A Cardiff University report warns the next Welsh Government faces a tight, though uncertain, budget outlook.
Ahead of the Senedd election in May, the analysis from the Wales Governance Centre, in collaboration with the University of Strathclyde's Fraser of Allander Institute, challenges the notion that the nation is currently funded well above estimates of relative need.
Overall spending per person in Wales on largely devolved functions is close to 115% of England's level – broadly consistent with the 2010 assessment of Wales' relative needs and well below figures frequently cited in political debate.
Guto Ifan, lead author of the report who is a member of the Wales Fiscal Analysis team, said: "The political debate about Welsh public finances has too often relied on headline funding figures that overstate Wales's fiscal position. Our analysis of actual spending suggests Wales is broadly funding public services at the level its needs require — not from a position of unusual privilege. That context is essential for any honest conversation about why services are under pressure and what the next government can realistically promise."
The report shows per person spending on health in Wales is 9% higher than in England – or just 4% higher when adjusted for Wales' older population – while spending on education is 7% higher. Per person spending on social services and other local government spending, alongside smaller areas of spending, is significantly higher in Wales.
But outturn spending on devolved services in 2024-25 was well below the 127% of England's level that Wales supposedly gets through the block grant and devolved taxes. Because there is no 'English budget', comparable spending in England on services devolved to Wales is not published and has to be estimated.
Our analysis of actual spending suggests the existing methodology is significantly underestimating comparable spending in England - thereby inflating Wales' relative funding levels.
Guto Ifan said: "The next Welsh Government also faces a tricky budget outlook over the next Senedd term. Despite repeated claims of the 'largest-ever settlement' from Westminster, we forecast real terms growth in the block grant for day-to-day spending is set to average just 0.5% per year from 2026-27, with funding currently set to fall in real terms in 2027-28."
The report also documents a significant redistribution of resources during the current Senedd term:
- Growth in health spending has averaged 3.1% per year in real terms between 2022-23 and 2024-25. However, the current budget plans for 2026-27 will see spending fall in real terms – for the first time since 2012-13 – unless the next Welsh Government allocates the majority of additional funding from the recent Spring Statement to the NHS.
- Local authority budgets were protected from mid-term spending cuts, and core funding has actually increased at a faster rate than health spending since 2022-23, reflecting significant pressures on local services.
- Budgets outside health and local government fell by around 6% in real terms between 2022-23 and 2024-25, as emergency mid-term cuts hit arts and culture, environmental protection, economic affairs, transport, and higher education. The report identifies higher education as a key financial challenge for the next Welsh Government, with Welsh universities facing a mounting financial crisis from lower institutional income per student than counterparts elsewhere in the UK.
- Childcare is identified as one of the sharpest points of divergence between the parties. The UK government has significantly expanded free childcare entitlements for working families in England – which will have led to an additional £330 million for the Welsh budget by 2028-29. Welsh Government spending on childcare has grown over recent years but has fallen well behind what has been offered to families in England, making it one of the election's defining policy fault lines.
Setting the Scene: Wales on the Eve of the 2026 Senedd Election is published as part of the 2026 Scotland and Wales Election Analysis, a collaboration between the Wales Governance Centre at Cardiff University and Fraser of Allander at the University of Strathclyde, with support from the Nuffield Foundation. The project includes pre-election reports on the fiscal context and outlook for Scotland and Wales, blogs and podcasts during the campaign, manifesto analysis, and four public events in Central Scotland, Cardiff, Gwynedd, and London.
