2026 Senedd Election manifesto analysis: Devolution of more powers and the fiscal framework

By Guto Ifan, Ed Gareth Poole and Owain Cynfab

This blogpost outlines what the party manifestos say on the future of devolution and how it should be funded. Although any changes to the devolution settlement and fiscal framework will need to be agreed by the UK government, the manifestos contain several proposed reforms which the parties would pursue if they formed the next Welsh Government.

This is the fifth and last blogpost in a series of manifesto analyses as part of the 2026 Scottish and Welsh Elections Project, conducted in partnership with the Fraser of Allander Institute and supported by the Nuffield Foundation. Previous blogs have covered tax policies, day-to-day spending priorities, childcare and capital and investment spending plans.

The Crown Estate

Four of the main parties (Plaid Cymru, Welsh Labour, Welsh Liberal Democrats and the Wales Green Party) propose the devolution of the Crown Estate to Wales.

To understand why the Crown Estate is a key issue for these parties, we need a quick explanation by looking to the situation in Scotland, where the Crown Estate has been devolved since the post-indyref Scotland Act 2016.

Crown Estate revenues relate mostly to activities on the marine seabed out to 12 miles from the shoreline, such as offshore windfarm leases via the Scottish Government’s ScotWind programme. In 2024-25, Crown Estate Scotland generated £130.8 million for the Scottish public purse, up from £113.2 million in 2023-24.[1]

The UK government makes annual deductions from the Scottish block grant to offset for the devolution of the Crown Estate, and these amounts are agreed in Scotland’s Fiscal Framework Agreement. In 2024-25 the deduction was £10 million.[2] In Scotland, therefore, Crown Estate net profits are far outpacing block grant deductions – with a net benefit to the Scottish purse.

Of course, these circumstances may not be the same if the Crown Estate were devolved to Wales. Lease revenues would likely be smaller than in Scotland because Wales is geographically smaller and has a less extensive coastline.

But while the total amount of annual revenue is small, the growth in receipts from Crown Estate leases all across the UK have grown very significantly over the past decade. The Scottish Government gets to keep the benefit of any growth in the value of the activities on the land and seabed that it leases such as offshore renewable energy, farming, tourism and aquaculture. Devolution therefore gives an incentive to draw advantages from Scotland’s natural environment in a way that helps generate resources for the Scottish budget. If devolved to Wales, the direct budgetary incentive might give the Welsh Government a useful lever to develop these types of economic activities further in Wales.

Justice and Policing Powers

Plaid Cymru, Welsh Liberal Democrats and the Wales Green Party all call for the devolution of powers over Justice and Policing. Welsh Labour call for the devolution of youth justice and probation as a first step towards devolution of justice and policing. These calls have been explored and supported by the Silk Commission, the Thomas Commission and the Independent Commission on the Constitutional Future of Wales. Meanwhile, the Welsh Conservatives would reject efforts to devolve policing and justice.

Persuading the UK government on justice devolution will be a challenge, given the lack of serious movement on devolution since being elected in 2024. The 2024 General Election Manifesto promised to “explore the devolution” of probation services, as part of a “strategic review into probation”, and that it would “work with the Welsh Labour Government to consider devolution of youth justice”. Progress on this has so far been limited. In March 2026 the UK Government and Welsh Government agreed to work together to find agreement with respect to Youth Justice and Probation,[3] but the joint document gave few specifics on how this would be achieved in either area.

Social Security Devolution

Plaid Cymru also want Social Security to be devolved – which the Welsh Conservatives also explicitly reject. The wholesale devolution of such a large, demand-led area of spending would have to be accompanied by large scale changes to fiscal arrangements. However, powers similar to those of the Scottish Government over a select number of benefits would likely prove more manageable; the fiscal impact of such devolution could also be favourable given underlying trends.

Plaid Cymru propose trialling a Welsh Child Payment, providing £10 a week for children aged 0-6 in households claiming Universal Credit, and have cited previous Welsh Government initiatives such as the UBI for care leavers pilot undertaken under current powers. The full roll-out of their Welsh Child Payment would likely require Scottish-style powers over social security.

Reforming the Barnett Formula

The manifestos also contain substantial calls for reforming the way the Welsh Government is funded. The UK Labour manifesto for the 2024 General Election did acknowledge that “the Welsh Fiscal Framework is out of date”, so there may be more scope here for intergovernmental discussions.

Plaid Cymru, Welsh Labour, the Wales Green Party and Welsh Liberal Democrats all call for reforming or replacing the Barnett formula, which determines annual changes in the Welsh Government budget.

As we explored in our report on Wales’ fiscal framework last year, the Barnett formula is indeed “outdated” and moving towards a more rational system based on agreed principles would be a good thing. This would involve a UK-wide exercise of determining relative spending levels and relative needs for public spending in each country. The last comprehensive estimate of relative need was produced by the Holtham Commission back in 2010, based on even older data.

