by government departments and how these have changed from the Draft budget 2025-26 are summarised below.
Welsh Government Final Budget 2025-26 Allocations
Changes between the Main Expenditure Groups in the Final Budget 2025-26, from the Draft Budget 2025-26
* Excludes around £1.1 billion non-domestic rates income.
** Includes allocation of £261 million of non-fiscal revenue due to student loans.
Figures are rounded. Refer to the Welsh Government Final Budget 2025-26 for exact figures.
Funding concerns remain for the higher education sector
Earlier this year, Cardiff University, Bangor University and the University of South Wales announced plans to make redundancies as a result of funding shortfalls.
Whilst the additional funding towards social care in the Final Budget was welcomed by the Royal College of Nursing, they noted “growing concerns about the future of nursing education in Wales”, and requested information on plans around funding for nursing education following Cardiff University’s proposal to close its school of Nursing..
The Welsh Government recently announced an additional £18.5m of capital in-year funding for the 2024-25 financial year to support universities with “estate maintenance and digital projects to reduce operating costs”. The Welsh Government noted this funding was in addition to the £21.9 million which is expected to be raised from increases in tuition fees and an additional £10m in grant funding to the sector.
Universities Wales welcomed the additional £18.5m of in-year capital funding but in response to the Final Budget 2025-26 said:
[…] it is difficult to see how this budget provides a sustainable position for Welsh universities going forward. If nothing were to change the Welsh Government runs the risk of universities entering the next academic year without the required support in place.
Welsh Rates of Income Tax
Alongside the debate on the Final Budget itself, there will be a debate to set the Welsh Rates of Income Tax (WRIT). The Welsh Government isn’t intending to change WRIT for 2025-26, which will keep WRIT at 10p for basic, higher and additional rates
This means taxpayers living in both Wales and England will continue to pay the same amount of income tax. You can use the Senedd Research Income Tax Tool to help calculate how much you may need to pay in income tax.
A March towards spring – what happens next?
The 4 March is a significant day for Welsh finances, with the Senedd due to debate the Final Budget, the Welsh Rates of Income Tax and the Local Government Settlement.
You can tune in and watch all the debates on Senedd tv, check the transcript afterwards and follow Senedd Research on ‘X’ (formerly Twitter) for the latest articles exploring the budget and more.
Article by Božo Lugonja and Helen Jones, Senedd Research, Welsh Parliament
