{"id":2252,"date":"2026-07-08T13:38:39","date_gmt":"2026-07-08T12:38:39","guid":{"rendered":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/?p=2252"},"modified":"2026-07-08T15:31:57","modified_gmt":"2026-07-08T14:31:57","slug":"the-first-supplementary-budget-what-it-means-and-the-options-ahead","status":"publish","type":"post","link":"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/the-first-supplementary-budget-what-it-means-and-the-options-ahead\/","title":{"rendered":"The First Supplementary Budget: what it means and the options ahead"},"content":{"rendered":"<p><em>Owain Cynfab and Ed Gareth Poole<\/em><\/p>\n<p>A lot has changed since the outgoing Welsh Labour government set out its Final Budget for 2026\u201327. Not only has UK government spending crept up &#8211; which means extra cash has landed in Cardiff Bay \u2013 but a new Welsh First Minister and UK Prime Minister will take office within ten weeks of each other.<\/p>\n<p>The new Welsh Government\u2019s First Supplementary Budget, published at the end of June, sets out how the Plaid Cymru administration proposes to allocate these additional resources, and provides an early indication of its priorities.<\/p>\n<p>Plaid Cymru forms a minority government and will require support from either Reform UK, Welsh Labour or the Welsh Conservatives for the budget to pass in the upcoming vote on 14 July.<\/p>\n<p>This blog post examines the additional spending proposals included in the budget, who might possibly sign up to it, and where the sticking points lie ahead of Tuesday&#8217;s vote.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Where did the extra money come from?<\/strong><\/h3>\n<p>Mark Drakeford\u2019s <a href=\"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/neutral-or-neutered-analysing-the-2026-27-welsh-government-outline-draft-budget\/\">&#8220;neutral&#8221;<\/a> \u00a0approach to the 2026-27 Final Budget left around <strong>\u00a340 million<\/strong> of day-to-day spending unallocated. Since then, two \u2018consequentials\u2019 have topped up the pot:<\/p>\n<ul>\n<li><strong>\u00a3327 million<\/strong> from the UK Government&#8217;s Spring Statement \u2013 most of which comes from writing off accumulated Special Educational Needs and Disabilities (SEND)-related deficits held by English local authorities<\/li>\n<li><strong>\u00a346 million <\/strong>from the UK Government\u2019s Main Estimates.<\/li>\n<\/ul>\n<p>Taken together, these developments increased the amount of day-to-day spending available for 2026-27 by approximately <strong>\u00a3411<\/strong> <strong>million<\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>What&#8217;s on the table<\/strong><\/h3>\n<p>Of the <strong>\u00a3411 million<\/strong> available, the Supplementary Budget allocates <strong>\u00a3164 million <\/strong>to new day-to-day spending priorities:<\/p>\n<ul>\n<li><strong>\u00a3100 million <\/strong>for the NHS aimed at reducing waiting lists<\/li>\n<li><strong>\u00a347 million <\/strong>for childcare and early years support, of which <strong>\u00a324 million <\/strong>supports the expansion of funded childcare to two-year-olds<\/li>\n<li><strong>\u00a38 million <\/strong>to continue the \u00a31 bus fare scheme for young people<\/li>\n<li><strong>\u00a35 million<\/strong> to begin extending free school meals to secondary school pupils in households receiving Universal Credit<\/li>\n<li><strong>\u00a32 million <\/strong>for a new north-south bus service<\/li>\n<li><strong>\u00a32 million<\/strong> for school swimming provision<\/li>\n<\/ul>\n<p>This leaves roughly <strong>\u00a3247 million of day-to-day funding still unallocated &#8211;<\/strong> a decent-sized war chest for whatever comes next.