Councils, charities and experts have had their say on the Welsh Government’s planned budget for 2025-26. Despite the Welsh Government praising the size of the budget, many expressed concerns that it does not go far enough to help.
Council leaders issued stark warnings that it will not help fill many of the gaps in services they provide and will lead them to have to raise council tax and/or spend money from their reserves.
Experts explained the figures championed by Eluned Morgan and her finance minister Mark Drakeford weren’t quite as good as they suggested when the whole financial picture was looked at.
The impact of employer National Insurance rises was also raised a number of times, with financial experts warning that 75% of the impact will be passed on to workers. Charities and voluntary groups also warned that without help, the impact on them could be huge. The chief executive of cancer charity Tenovus has warned their bill will likely be a minimum of £250,000 and that it will lead to them having to cut services or reduce its workforce without help. For our free daily briefing on the biggest issues facing the nation, sign up to the Wales Matters newsletter here
The various groups were giving evidence to different Senedd committees ahead of a crucial vote about the budget on March 4.
Employees will foot bill for Labour’s National Insurance rise
In the finance committee, witnesses from the Office of Budget Responsibility (OBR) were asked about the impact of the UK Government’s decision. Professor David Miles said while the extra NI is paid by employers, “we think it’s very likely they will respond to the higher tax by adjusting, over time, the wage increases on the workforce it may also affect employment levels”.
He said “as much as 75% of it could be passed back onto workers in the form of lower wage increases than they otherwise would have got”. He said “one way or another it seems very likely a large part of the impact of this tax will flow back onto the labour market and workers and reduce income tax”.
And charities are worried too
In questioning in the finance committee, Natalie Zhivkova, from Wales Council for Voluntary Action, said it was “difficult to calculate” the actual impact of the National Insurance rise from April. She said it is estimated to be £100m for voluntary groups in Wales. She said it will particularly impact sessional or seasonal staff. Tenovus, the cancer charity, has said their bill will be £250,000. Welsh Marie Curie is facing a £256,000 bill while medium-sized charities are facing £13,000 to £16,000 bills which will impact staff numbers and opening hours. “Unlike businesses who, granted will struggle with this, our sector can’t really increase the price to users they mainly come for free or at a very discounted rate”. She said they are often already paying uncompetitive wages so there was no “wiggle room”.
She said a survey had told them their members expected to meet the bill is not offer pay increases, reduce staff or helping less people.
In their letter, Tenovus told the committee charities will have to make “extremely difficult decisions – cutting services,reducing workforce, or both. Such cutbacks would not only harm the vulnerable individuals wesupport but also the NHS, which cannot deliver the services we provide at the cost-efficiency we provide”.
The letter, by Judi Rhys, the charity’s chief executive, says the scale of the National Insurance rise is “unsustainable”. “It is a misconception that all charities are cushioned by government grants or contracts. For many,including us, operations rely almost entirely on charitable donations,” she writes. For the latest Welsh news delivered to your inbox sign up to our newsletter
How the budget compares to previous years
Ed Poole, from Wales Governance Centre, told the committee having analysed the major components of the budget, over the two financial years from 2023-24 to 2025-26 the NHS will be growing by 3.7% per year on average, in line with NHS England since Rachel Reeves’ budget, in terms of councils, they are getting 3.1% per year, which he described as a “significant increase”.
Everything else, Dr Poole said, it is a “much tighter outlook” so there is a “much smaller increase in cash terms and actually falling in real terms”. He said that is due to inflation, over that time, and compounded by pay settlements.
Councils are ‘still on the edge’
In a session of the local government committee, witnesses came from four of Wales’ 22 councils. While they repeatedly said they were grateful they had a better-than-expected settlement from the Welsh Government serious concerns were expressed with one council leader warning the risk of bankruptcy “is still there, it never goes away”.
Bridgend’s deputy leader, Councillor Jane Gebbie said their authority no longer delivers “gold standard” services “I have worked in local government since the 1990s so I am au fait with how things used to work, we were considered gold standard, we’re not any more.”
