Think tank warns Plaid Cymru government faces tough fiscal outlook in which to deliver its promises

Martin Shipton

A leading think tank has warned that Wales’ new Plaid Cymru government faces a difficult fiscal outlook – and the need to find common ground with other parties.

A briefing from the Institute for Fiscal Studies states: “Last week saw it confirmed that Plaid Cymru will form the new Welsh Government on its own. But a tough fiscal outlook and, as a minority government, the need to forge consensus with other parties to pass legislation – including Budgets – mean that not all its manifesto pledges are likely to come to fruition.

“With the Green Party and Liberal Democrats having just two and one seat, respectively, the support (or abstention) of at least one of Reform UK, the Conservatives or Labour will be needed for measures requiring legislation.

“Some pledges will be easier to progress from both a fiscal and a political perspective. For instance, both Plaid Cymru and Labour pledged to make council tax fairer, and they previously collaborated on reform proposals as part of a cooperation agreement in the last Senedd term.

“Both also support an expansion of free school meals to all children in secondary schools whose families are in receipt of universal credit (not just the lowest-income ones). On the other hand, Plaid Cymru’s proposals for improving school standards – including reforming the Curriculum for Excellence, increasing the role of synthetic phonics in literacy, and the greater use of data from tests – bear some similarities with proposals from Reform UK and the Conservatives.

“Other policies may be more difficult to enact, at least in full. While all parties bar Reform UK pledged extensions to free childcare entitlements, in a difficult fiscal outlook, finding the £400m a year needed for Plaid Cymru’s proposals would likely require cutbacks to other services or increases in taxation.

“Caps on increases in private sector rents, proposed by both Plaid Cymru and the Green Party, are opposed by Reform UK and the Conservatives elsewhere in the UK, who cite concerns that this would reduce the supply of rental property – a position shared by Labour during the last Senedd term, at least. And proposals for a new Welsh child payment of £10 per week per child for families in receipt of universal credit, as well as costing over £100m a year to fully roll out, would require UK government approval to do so.

“The new government will therefore have to choose carefully which pledges it prioritises given the financial situation – and the scope for finding a majority in the Senedd in favour of different policies.

‘Financial and political challenges’

David Phillips, head of devolved and local government finance at IFS, said: “The incoming Plaid Cymru government will face both financial and political challenges as it seeks to implement its various tax and spending plans. Policies with lower direct financial costs, and/or with support from one or more of Reform UK, the Conservatives and Labour, will be easier to progress – this may include changes to council tax and changes to certain school-related policies. In contrast, policies with big price tags – such as expanded childcare provision – or where support from the other parties is less assured – such as strict rent controls – would be more challenging to deliver.

“Paying for significant new entitlements to government support would require either cutbacks to other spending or increases in devolved tax revenues – both feasible, but requiring difficult trade-offs. And persuading other parties to vote for, or at least abstain on, policies they have previously voiced opposition to may require concessions in other areas.”

Ambitious plans

On Tuesday, responding to a question from interim Welsh Labour leader Ken Skates, First Minister Rhum ap Iorwerth said: On funding, we have laid out plans that, yes, are ambitious but that we know are achievable. That is what people should be able to expect from a Government—not going for the easy option, but pushing the boundaries of what we might be able to achieve as a Government.

“I remember the previous Labour administration making it clear that in no way would school meals be affordable, but, of course, through Plaid Cymru’s influence from opposition, it was shown that not only was it affordable, but that it was necessary in order to provide the equal opportunities for children in our schools. The same will be our guiding principles this time.

“We know what needs to be done; we know they’re challenging. And looking at childcare, yes, there’s a focus, understandably, on the finances, which we know will be manageable, though pushing our limits as Ministers, but it’s the workforce that we also have to focus on, how we make sure that we have enough people to put in place this ambitious programme to help families and help them with the cost of living.

“We will give it our best shot with a programme carefully thought out, carefully planned, and it’s a pleasure now being able to work with those civil servants who will enable us to deliver.”