The Welsh Government has revealed its Draft Budget 2025-26 with all government departments receiving increases in revenue and capital funding.
The Welsh Government says there will be an extra £1.5 billion to spend on public services in its £26 billion budget for next April.
The Draft Budget will be scrutinised by Members of the Senedd before a final vote in March 2025.
Budget Breakdown
- More than £600 million in extra revenue and capital funding for health and social care.
- £81 million more capital funding to build more homes for social rent.
- More than £100 million more for the education budget and a 4.3% increase in the local government settlement.
- £181.6 million to improve rail services, including transforming the Core Valley Lines from a Victorian-era railway to a state-of-the-art Metro network.
- £3.7 million to accelerate planning decisions and digitise planning services.
- Two new funds to maintain Wales’ road network – fixing potholes and repairing defects.
- Additional funding will also ne allocated to repair and monitor coal tips.
- For Welsh businesses, the non-domestic rates multiplier will be capped at 1% for 2025-26 and retail, leisure and hospitality businesses will continue to receive 40% relief towards their bills. In total £335 million will be spent on non-domestic rates support in 2025-26.
- Welsh Rates of Income Tax will remain unchanged – Welsh income taxpayers will continue to pay the same rates as people in England and Northern Ireland.
- From 11 December 2024, the higher residential rates of Land Transaction Tax applying to purchases of additional residential properties will increase by 1%, raising an estimated additional £7 million in 2025-26. This change is broadly in line with changes made to Stamp Duty Land Tax in England and Northern Ireland.
- The standard rate of Landfill Disposal Tax will rise to £126 and to £6.30 per tonne for the lower rate to help reduce the amount of waste sent to landfill and encourage more recycling.
Alison Orrells, Chair, CBI Wales, said:
“Businesses were looking to the draft Welsh Budget to inject momentum into the economy after a tough UK Budget.
“Despite the UK administration’s £1.7 billion real terms funding increase – the largest since devolution – the Welsh Government still face limited fiscal headroom to shore up public sector finances and support struggling households.
“The First Minister’s recent announcement of £157 million to be invested in transport, the economy, planning reform, business and infrastructure measures – along with the new economic forum and next year’s investment summit – shows the government’s commitment to economic growth.
“However, Welsh businesses still face multiple challenges in 2025, in the form of higher employer National Insurance contributions and other rising costs like the National Minimum Wage.
“The commitment to emulate the business rate reliefs available to hospitality, retail and leisure sectors based in England is very welcome. This will provide much-needed support for hard-pressed Welsh businesses and means they are not being put at a disadvantage to companies operating just across the border.
“While the announcement of some reliefs is helpful, the lack of clarity on the Non-Domestic Rates multiplier and sector-specific reliefs creates uncertainty for firms. The ending of transitional reliefs could also lead to additional costs for some companies.
“The promise of streamlined and digital planning processes will cut red-tape, but will not happen overnight. High-growth businesses have complex needs, and the government must invest heavily in strategic planning authorities and local authority planning departments to see short-term benefits.
“The additional £6.5 million investment in the Flexible Skills Programme, prioritising growth sectors like decarbonisation, aligns with business’ net zero ambitions. But firms want further measures in a rapidly changing labour market.
“Ultimately, the only way to support the Welsh Government’s mission to improve public services and raise living standards is to help firms thrive and deliver growth. We need business and government to work together to co-create policy that protects competitiveness and avoids short-changing Wales’ long-term growth ambitions.”
Helen Edwards, Partner at property consultancy Gerald Eve, commented:
“The Welsh government’s decision not to freeze the non-domestic rates (NDR) multiplier is a blow to businesses already under pressure. Despite the continued 40% retail, leisure and hospitality (RHL) relief, Welsh businesses will now be hit with a double whammy, given that there will be no transitional relief for businesses for 2025/26. This, on top of last year’s 6.7% hike, makes Wales one of the most expensive places in the UK for business rates. Many businesses will feel the strain, particularly in retail and hospitality, at a time when every penny counts.”
Responding to the Welsh Government’s Draft Budget, Ben Francis, FSB Wales Policy Chair, said:
“Following campaigning by FSB, the Draft Budget has delivered an extension of the rates relief for retail, leisure and hospitality businesses and the multiplier used to calculate rates for all businesses has been capped. We welcome that the Welsh Government has heard our concerns. This lifeline will be crucial for many businesses in a context of razor-thin margins and soaring costs, helping them to reposition themselves for the next stages of economic recovery.
“These measures are particularly important against a challenging backdrop for small businesses, with inflation and energy costs spiking, whilst many small and medium employers are facing increases in employment costs.
“In the longer term, the Welsh Government must deliver a business rates framework that aligns with a forward-looking mission to drive prosperity and addresses the imbalance between our small-town centre retailers and large out-of-town developments.
“Investment in infrastructure is key to future growth, and the Welsh Government’s announcement of additional funding for rail projects, fixing potholes and accelerating planning is therefore encouraging. Additional funding and a clear drive to unlock the planning system is welcome. It is vital that these benefits are distributed equitably, supporting a wide range of developments.
