Skates rejects claim UK Budget delivers real-terms funding cut for Wales

Mark Mansfield

Welsh Labour leader Ken Skates has rejected the Welsh Government’s claim that the UK Budget amounts to a real-terms funding cut, accusing Plaid Cymru ministers of preparing excuses for spending reductions.

Speaking on ITV Cymru Wales’ *Sharp End* on Tuesday evening, Mr Skates challenged Finance Minister Elin Jones to explain her assessment of the settlement.

Ms Jones had told ITV Wales Political Editor Adrian Masters that the UK Budget had “the most defining impact” on her own spending plans and represented a “definite real terms cut” for Wales.

Mr Skates responded: “The Finance Minister would have to lay out the detail of why she assesses it as a real terms cut because I don’t believe it is.”

He described the position as “broadly cash flat” for the next financial year, with an increase in the following year.

“When I was a minister during the Tory austerity years, I was having to look at cuts of between 10 and 20% for certain organisations,” he said.

“We now occupy a very different time where we’ve got economic stability because of the UK Labour government.

“But I think this is fundamentally a deflection by the Plaid Cymru minority government because they never costed their manifesto. They’re looking for excuses already for the cuts that they’re going to make.”

Ms Jones had previously described the settlement as “a real-terms cut dressed up as a windfall”.

“The UK Government will try to present today’s budget as a win for Wales. It isn’t. Once you account for inflation, this is still a real-terms cut to our funding, not new money that improves our position,” she said after the Budget.

“Our fiscal position is worse than it was before the Chancellor stood up, and that has direct consequences for our own Budget on 17 November.”

Around £450 million in additional Welsh Government funding was announced over three years. Mr Skates previously called the Budget a “massive boost” for Welsh public services.

Independent analysis by Cardiff University’s Wales Fiscal Analysis team warned that Chancellor John Healey had done little to protect services against higher inflation.

However, its assessment of the Welsh Government’s overall resources includes devolved taxes as well as funding from Westminster. That is a broader measure than the UK Government settlement alone.

The researchers project that total Welsh day-to-day financing, including non-domestic rates revenues, will remain broadly flat in real terms in 2027–28.

Improved devolved tax forecasts have helped cushion the pressures. Their expected net contribution to the Welsh budget in 2027–28 increased by £184 million compared with March forecasts – more than the £165 million in additional day-to-day funding arising from UK spending decisions that year.

The distinction matters because a broadly flat overall budget does not necessarily mean the UK settlement has kept pace with inflation. Equally, unchanged funding in cash terms would represent a reduction in spending power as prices rise.

NHS spending

Authors Owain Cynfab and Ed Poole warned that even with overall resources holding steady in real terms, increasing NHS spending would require cuts elsewhere.

They calculated that matching the NHS’s historical average annual real-terms growth of 3.6% would require reductions averaging around 3.8% across the rest of the Welsh budget.

The Office for Budget Responsibility now expects inflation to average 3.4% in 2027, compared with its March forecast that it would fall to 2% from that year onwards.

The Welsh Government has confirmed it will extend the Chancellor’s £100 payment for households in council tax bands A–D to Wales.

Wales Fiscal Analysis estimated that this would absorb around £120 million of the £199 million added to Welsh day-to-day funding for the current financial year, leaving approximately £80 million for other priorities.

Ms Jones is due to publish the Welsh Government’s draft budget on November 17.