Wales’s Budget Needs a Clear Plan for Growth

With the Welsh Government’s Draft Budget due on 17 November, the priority must be more than a response to stretched public finances. The question is how the money available can help build a stronger Welsh economy and a more sustainable tax base.

There is no getting away from the difficult choices facing Wales in this budget. The size of the settlement matters, as do the pressures on public services. But another question needs to sit alongside them, what will the Welsh Government do to help businesses invest, grow and create jobs?

The Senedd Finance Committee’s scrutiny of the 2027–28 Draft Budget is an opportunity to ask that question, alongside its work on the Taxation (Wales) Bill and the Second Supplementary Budget.

The financial picture is difficult. Following the UK Government’s Autumn Budget on 28 October, the Welsh Government confirmed an additional £448 million over the current spending review period. Yet Finance Minister Elin Jones has warned that resource funding will still fall by 0.5% in real terms next year, while capital funding is expected to be almost 10% lower in real terms by 2029–30.

This matters to businesses, not just public services. Capital funding pays for the transport links, energy networks, infrastructure and public facilities that businesses rely on. If that investment continues to fall, it risks holding back private investment and delaying projects Wales needs.

The Welsh Government must manage the pressures in front of it. But it also needs to make choices now that give the economy a stronger footing over the long term.

The business test

For businesses, the budget is about much more than a particular tax rate or support scheme. It is about whether Wales is a place where they can confidently invest, recruit and grow.

Planning delays, skills shortages, infrastructure constraints, energy costs and uncertainty over public investment all feed into those decisions. They affect where a business chooses to locate, whether it expands and when it takes on more people.

CBI Wales has raised several of these issues in its response to the Welsh Government’s Programme for Government. It has pointed to planning capacity, faster decisions, skills reform and delivery of the proposed National Development Agency as important tests of the Government’s economic ambitions.

The message is straightforward, businesses need to see delivery, not another round of strategies and reviews.

That raises an important question for the Draft Budget. Will the resources allocated to economic development, infrastructure, skills and business support be sufficient to address the barriers businesses themselves identify?

The answer will be particularly important for sectors where Wales has significant opportunities, including advanced manufacturing, clean energy, life sciences, digital innovation and defence.

Taxation, competitiveness and the Welsh revenue base

The Finance Committee’s scrutiny of the Taxation (Wales) Bill adds another dimension.

Wales has a range of devolved fiscal powers, but the question is how effectively those powers are used alongside wider economic policy. Taxation needs to provide sustainable revenue for public services, while decisions about the tax system must also take account of their impact on households, employers and investment.

Non-domestic rates will be an immediate issue for many businesses. The Welsh Government has committed to rebalancing the system from 2027–28, extending the lower multiplier currently applied to retail shops to certain small and medium sized hospitality, visitor accommodation and leisure properties.

That is a significant change for those sectors. But businesses will also want clarity on the wider business rates framework, the multipliers that will apply next year and how the system will affect different property types and parts of the economy.

The wider question is whether Wales has a sufficiently clear and predictable approach to business taxation to support investment over the long term.

Local government is part of the economic equation

The financial position of local authorities also deserves greater attention.

Councils are responsible for services and functions that have a direct bearing on economic development including planning, transport, regeneration, local infrastructure and aspects of business support. Their ability to invest, maintain services and support local economies is therefore part of the wider business environment.

The Draft Budget should be considered not only in terms of departmental allocations, but also in terms of what it means for the capacity of local government to support economic growth across Wales.

There is a further regional question. How will investment and economic opportunity be distributed? Will funding support the places with the greatest potential for growth, including communities undergoing industrial transition, or will it simply respond to immediate pressures?

A stronger focus on the return from public spending

The debate should not be reduced to whether Wales needs more money, although the scale and fairness of the funding settlement remain important.

It should also examine what Wales gets from the money it spends.

How effectively are public funds supporting productivity? Are skills budgets aligned with the needs of employers and emerging industries? Is infrastructure investment connected to identifiable opportunities for private investment? Are business support programmes delivering measurable improvements in business growth and employment?

These are questions that require evidence from employers, investors, local authorities, colleges, universities and sector organisations.

The Finance Committee has published responses to its Draft Budget consultation, creating a body of evidence against which the Government’s proposals can be tested. The Taxation (Wales) Bill consultation, which closes on 20 November, provides a further opportunity for businesses and other stakeholders to contribute to the debate.

The test on 17 November

The Draft Budget will inevitably be shaped by difficult choices. But those choices should be judged against more than the immediate management of public finances.

Wales needs a stronger economic base, more productive businesses, higher value employment, greater investment and a broader source of tax revenue to support public services.

That requires a clear connection between the Government’s spending decisions and its ambitions for economic development.

The question on 17 November is not simply where the money goes. It is whether the budget sets out a credible route towards an economy that can generate more of its own wealth, attract investment and sustain the public services on which communities and businesses depend.

For Wales, managing the constraints is unavoidable. Making sure those constraints do not become an excuse for a lack of ambition is the real test.