“Ultimately, the true test of the Draft Budget and whether it will succeed in delivering a brighter future is whether it ends Wales’ prolonged period of economic stagnation. For the economy to grow, we need more people in all parts of the country to be incentivised to set up or expand their business, in turn, creating jobs and opportunities.
“To achieve these goals, we urge the Welsh Government to work closely with businesses to develop a long-term economic delivery plan. This must be underpinned by adequately resourced regional structures and performance metrics, and focused on creating a supportive business environment, easing regulatory burdens, and boosting access to finance.
“Businesses will now be looking to the UK and Welsh Government to articulate how they will work together to deliver policies that empower small businesses to drive innovation, create jobs and unlock the potential of our local economies.”
Cabinet Secretary for Finance Minister Mark Drakeford said:
“This is budget for a brighter future, delivering an extra £1.5 billion for our public services and priorities, helping to put Wales firmly back on the path of growth after 14 difficult years. This is in stark contrast to the last couple of years when we have been forced to make some very difficult and painful decisions.
“This Draft Budget offers a real opportunity to start to rebuild and reinvigorate our public services. It delivers increases to all departments and a significant boost in capital funding, meaning more investment in the very fabric of our nation – in our school and NHS estate, in housing and in public infrastructure.
“This is good budget for Wales. But it will take time to reverse the damage inflicted on Wales over 14 long years of neglect from previous UK administrations.”
Lloyd Powell, head of ACCA Cymru/Wales, in response to the draft Welsh budget said:
“Following on from the extra spending on public services announced in the UK Budget in October, the draft Welsh Budget saw additional £1.5 billion of spending announced on public services, including the NHS and local authorities. Spending announcements in the draft Budget were firmly in line with the four priorities outlined by the First Minister earlier this year.
“Recognising the significant challenges the NHS in Wales faces, with an ageing population, increasing demand, persistent health inequalities and skills shortages, the 2025/26 draft Welsh Government budget saw a further £600 million allocated to Health and Social Care in Wales – amounting to over 50% of the total Government Budget. This needs to be accompanied by service reform and productivity gains. WG needs to redouble its efforts to address the fundamental challenges as outlined in ‘A Healthier Wales’ in 2022, including reducing waiting times, increased use of technology and investing in the workforce for the future.
“Businesses in Wales continue to face challenges in 2025 and into 2026 which have adversely affected business confidence. These include higher employer National Insurance contributions and other rising costs such as the National Minimum Wage.
“The commitment to continue to support skills provision is welcome. The importance of supporting people into high-quality jobs, which are designed to drive economic growth and tackle poverty cannot be overstated. The additional investment of £6.5m resource funding to support the Flexible Skills programme, particularly in those sectors associated with decarbonisation, is a positive announcement.
“The announcement to extend non-domestic rates relief for businesses in the retail, leisure and hospitality sectors at the current 40% will help Welsh businesses in these sectors, although there will be concern at what support will be available beyond 2025/26.
“The announcement on accelerating planning decisions to grow the Welsh economy will be welcomed by many Welsh businesses looking to expand, as will announcements to improve the transport system in Wales. Businesses will hope that improvements in these areas will be delivered at pace to support the growth of the economy across all of Wales. .
“The additional funding to support climate change is welcomed as Wales continues to transition to low carbon industries and developing renewable sources of energy which also provide high skill jobs for Wales.
“The draft Budget only outlines spending plans for one year. Multi-year settlements for resource and capital at the conclusion of the UK Spending Review in 2025 will provide much needed certainty for the Welsh Government and its partners.
“The draft Budget needs the support of at least one opposition party, and it will be interesting to see how the discussion and debate on the draft budget develops in the new year prior to the Budget’s final approval in February 2025.
“Welsh Government needs to work with all partners, including businesses and the UK Government, to ensure the successful delivery of programmes of work that benefit the Welsh economy and society.”
Simon Jones, Head of Policy & Campaigns at Mind Cymru, said:
“Increased health and social care spending and a commitment to over £820m for mental health is a step towards relieving the pressure on mental health services. The question is, will it be enough to meet the rising demand and complexity of need we are seeing in our local Mind services?
It’s still unclear whether this funding allocation can truly meet the needs of people who are currently waiting too long for mental health support, many of whom are becoming more ill as a result.
For Wales to create a mental health system that is capable of meeting current levels of demand, in-patient and early support services need more resource, and we must also invest in collecting, publishing and responding to data around people’s experiences so we are better informed on what’s working, and where the challenges are.
We need to see people’s current needs being met whilst also investing in more preventive measures to get them the help they need before more intensive support is required, and it is these kinds of specifics that we will be looking for further clarification on during the scrutiny process.
Put simply, we need more detail about where this budget will be spent and how the impact of that will be measured if we are to truly deliver transformational change for those working within the mental health system, and everyone in need of support.
With a new Mental Health Strategy for Wales within touching distance, there is every chance for us to make sure that each pound spent goes directly where it is needed within the next financial year.
And if the Welsh Government really can deliver on the promise of its draft strategy to prioritise improving the mental health of the nation in this way, there is a very real opportunity the impact will be felt across the board, from education and training to employment and the wider economy as a result.”
