The Welsh Government has unveiled the full details of its £27 billion draft budget for 2026-27, marking a pivotal moment for the country’s public services and political landscape. With increases in funding promised for every major department, the budget is being hailed by some as a shield for vital services, while others warn it may not go far enough to address mounting financial pressures. The stakes are high: this is the last budget before the Senedd election in May 2026, and Labour’s recent loss in the Caerphilly by-election means the government must now win over at least two opposition members to see its plans through.
Finance Secretary Mark Drakeford, who has been at the heart of Welsh politics for a quarter-century, described the spending plans as a commitment to “protecting the services people rely on most.” According to Nation.Cymru, Drakeford emphasized, “Every key department will see increased funding, providing the stability our public services need.” The draft budget was published in two stages, with the first on October 14, 2025, outlining high-level allocations, and the second on November 3, 2025, providing detailed breakdowns for each area.
The numbers are eye-catching: more than £800 million in additional funding compared to last year, with health and social care alone receiving an extra £259 million, bringing their total to £12.4 billion—more than 55% of the government’s resource budget, according to Wrexham.com. Local government is set for an average 2.5% increase, with a “funding floor” ensuring no council gets less than a 2.3% uplift. Education, housing, transport, and climate change departments are all promised real-terms increases, though these are generally in the 2-4% range, broadly in line with inflation forecasts.
But as the details emerge, so do the challenges. The draft budget leaves about £380 million unallocated, a pot of money that provides “genuine potential for ambition in the final budget to help SMEs across Wales,” as Joshua Miles of the Federation of Small Businesses Wales told Nation.Cymru. Miles warned, “It’s crucial that cross-party negotiations lead to this being protected, either as a relief or as part of a new expanded retail, hospitality and leisure multiplier.” Without such measures, he cautioned, many businesses could face a 40% tax increase at a time when costs are already rising.
Transport is another area under strain. Bus operators, who carry nearly 200,000 passengers daily, welcomed the government’s continued support but noted that rising wages, fuel, and overheads have pushed industry inflation up by 5.8%—far outpacing the 1.9% increase in government support. Aaron Hill of the Confederation for Passenger Transport Cymru told Nation.Cymru, “These cost pressures pose a clear risk to the sustainability of some routes and services used daily by passengers across Wales.” Hill urged politicians to prioritize bus funding to avoid cuts before industry reforms take effect.
For local councils, the pressure is equally acute. The Welsh Local Government Association (WLGA) has warned that the proposed “roll-over” budget isn’t enough to fund existing services. Torfaen council leader Anthony Hunt, speaking to WalesOnline, said, “At 2% I think councils would be in a difficult position. The pressure is very real.” He explained that councils are facing budget pressures of between 7% and 9% due to demand, inflation, and pay, amounting to a £600 million challenge. Without further support, councils may have to consider steep council tax hikes or cut as many as 13,000 jobs.
Education leaders are also sounding the alarm. Laura Doel, national secretary at school leaders’ union NAHT Cymru, told WalesOnline, “This budget will do nothing to rescue schools across Wales which are at crisis point when it comes to funding.” She cited a predicted £137 million budget shortfall for schools in 2026-27, warning of redundancies, reduced subject offerings, and inadequate support for vulnerable learners. Doel urged all Senedd members to “listen to the plight of schools and act now.”
Despite these concerns, the Welsh Government has highlighted increases in capital allocations for culture, heritage, and sport, as well as new investments in climate change and rural affairs. The draft budget includes £43 million for coal tip safety, £4.9 million for reservoir safety, and substantial sums for recycling and border controls. The transport budget sees additional resource and capital funding, with priorities including rail service transformation, road improvements, and bus fleet upgrades.
On the political front, the budget’s passage is far from certain. After losing the Caerphilly by-election on October 23, 2025, Labour no longer holds enough seats to pass the budget unilaterally. As BBC News notes, “Labour will now have to guarantee the support of at least two other Members of the Senedd (MSs) to make up the numbers.” In previous years, Labour relied on deals with the Liberal Democrats or Plaid Cymru, but with Plaid having won the recent by-election and a formal co-operation agreement now ended, the field is wide open for negotiation.
The Welsh Conservatives, led by Darren Millar, have made scrapping the Land Transaction Tax (Wales’ version of stamp duty) on primary homes a top priority in any deal. Millar wrote to First Minister Eluned Morgan suggesting a deal “may be possible” if their key demands are considered. However, Mark Drakeford has indicated this would not be feasible, as it would leave a “big hole in the budget”—an estimated £200 million, according to Wrexham.com.
Other parties are weighing their options. Plaid Cymru has yet to begin formal negotiations, while Reform UK has positioned itself as an alternative to what it calls Labour’s “woke, mad and extreme policies.” Independent MSs are also potential kingmakers, with at least one indicating he wouldn’t rule out a deal but is considering his own red lines.
The consequences of failure are stark. If the budget isn’t passed by April 2026, spending would revert to 75% of the previous year’s level, rising to 95% if not agreed by July. Drakeford has warned that such a scenario could cost Wales up to £7 billion and result in thousands of job losses. “The failure to pass a budget is genuinely catastrophic,” Drakeford told WalesOnline. “Catastrophic to the reputation of the Senedd, undermining to the reputation of devolution, but most of all catastrophic in the lives of those thousands of people without a service, without a job, without a prospect we can hold out in front of them that things can improve in the future.”
Looking ahead, the draft local government settlement will be published later in November, followed by the UK Government’s autumn budget on November 26, which could have further implications for Wales. The final Welsh budget is due on January 20, 2026, with a crucial Senedd vote scheduled for January 27. Until then, negotiations will continue in earnest, with every party aware that the outcome will shape not only the next year but the fortunes of Welsh politics for years to come.
As the clock ticks down, the Welsh Government’s draft budget remains both a promise and a challenge—a balancing act between ambition and austerity, consensus and competition, all set against the backdrop of a looming election and an uncertain economic climate.