Mark Pritchard, leader of Wrexham County Council said councils had been told they would be a “priority” for Welsh Government but the settlement wasn’t enough. He said they had put £25m extra into children’s and social care and extra money into helping people with additional learning needs but it wasn’t enough. “Is it a relief? Yes, but it’s not enough,” he said.
“Is the Welsh Government setting us up to fail? Because you know the pressures, you know, as a government, what the pressures are, and all we want, all the 22 authorities want, is to be funding appropriately”. He said if it doesn’t happen “we will have to make redundancies”. He said an appeal for staff who wanted to take early voluntary redundancy resulted in 15 people applying. He said they will now have to make people redundant.
Monmouthshire council leader Mary Ann Brocklesby said that in her authority, external resources to help with additional learning needs and children returning to school after Covid had “already been cut to the bone” but “they’re not sufficient to deal with the complex needs of our learners”.
The witnesses said that while the Welsh Government has said it will cover the National Insurance rise for public sector jobs, that does not cover commissioned services. Leader of Ynys Mon council, Gary Pritchard, said they do not have the money to pay for any extra rise. He said they will have to use reserves or up council tax to pay for it and that was a “significant risk” especially as they will not know the financial assistance they are receiving until June, after they have set their budget. He said there will have to be a combination of using “reserves, cuts and council tax rises” to meet financial shortfalls. Cllr Pritchard said: “We are going to be challenged about why council tax is rising while services are cut while the government in Westminster and in Cardiff are saying local authorities have had more money than ever before”.
NHS capital rise claims not ‘a true picture’
There had already been discussion about the way the draft budget was presented and whether it gave a true comparison between different years. Every year, a draft budget it published, and then there can also be a supplementary budget later in the year, this happened for 2024-25. Within a financial year, a government makes and commits different sums of money too.
Guto Ifan, from the Wales Governance Centre, said he had made a point of looking at NHS capital spending because that was a key feature of the Welsh Government’s narrative. “They made a big point about spending an additionally £175m of capital funding, bringing it to £614m in the draft budget. It was repeated in the First Minister’s speech yesterday that they were spending an additional £175m on modernising the NHS, but that wasn’t accounting for the fact the baseline changed by £80m so it’s more like £95m. The real terms increase in NHS capital budget isn’t 36 or 37% it’s more like 16% increase in real terms, that’s still a huge and significant increase but I don’t think it’s useful in terms of scrutinising a PDF document published in October to get a true picture”. Mr Ifan had already discussed why the budget wasn’t as straight forward as it suggested in a blog.
‘We expected more’
Natalie Zhivkova, from Wales Council for Voluntary Action, said across the board cuts had impacted her sector. She said a recent survey of the voluntary sector by them found 40% had received less funding and 50% had received no uplift, a problem given the rise in inflation. She said last year’s budget had impacted the voluntary sector in a number of ways including recruiting and retaining staff and volunteers, as well as the cost of living crisis impacting voluntary groups. She said last year’s budget made a tough situation worse. Asked if the draft budget for the upcoming financial year would make a difference she said “we were hoping for more”. She said she wanted to see a change in the narrative. “Prevention is not mentioned nearly as many times as two years ago, we’re not seeing that long term thinking,” she said, “it’s more about addressing the challenges right now.”
Director of the Women’s Equality Network Victoria Vasey said funding which went to the now-defunct charity Chwarae Teg has not been reallocated leaving a “huge gap”. She said women were particularly vulnerable to the cost of living crisis. “All of the hardship measures we saw in last year’s budget were very welcome, absolute essential lifelines but sticking plasters and short-term measures not looking at the structural problems”.
She said they are “still worried” having seen the draft budget for the upcoming year.
Questions over Flying Start roll-out
Ms Vasey said she welcomed £20m budgeted for childcare but it was “not looking at structural issues we see around provision of childcare”. “It’s not clear the rollout of Flying Start is funded at all. We feel there’s a lot of structural work to be done. We feel a focus on Flying Start would be incredibly important, it’s a flagship, wonderful scheme but very limited in its accessibility,” she said.
She said a pledge to uplift the hourly rate for childcare providers was “great” but not at the rate which providers said it needed to be at to “provide sustainable childcare”.