Senedd approves the Welsh final Budget 2026–27

The Budget includes £1.2 billion more for public services and businesses than in the current financial year, along with £400 million of new allocations added since the draft Budget was published in October.

On the same day, the Senedd approved a Welsh Rates of Income Tax (WRIT) motion confirming that the Welsh rate will remain at 10p in the pound for basic, higher and additional rates, leaving income tax rates the same as in England. The Welsh Conservatives argued the rate should have been cut while the Welsh Lib Dems wanted it to rise.

Welsh Rates of Income Tax debate

Opening the debate, Cabinet Secretary for Finance and Welsh Language Mark Drakeford highlighted the fiscal importance of WRIT since its introduction in 2019. Income tax raised in Wales is forecast to generate nearly £4 billion next year, with devolved income tax powers contributing a net £2.7 billion to the Welsh budget over their first decade. According to Drakeford, these revenues have become integral to sustaining public services, and rejecting the resolution would remove £3.8 billion from the coming year’s budget. He also noted that the administrative partnership with HMRC remains robust, and drew Members’ attention to the upcoming legislative consent motion relating to the UK Government’s latest fiscal devolution proposals, which would enable Wales to set income tax rates on property‑derived income.

Plaid Cymru’s Heledd Fychan offered conditional support, emphasising that devolved tax powers have played a positive role in strengthening the Welsh budget. She contrasted Wales’s limited tax‑setting autonomy with Scotland’s wider latitude to vary thresholds and bands, arguing that the Welsh system remains “ornamental rather than practical”, having never been used. Fychan reiterated Plaid Cymru’s long‑standing call for parity with Scotland over income tax powers and welcomed the incremental devolution proposed for property income, though she stressed that more substantive reform is needed.

The Welsh Conservatives took a very different stance. Sam Rowlands confirmed that his party would oppose the motion, advocating instead for a 1p reduction in the basic rate of income tax to “put more money into people’s pockets”. He argued this could be funded through efficiency savings without affecting key frontline services. Rowlands criticised what he described as the Welsh Government’s record of “wasteful spending”, citing examples such as settlement payments, green initiatives, the 20mph speed limit and Senedd reform proposals. According to Rowlands, the Government’s refusal to cut taxes leaves Welsh households facing unnecessary financial pressure.

Labour backbencher Mike Hedges spoke in support of the Welsh Government’s position, stressing that maintaining alignment with the rest of the UK avoids perverse incentives for residency‑based tax planning. Hedges argued that simply changing rates—without the ability to alter tax bands—offers limited practical benefit, as seen in Scotland’s early experience with devolved rate‑setting powers. He reiterated a long‑held view that further devolution of dividend income would provide a more meaningful fiscal tool.

Welsh Liberal Democrat Jane Dodds also announced her support for the motion, while pressing the government on its continued reluctance to use WRIT as a policy lever. Dodds questioned why the power to vary rates has gone unused for six years, even during periods of acute budget pressure. She set out her party’s policy of a temporary 1p increase to support social care reform, arguing that modest contributions from taxpayers could produce substantial improvements to care provision. Dodds also echoed concerns about the slow pace of wider fiscal devolution “to give us the powers that we need to vary income tax and to get a fair fiscal settlement for Wales”. 

Closing the debate, Drakeford thanked Members for their contributions but criticised the Conservatives’ poasition, stressing that voting against the resolution would not advance their aims and would merely reduce the Welsh budget dramatically. He welcomed constructive engagement from other Senedd members on the future shape of fiscal devolution and reiterated that an external review—jointly undertaken by the Fraser of Allander Institute and Bangor University—would soon report on Wales’s current income tax powers, providing evidence to inform the next Senedd term.

Budget Debate

Opening the Budget debate, Mark Drakeford said “we have more money to allocate in this final Budget as a result of both additional funding arising from the UK Budget in November and from increases in forecast devolved tax revenues”.

The Chair of the Welsh Finance Committee, Peredur Owen Griffiths, welcomed the Cabinet Secretary’s acceptance of “the vast majority” of its 33 recommendations on the draft budget.

Heledd Fychan (Plaid Cymru) emphasised their co-operation with the government “for the benefit of the people of Wales,” explaining Plaid’s abstention to enable passage of the Budget. She said: “This is not an endorsement of the budget, but rather Plaid Cymru providing much‑needed stability for public services and ensuring that we avoid a catastrophic situation had the budget not passed.” She argued the original draft would have left councils facing a £436m deficit and potential “council tax hikes of around 22 per cent or the loss of 14,000 jobs”.

Sam Rowlands (Conservative) called it “a roll‑over budget” that “does not offer the ambition that Wales deserves,” reiterating his call for a 1p cut to the basic rate of income tax, plus scrapping Land Transaction Tax (LTT) on primary residences. He continued: “This Budget fails to address the most pressing issue of the day, which is our economy”.  Another Conservative MS, Janet Finch-Saunders, added that Welsh Conservatives offered a different approach “to cut tax… to cut waste… But, once more, Welsh Labour has chosen the same path as almost every year before, backed by Plaid Cymru”.

Mike Hedges (Lab) called on the MSs to support the Budget, saying that “failure to do so would mean services ending and large-scale public sector redundancies”.

Jane Dodds (Lib Dem) said that, similarly to Plaid Cymru, she would abstain from the Budget. Dodds urged a long‑term solutions in social care, stating that “we want to see a penny increase in income tax to fund social care. We need to be clear that you can't fix the NHS without fixing social care”.

Carolyn Thomas (Lab) criticising the Conservative proposal of cutting LTT, saying: “ I am told [it] would cost £140 million, but where would this come from if we're still to expect decent public services”. She further welcomed extra funding for councils and health.

Laura Anne Jones (Reform UK) suggested that the final Budget does nothing “to close that gap or restore confidence” in the future of Welsh farming, adding that her party will listen to farmers. She also expressed concern about a council tax rise, while suggesting that there is no “Wales-wide response” to this budget to help small and medium-sized businesses ‘absorb’ costs and taxes. She blamed Plaid Cymru for ‘agreeing and signing’ the Budget.

Russell George (Ind) did not support the Budget and said he will vote against it. He stated that: “This Labour and Plaid Cymru budget deal is not a good deal for the people”.

Votes

Welsh Rates of Income Tax 2026-27 motion- passed 26 in favour, 13 against, 13 abstentions

Welsh final Budget 2026–27 - passed 25 in favour, 13 against and 14 abstentions

You can read the full debate here.