On Tuesday Labour’s Welsh Government made a budget agreement with Plaid Cymru, ensuring that the £27 billion budget will pass in January. This follows a budget compromise which saw Labour’s First Minister Eluned Morgan agree to increases in budgets for NHS Wales and local councils in exchange for Plaid Cymru’s abstention during January’s vote. The Welsh Conservatives immediately hit back, branding the proposed budget “another Plaid-Labour stich up”.
So, why can’t Labour pass the budget alone, what does the budget proposal contain and how have other Senedd Parties reacted, as they prepare for the Senedd elections in 2026? Labour’s struggle to pass bills and budgets in the Senedd can be mainly attributed to their lack of a majority. The first cause of this was the 2021 election, which saw Labour fall one seat short of a majority, with a total of 30 Labour MSs elected.
Then First Minister Drakeford’s remedy to this was to enter into a co-operation agreement with Plaid, effectively giving them a working majority. This saw Plaid and Labour work together to legislate on 46 policy areas for a minimum of 3 years. This agreement, however, expired in 2024 and Plaid declined to re-enter negotiations.
This was mainly due to concerns over then First Minister Gething receiving £200,000 for his leadership campaign from a company owned by a man who had been twice convicted of environmental offences. This left Labour as a minority Government. However, Labour’s situation was further compounded by their defeat in the Caerphilly by-election which saw Plaid win the seat with 47% of the vote, allowing them to win where Labour had won every election for half a century.
This led to Labour being left with 29 Members of the Senedd, 2 short of a majority, hence the need for compromise with Plaid for the budget. So, what exactly is the compromise that Plaid Cymru and Labour have come to for the proposed budget? The first is an extra £113 million in funding for local government.
This is a 4.5% increase in local governments budget and with a 3.6% inflation rate, that is a real term increase of 0.9%. While not all councils will receive a 4.5% increase, all councils will receive a minimum increase of 4%, ensuring a minimum real-term increase of 0.4% for all councils in Wales. The health and social care budget will also see an increase of £180 million, an overall increase of 3.6%.
First Minister Eluned Morgan argues that the proposed budget will avoid ‘catastrophic’ cuts to public service funding. However, the First Ministers plan to ‘deliver for Wales’ may be hampered by the fact that the rate of inflation matches the planned increase in the health and social care budget, meaning there will be no real term increase in NHS Wales’s budget for the next fiscal year. Serious doubts remain as, if no real term increase is expected to the NHS Wales’s budget, one must contemplate if this is enough investment to tackle the 73,200-wait list of people who are being forced wait to over a year for an NHS outpatient appointment in Wales.
As the 2026 election approaches, opposition parties have wasted no time to shape their own narrative surrounding the proposed budget. The Welsh Conservatives leader Darren Millar claimed that the budget was ‘another Plaid-Labour stitch up’. He further argued that he had reached out to the Welsh Labour Party, offering to help to put together a low tax budget, which aimed to cut ‘wasteful spending in order to get the Welsh economy moving again’.
Reform UK Wales was also quick to criticise the proposed budget. They attempted to highlight a contradiction in Plaid Cymru policy by arguing they were helping ‘prop up Starmer’s Welsh Government by voting for the budget’ despite Plaid’s position that ‘Starmer was calling the shots in Welsh Government’. However, Plaid Cymru leader Rhun Ap Iorwerth stated that Labours original budget had proposed major job losses in local government and a ‘low settlement’ for the NHS, and so he entered budget negotiations to prevent ‘harm’ to Welsh public services.
However, he was also quick to qualify that it was Labours budget to defend and although he was allowing it to pass, it was ultimately Labour’s responsibility to advocate for it. First Minister Morgan also pointed swiftly towards the bipartisan nature of the budget by stating that ‘This agreement shows the strength of the Senedd parties working together on shared priorities to deliver for Wales’. As the 2026 election looms with Reform UK and Plaid Cymru leading in the polls, it remains to be seen if this budget will be enough to turn Labour’s fortunes around in Wales.
With less than 6 months remaining, this attempt to steady the ship may be too little, too late for Welsh voters from the Labour Party.