Elin Jones MS, Cabinet Minister for Finance
I am issuing this statement to expand on comments made in the Welsh Government’s response to the UK Government’s Autumn Budget. The Welsh Government’s analysis of our funding position for next year has been contested in subsequent political debate.
The Welsh Government’s resource block grant settlement in 2027-28 is £146m or 0.6% higher in cash terms than in 2026-27. However, taking account of inflation in 2027-28 of 2.1%, this translates into a 1.5% real terms reduction.
The Welsh Government’s resource budget also includes the devolved taxes net position and business rates. Taking account of those elements in both years increases the year-on-year cash terms increase to around £400m or 1.6%. However, in real terms that still means a 0.5% reduction.
On that basis, the Welsh Government, alongside independent commentators such as the Institute for Fiscal Studies, have assessed the impact of the UK Budget on Wales as resulting in real terms reductions to our funding next year.
As prices rise, the funding we receive won’t go as far. Inflation is now projected to be higher this year and next compared to March forecasts. The additional funding announced has not offset that hit from higher inflation; the real terms value of the block grant settlement in 2027-28 and 2028-29 is lower than we were expecting before the Autumn Budget.
Claims have also repeatedly been made around “record level” funding for the Welsh Government budget. It should be noted that the average annual real terms increase in the Welsh Government’s budget over the course of the current UK parliamentary term (2023-24 to 2028-29) is set to be lower than the previous UK parliamentary term (2019-20 to 2023-24).
This statement is being issued in the interest of clarity and informing public understanding of the vital issue of funding for our public services.
Notes
The year-on-year change in the resource DEL settlement quoted above excludes technical adjustments to take account of reductions to employer public service pension contributions.
The inflation measure used is the GDP deflator forecast (at 2.1% for 2027-28), as published by the Office for Budget Responsibility alongside the UK Government Autumn budget and used to adjust for inflation in the UK Government Budget. An alternative measure of inflation, the Consumer Price Index, is currently forecast to be 3.1% in 2027-28.
The devolved taxes net position is the difference between devolved tax revenues and the associated block grant adjustments.