Calls for the Welsh Government to address inflation and productivity issues

The Senedd’s Finance Committee is calling for the Welsh Government to look again at the Draft Budget to reconsider how it calculates inflationary increases when funding Wales’ public services.

The cross-party Committee has analysed the Welsh Government’s spending plans – which were originally announced in October – and outlined concerns with how inflationary increases have been applied.

The Committee found that figures used by the Welsh Government do not fully reflect the real pressures faced by different parts of the public sector, particularly for health and local government. According to the Finance Committee, this risks real-terms cuts to those services unless funding is increased.

To get an accurate picture of what this would mean for Wales’s public services, the Committee has called on the Welsh Government to complete an assessment of inflationary pressures, and to present these findings when the Final Budget is published in January.

The Committee also heard evidence that Wales’ productivity is “significantly below the UK average” and that only a long-term approach will begin to tackle this problem.

The Committee’s report queries why the UK and Scottish governments both have productivity targets whilst Wales has none. It recommends that the Welsh Government develops a national productivity plan, with clear targets, to get to grips with the problem.

Peredur Owen Griffiths MS, Chair of the Finance Committee, said: “This year’s Draft Budget leaves the Committee concerned that the inflationary pressures facing public services – especially health and local government – are not being fully acknowledged in the figures put forward.

“We ask for these figures to be reassessed, to guard against any real-terms cuts that would adversely affect communities across the country. We therefore call on the Welsh Government to provide a comprehensive analysis of these inflationary pressures and to publish its findings alongside the Final Budget in January.

“In addition, the evidence shows that productivity in Wales lags significantly behind the UK average. Unlike other UK countries, Wales currently has no formal productivity targets, which is why the Committee is recommending a national productivity plan with clear, measurable targets, so that we can begin to close this gap.

“As a Committee, we are also aware that there are likely to be significant changes between the draft and final budgets this year. We look forward to hearing from the Welsh Government in the new year on how it will respond to our recommendations and what these new spending plans will mean for Wales”.

The Welsh Government’s Outline Draft Budget for 2026-27 was published on 14 October 2025, followed by the Detailed Budget on 3 November 2025. Click here to read the budget proposals and related reports.