Welsh Budget and tax rates resolution backed by Senedd

In a vote on 4 March, the Senedd agreed the Budget by 29 votes to 28, with Lib Dem Jane Dodds abstaining and Conservatives and Plaid Cymru voting against. In total, the Budget sets out £26 billion of spending commitments for the NHS, education and other public services. The government won the support of Dodds after reaching an agreement to include £100 million of extra funding for childcare, councils and transport.

During the plenary session, along with the Budget, the Senedd agreed a motion setting Welsh rates of income tax for 2025-26 – maintaining all rates at 10p in the pound which means Wales continues to have the same income tax rates as England and Northern Ireland. A further motion withdrawing charitable non-domestic rates relief from independent schools was also passed.

Welsh rates of income tax

Introducing the Welsh rates of income tax motion, the Finance Secretary, Mark Drakeford, emphasised the importance of the rates which are forecast to raise nearly £3.5 billion in the next financial year. He said that this is not the “right time” to increase income tax levels in Wales: “Making a significant change to our resources through income tax rises would require an increase to the basic rate—that's the only way you can raise significant resources in Wales—and that at a time when too many people still face issues paying bills.” 

However, the minister told the Senedd that he wanted to ensure that the fiscal levers available to Wales provide “the right balance between risk and reward”. He said that “the income tax powers devolved to Wales are currently too blunt to deliver a more progressive tax system. I intend, therefore, to commission an external review of our current income tax powers, exploring, for example, the more flexible set of powers available to the Scottish Parliament, as well as other reform possibilities. This work will consider the opportunities as well as the risks of these different models, working within the tax principles we have set ourselves in Wales. The research will provide a clear evidence base to inform future decisions about tax powers to benefit people in Wales.”

There were no other speakers in this debate and the motion passed without opposition.

Budget debate

The debate on the Budget was longer but focused mostly on the spending choices of the government, and the deal reached with the Lib Dem member, with few mentions of tax.

Rhun ap Iorwerth, the leader of Plaid Cymru, considered the government’s plans a “flawed Budget” and said that his party would vote against. Likewise, the party’s finance spokesperson, Heledd Fychan, claimed that the Budget “falls short”, though she accepted that “undoing 14 years of damage caused by the Conservatives is not going to be possible overnight”. She stated: “when you look at the £1.7 billion in additional funding for the Welsh Budget over the next two financial years, a large proportion will have to be swallowed up to offset the UK government's short-sighted decision to increase employer national insurance contributions, with no plans to reimburse the cost for third sector organisations, charities and even GP surgeries.”

Peredur Owen Griffiths (Plaid Cymru), the chair of the Welsh Finance Committee, welcomed the government's acceptance of some of the committee’s recommendations. However, he expressed disappointment that the government has not yet received confirmation from the Treasury regarding the amount of funding they can expect to cover these costs.

Darren Millar, the leader of the Welsh Conservatives, criticised the Budget, claiming that it entails “more of Labour taxing, spending, frittering away our hard-earned cash”. He continued that Conservatives would have done things differently by backing Welsh businesses and scraping business rates for small businesses. 

Similarly, his colleague, Sam Rowlands, the Conservatives’ finance spokesperson, believed the Budget was “ploughing on with the same old failed orthodoxy”, labelling it a “sticking plaster” for the problems people in Wales face. He stated that his party would not support it.

Jane Dodds said that her decision to abstain on the Budget vote had been difficult, but: “I cannot fully support a Budget that falls short of delivering the investment and radical change that Wales needs”. However, she expressed satisfaction that she had been able to secure additional funding for childcare and social care.

Labour MSs such as Mike Hedges and Alun Davies supported the government. Hedges accused the Conservatives of being “either incapable or unwilling to produce an alternative budget”. He said the Conservatives support additional spending but: “They oppose all tax rises, they oppose all new taxes, they oppose borrowing”.

Responding to the debate the Finance Secretary declared: “With this Budget, we turn the corner, moving beyond austerity to investment and to growth”. He expressed his gratitude to Jane Dodds. He accused the Conservatives of “being against everything and in favour of nothing”, seeing it as simply being their duty to oppose. However Plaid’s opposition he regarded as “extraordinary” as, he argued, it delivers their ambitions on childcare.

The Senedd passed the Budget for 2025-26: For: 29, Against: 28, Abstain: 1

Non-Domestic Rating - Withdrawal of Charitable Relief for Independent Schools) 

There was a short debate on the proposal to withdraw charitable non-domestic rates relief from independent schools. Opening it, Finance Secretary Mark Drakeford stressed that the aim is to make additional funding available for local services in Wales. He said that there are 83 independent schools registered in Wales but only 17 of these receive charitable rate relief and will be affected by this policy change. He confirmed that independent special schools are exempted from this policy.

While Heledd Fychan (PC) welcomed the regulations, Natasha Asghar (Con) opposed it, arguing that the policy “may seem like a quick fix, but it risks creating more problems than it actually solves”. 

The Non-Domestic Rating (Withdrawal of Charitable Relief for Independent Schools) (Wales) Regulations 2025 was passed with voting as follows: For: 42, Against: 16, Abstain: 0