At the 2021 Census, 7.8 per cent of Welsh households relied entirely on oil for central heating. In England, the figure was just 3.2 per cent.
It is a useful statistic to keep in mind when considering John Healey’s first Budget. Among the Chancellor’s announcements was a plan to abolish standing charges on household gas bills. For Welsh households that heat their homes with oil, the change will offer little help.
The wider point is that a national economic shock does not affect every household, business or community in the same way. Nor does a national policy necessarily provide the same relief.
The war in the Middle East has pushed up oil and gas prices, leaving the Chancellor facing an economic outlook considerably worse than expected in March. The Office for Budget Responsibility (OBR) now expects inflation to average 3.4 per cent next year, rather than returning to the Bank of England’s 2 per cent target. Economic growth in 2027 has also been downgraded to just 1 per cent.
Higher energy prices squeeze households directly, but their effects do not stop at the front door. Businesses face higher production and transport costs, while customers have less money to spend. Persistent inflation also reduces the purchasing power of the Welsh Government’s budget, making it harder to maintain public services and deliver planned investment.
Healey’s immediate response was to offer what he called “breathing space”. Fuel duty will remain frozen until July, the temporary VAT cut on domestic electricity will be extended, and households in council tax bands A to D in England will receive a £100 winter energy payment. The fuel duty decision is particularly relevant to rural communities, where a car is often essential. But the £100 payment is not yet a Welsh entitlement. The devolved governments will receive funding to provide similar support, with the arrangements in Wales still to be decided. There is also a question about how effectively council tax bands identify financial need. Property values are not household incomes, so they are an imperfect way of identifying those under the greatest financial pressure.
The Chancellor also confirmed an increase in the National Living Wage to £13.21 an hour from April 2027, a rise of 3.9 per cent. This has particular relevance to Wales. According to the Low Pay Commission, 7.7 per cent of employee jobs in Wales were paid at or very close to the minimum wage in 2025, compared with 6.6 per cent across the UK. A greater proportion of Welsh workers should therefore benefit from the increase. But higher wages will not necessarily translate into equivalent improvements in living standards if inflation remains elevated.
For businesses, the same announcement presents another challenge. Higher wages support household spending, but also increase employment costs, particularly in labour-intensive sectors such as hospitality, retail and social care. Some employers may absorb the increase through lower profits, while others may raise prices or reconsider recruitment.
These pressures come on top of already high energy costs. The British Industrial Competitiveness Scheme, announced earlier this year and now funded through the Budget, will help eligible manufacturers by reducing electricity bills by up to 25 per cent. Many smaller businesses will receive no equivalent support. The Chancellor
also announced changes to business rates in England. Wales operates a separate system and has already announced plans to reduce rates bills by 30 per cent for eligible hospitality and leisure properties from April 2027, subject to Senedd approval.
There are limits to how much relief any Chancellor can provide.
The OBR now expects UK borrowing to reach 4.2 per cent of GDP in 2026-27, rather than the 3.6 per cent forecast in March. The Chancellor’s fiscal headroom has also narrowed from £23.6 billion to £15 billion. This means the government has less flexibility to respond to another economic shock without increasing taxes, reducing expenditure, or reconsidering its fiscal rules. Higher borrowing costs also mean more public money is spent servicing debt rather than providing services or financing investment.
For Wales, where public services depend heavily on decisions made in Westminster, that constraint matters. The Budget provides an additional £450 million for the Welsh Government through the Barnett formula over the spending-review period, although higher inflation will reduce what that funding can purchase.
With public finances under pressure, the Budget’s investment announcements become particularly important.
An additional £20.4 billion for the National Wealth Fund and British Business Bank could help businesses and infrastructure projects secure finance. But a larger UK investment pot is not a Welsh allocation. Projects still need commercial viability, skilled employees, and reliable infrastructure before capital can be turned into productive economic activity.
The Budget also confirmed £2.5 million to expand M-SParc on Anglesey, subject to a business case. Science parks can help turn research and new ideas into commercial opportunities by bringing businesses together with universities, researchers and investors. They can also help smaller firms develop technologies, access specialist knowledge and establish connections needed to grow. Their contribution is not simply the investment in buildings, but the businesses, employment and wider economic activity that follow.
Another Budget announcement raises an interesting question for North Wales.
Under the proposed British Data Centre Covenant, developers seeking enhanced government support will need to demonstrate local benefits, create employment opportunities, and meet conditions relating to energy and environmental protection. In return, strategically important projects could benefit from faster electricity grid connections. Near Caernarfon, a large data centre campus is proposed for the former Ferodo site. The developer anticipates 210 jobs once operational, alongside construction employment. Opponents have raised concerns about the development’s scale and environmental implications. The planning application remains undecided. This is not simply a question of whether a development should proceed. It is about ensuring that communities hosting major investments receive a meaningful share of the economic benefits.
The same principle applies more widely to the Budget.
A £100 energy payment can offer immediate relief. The return from a science park, business investment fund, or major infrastructure project will take longer to establish.
But for an economy where a relatively large proportion of workers earn close to the legal minimum, the more significant question is whether those investments create the conditions for more productive businesses, higher wages, and greater prosperity across Wales.
