Welsh Government’s Draft Budget 2025-26: £1.5bn for public services, support SMEs and drive economic growth

An extra £1.5bn to strengthen public services, support small businesses and drive economic growth is at the heart of the Welsh Government’s Draft Budget 2025-26.  

All government departments will receive increases in revenue and capital funding, marking a significant contrast from previous budgetary constraints.

Capital spending plans will exceed £3bn for the first time at the Draft Budget stage, enabling substantial investments in the school estate, NHS infrastructure, housing and public transport.

Cabinet Secretary for Finance Minister Mark Drakeford said:

“This is budget for a brighter future, delivering an extra £1.5bn 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.”

The Draft Budget demonstrates the Welsh Government’s commitment to invest in the areas which matter most to people – supporting the NHS; in jobs and growth, providing opportunities for families, and connecting communities.

It includes:

• More than £600m in extra revenue and capital funding for health and social care, which will help the NHS continue to cut the longest waiting times, improve mental health services, and strengthen women’s health services.
• Additional funding to repair and monitor coal tips on the same day new legislation to improve disused coal tip safety is introduced in the Senedd.
• £81m more capital funding to build more homes for social rent, helping to reduce homelessness and ensure everyone in Wales has a place to call home.
• More than £100m more for the education budget and a 4.3% increase in the local government settlement, which will help fund schools, social care and the other services we rely on.
• £181.6m 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.

To support 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 £335m 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.

But the Draft Budget does include a number of other tax measures, which will raise funding to support businesses and public services and help support Wales’ ambitions to recycle more waste.

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 £7m 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.

The Cabinet Secretary added:

“This budget shows the power of two governments, which share the same values, working together.”

The Draft Budget will be scrutinised by Members of the Senedd before a final vote in March 2025.