However, Wales is currently funded at around or above the estimate of relative need from 2010 (of 115% of England’s level per person), regardless of the methodology used for calculating current levels of relative spending. The ‘underfunding’ issue identified by the Holtham Commission was largely ‘solved’ through the unintended effect of austerity and Wales’ slower-growing population on relative spending levels, and the inclusion of a 105% Needs-Based Factor in the Barnett formula from 2018-19.

Replacing or reforming the Barnett formula on its own therefore will not necessarily lead to more funding for the Welsh Government budget and will not solve the fiscal trade-offs and difficult decisions the next Welsh Government will face. Given the trends in spending on public services since 2010 – with non-NHS spending still below pre-austerity levels – and the planned slow growth in spending over future years, it is the absolute level of public spending which is the biggest problem for devolved public services, rather than its relative level compared with England.

Parties that believe devolved spending on public services should be higher than what is provide through the block grant should therefore look to the devolved tax levers available to them.

Reforming Devolved Tax Powers

On this note, Plaid Cymru and the Welsh Liberal Democrats want the Welsh Government to have the ability to set income tax bands and thresholds – while Welsh Labour would “carefully explore the case for expanding Wales’ income tax powers”. Such powers would make the powers significantly more usable for those wanting to change tax policy – for example, enabling the protection of lower income households from broad income tax rises, as has been seen in Scotland.

The manifestos also make other calls for reforming Wales’ fiscal framework, particularly the Welsh Government’s budget management tools and borrowing powers. Some minor amendments were made to the fiscal framework at the 2025 Autumn Budget, with capital borrowing powers and limits on the Wales Reserve increased by 10% and indexed to inflation for future years.

Reforming Wales’ Borrowing Powers

Welsh Labour and Plaid Cymru call for increasing or removing the limit on annual drawdowns from the Wales Reserve, something which was temporarily allowed for 2025-26.

The Welsh Liberal Democrats and the Greens make the call for greater borrowing powers, while Plaid Cymru make a specific call for the capital borrowing limit to be increased to £3 billion (up from the current total of £1.1 billion). We previously calculated that if such a limit was fully utilised, debt repayments would remain at a relatively low share of day-to-day spending (below 1%) and would be cheaper than using private borrowing to fund capital projects, such as through the Mutual Investment Model.

On intergovernmental relations, Welsh Labour call for a “new independent adjudicator to ensure financial fairness across the four UK nations”, which would reduce HM Treasury’s ultimate authority on funding disputes that arise.

Wales’ share of reserved spending

The parties have a stronger case for arguing Wales is underfunded when it comes to reserved areas of spending. Wales tends to receive lower levels of spending per person on areas controlled by the UK government and not subject to the Barnett formula, such as rail infrastructure enhancements and R&D spending.

Plaid Cymru, the Greens and the Welsh Conservatives call for Wales to receive funding from rail projects such as HS2, which, since it was classified as an England and Wales project, does not trigger consequentials through the Barnett formula. Plaid Cymru and the Welsh Liberal Democrats also call for the full devolution of rail infrastructure to Wales, which through the application of the Barnett formula, would have resulted in significantly greater levels of funding for rail enhancement spending in Wales.

The Welsh Labour manifesto refers to the recent commitment of £14 billion of investment into rail infrastructure in Wales over coming decades. However, this announcement was not accompanied by actual additional spending commitments beyond the £350 million confirmed at the 2025 Spending Review, which fell significantly short of “making up” for HS2 as was originally claimed.

The Welsh Labour manifesto does acknowledge Wales’ relatively weak position when it comes to reserved spending, as it calls for a new ‘fair share formula’, which would see Wales automatically receive its “rightful share of UK resources in critical areas”. It is unclear how such a formula would work for spending in reserved areas, or how Wales’ “rightful share” would be calculated.

Another dividing lines between the parties

Reforming the devolution settlement and the fiscal framework will take persuasion and intergovernmental negotiations with the UK Labour Government. So far, it has shown relatively limited appetite for further devolution and reforms, beyond the fiscal framework changes and plans to devolve non-Jobcentre employment support funding. While there is significant common ground on the proposals discussed in this blog, the parties will argue over who would be in the best position to succeed in those intergovernmental negotiations.

Overall, as in the case of tax and spending priorities, this represents another area of significant divergence between parties. The Reform UK manifesto makes no mention of the future of devolution, the fiscal framework or funding, while the Welsh Conservatives rule out extending the Senedd’s powers. This a further dividing line between the two blocs of parties that would most likely have to work together to govern Wales over the next Senedd term.

[1] p36 in the Crown Estate Scotland Annual Report 2024-25 https://www.crownestatescotland.com/sites/default/files/2025-12/Annual%20Report%20and%20Accounts%20to%2031%20March%202025%20-%20Web.pdf

[2] These deductions are set out in the Scottish Fiscal Framework agreement, paragraph 80 > https://www.gov.scot/publications/fiscal-framework-agreement-between-scottish-uk-governments/

[3] Agreement between UK government and Welsh Government on Youth Justice and Probation, 25 March 2026: https://www.gov.wales/agreement-between-uk-government-and-welsh-government-on-youth-justice-and-probation-html