Looking ahead to the Welsh Government’s Draft Budget 2027-28

The Plaid Cymru-led Welsh Government will publish its first Draft Budget of the Seventh Senedd on 17 November 2026. The budget will be published in both an outline and detailed format, followed by a debate in Plenary.

Ahead of its publication, this article looks at some of the economic and funding pressures that could shape the Draft Budget and how you can keep up to date and follow scrutiny of the Draft Budget this autumn.

The economic context surrounding the Draft Budget

Economic statistics and forecasts are vital to the Draft Budget as inflation/rising prices affect how much can be delivered with a given level of public spending. A budgetary increase in cash terms may actually be a reduction in real terms.

The Consumer Prices Index (CPI) rose by 3.5% in the 12 months to September 2026, up from 3.1% the previous month. The Bank of England noted in September the outlook for inflation this year has shifted “materially” compared to previous projections.

The main driver of near-term inflation is developments in global energy prices.

The Office for Budget Responsibility (OBR) forecasts (October 2026) that higher energy prices contributing to CPI inflation will increase to a quarterly peak of 3.75% in early 2027. Inflation is then forecast to fall to 2% in 2028 as energy prices decline. Though the OBR highlight the outlook for inflation is “highly uncertain”.

The OBR forecasts real GDP growth in October of around 1.25% in 2026, a slight improvement on its March forecast. However, the OBR has downgraded its central forecast for real GDP growth in 2027 from 1.6% to 1.0%. This is due to higher global energy prices affecting consumers and businesses, and higher interest rates weighing on activity.

What has been the impact of the UK Government’s budget?

The UK Government published its budget for 2027-28 on 28 October.

The Welsh Government outlined the UK Budget means an extra £448m funding over the spending review period (2026-27 to 2029-30), including an extra £172m in the current financial year and £146m in 2027-28. It says resource funding will be 0.5% lower in real terms in 2027-28. On 5 November the Welsh Government published a further statement reiterating information on the real terms reduction.

The Welsh Government has also highlighted concerns around capital funding, which reduces by £19m in 2027-28.

The cost of living payment announced in the UK Budget is also being implemented by the Welsh Government in Wales. It is being implemented on the same basis as England – a £100 payment to all households in council tax bands A to D. Wales Fiscal Analysis (WFA) estimate that may cost £120m this year.

The OBR’s analysis says Real Household Disposable Income (RHDI) will fall slightly in the near-term. It also says that although labour income, non-labour income, and social benefits have boosted income, “across last year and this year, these factors are outweighed by higher prices and taxes on income and wealth”.

Following the UK Budget, WFA say beyond cost-of-living and Wales-specific measures, “the much bigger story for Wales is how little the Budget did to compensate public services for higher inflation”. It goes on to talk about inflationary impacts on the Welsh Government’s budget, suggesting the outlook is “bleak”, going on to say the funding situation makes the draft budget “essentially a zero-sum game, where any real-terms increase in spending necessitates cuts elsewhere”.

What happens if the budget is not agreed before the start of the financial year?

If a Budget resolution for a financial year is not passed by the Senedd before the start of that financial year (1 April), then initially only 75% of the budget authorised for use in the previous financial year is available.

This figure increases to 95% if a Budget resolution has not been agreed by the end of July.

However, an Annual Budget Motion can be tabled and considered by the Senedd during the financial year it relates to – so theoretically the budget for 2027-28 could be passed after 1 April 2027, if the Senedd had not agreed a budget by that point.

The budgets of directly funded bodies such as the Wales Audit Office, Public Services Ombudsman for Wales, Senedd Commission, and the Electoral Commission Wales are also included within the annual budget motion.

In the event that a budget was not agreed, these directly funded bodies would only be able to access 75% / 95% of their budget until an annual budget motion was approved.

Local authorities in Wales receive the majority of their funding from the Welsh Government and are legally required to set their budgets and council tax before 11 March in the financial year preceding the one to which the budget applies. This deadline ensures that billing authorities can issue council tax bills in time for the start of the financial year on 1 April.

Impact on the Welsh Rate of Income Tax (WRIT)

Income tax is technically a temporary tax and must be reapproved each year.

A Welsh rate resolution must be made before the start of the tax year, which begins on 6 April. It can only be made for one tax year and must apply to the whole of that tax year.

A Welsh rate resolution can only be considered once the Annual Budget Motion is published, but no earlier than 12 months before the start of the relevant tax year – this is to ensure that Members can only vote on the Welsh rate resolution when all of the information about the Welsh Government’s Final Budget is available.

The Senedd cannot pass a budget until it has first agreed a Welsh rate resolution. This is based on the principle that the Senedd cannot take a decision on the spending plans contained in the Annual Budget Motion without first agreeing how the revenues to pay for those funds will be raised through taxation.

Once agreed, a Welsh rate resolution can be cancelled before the start of the tax year, but it cannot be cancelled or changed once the tax year it applies to has started, so from 6 April onwards.

How to follow scrutiny of the Draft Budget 2027-28

The Senedd will hold a debate on the Draft Budget statement on the day of the Draft Budget. You can follow the debate and all scrutiny undertaken by Senedd Committees live on SeneddTV.

The Welsh Government currently plans to publish a Final Budget for 2027-28 on 16 February 2027, with a vote on the Final Budget Motion on 23 February 2027.

Further information on the Draft Budget can be found on Senedd Research’s Draft Budget timeline and glossary.

Article by Božo Lugonja, Senedd Research, Welsh Parliament