<\/p>\n<p><strong><em>Figure 1: Changes to unallocated Resource Spending<\/em><\/strong><\/p>\n<figure id=\"post-2253 media-2253\" class=\"image align-none\"><\/figure>\n<figure id=\"post-2254 media-2254\" class=\"image align-none\"><\/figure>\n<figure id=\"post-2255 media-2255\" class=\"image align-none\">\n<figure id=\"post-2262 media-2262\" class=\"image align-none\">\n<figure id=\"post-2265 media-2265\" class=\"image align-none\"><img decoding=\"async\" src=\"http:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-content\/uploads\/sites\/509\/2026\/07\/Rplot01.png\" alt=\"\" \/><\/figure>\n<\/figure>\n<\/figure>\n<p><em>Source: Analysis of Welsh Government budget documents<\/em><\/p>\n<p>&nbsp;<\/p>\n<p>The budget also includes capital allocation of <strong>\u00a3130 million<\/strong>, with the lion\u2019s share going to the NHS and public infrastructure:<\/p>\n<ul>\n<li><strong>\u00a345 million<\/strong> for the NHS (<strong>\u00a325m<\/strong> for new surgical and diagnostic hubs and <strong>\u00a320m<\/strong> for maintaining the NHS estate)<\/li>\n<li><strong>\u00a360 million<\/strong> for education (<strong>\u00a340m<\/strong> for school maintenance, <strong>\u00a310m<\/strong> for childcare settings, and <strong>\u00a310m<\/strong> to support the free school meals rollout)<\/li>\n<li><strong>\u00a320 million<\/strong> is allocated to social housing<\/li>\n<li><strong>\u00a35 million<\/strong> for community facilities<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h3><strong>Caveating the numbers<\/strong><\/h3>\n<p>Before considering the impact of these allocations, some of this year&#8217;s headline figures aren&#8217;t directly comparable to last year&#8217;s because ministerial portfolios have been reshuffled. Childcare has moved from the old Health and Social Care brief into Social Justice, and the new portfolio is now called Health and Care, so like-for-like comparisons need a bit of care.<\/p>\n<p>Under the old portfolio structure and prior to the First Supplementary Budget, Health and Social Care was heading for a <strong>1.2% real terms cut<\/strong> in 2026\u201327. Add in an additional <strong>\u00a3100 million <\/strong>allocated to the NHS and <strong>\u00a347 million<\/strong> for childcare, and spending would have been broadly flat in real terms. But under the new structure, and once childcare costs are removed, the Health and Care budget is set to <strong>fall by around 0.42% in real terms<\/strong>.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>The NHS: still the elephant in the room<\/strong><\/h3>\n<p>Comparing NHS spending to the rest of the budget is always the simplest way to see where the government\u2019s real budgetary pressures lie \u2013 and the picture remains extremely tight. Even after <strong>\u00a3100 million<\/strong> top-up in the supplementary budget, the NHS still faces a <strong>real term cut of 0.38%<\/strong>.<\/p>\n<p><strong><em>Figure 2: Real Term growth (%) in 2026-27 spending compared to 2025-26<\/em><\/strong><\/p>\n<figure id=\"post-2262 media-2262\" class=\"image align-none\"><\/figure>\n<figure id=\"post-2266 media-2266\" class=\"image align-none\"><img decoding=\"async\" src=\"http:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-content\/uploads\/sites\/509\/2026\/07\/Rplot02.png\" alt=\"\" \/><\/figure>\n<p><em>\u00a0<\/em><\/p>\n<p><em>Source: Analysis of Welsh Government budget documents<a href=\"#_ftn1\" name=\"_ftnref1\"><strong>[1]<\/strong><\/a><\/em><\/p>\n<p>Why will the NHS face real-terms cuts even with more than a hundred million pounds in top-ups at the supplementary budget? This is happening because of an unusually large \u00a3286 million <a href=\"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/2026-senedd-election-analysis-the-fiscal-outlook\/\">drawdown from the Wales Reserve<\/a> in 2025\u201326 \u2013 Wales&#8217; piggy bank, which normally faces strict annual limits on how much can be taken out. The previous government secured sign-off from the UK Government for the withdrawal on the basis of &#8220;exceptional circumstances&#8221;, in an effort to bring down NHS waiting lists. That withdrawal gave 2025\u201326 spending a boost, but it also raised the baseline that this year&#8217;s budget is being measured against. What\u2019s more, it&#8217;s not obvious the waiting list pressures behind that drawdown were particularly exceptional or one-off. If they weren&#8217;t, that \u00a3286 million cushion may have masked rather than resolved the pressure, and the underlying fiscal squeeze remains in place.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Will it pass?<\/strong><\/h3>\n<p>The Senedd will vote on the Supplementary budget on Tuesday 14 July. Given that cutting NHS waiting lists is a manifesto commitment for pretty much every party, you might have expected a budget that funnels most of its new money towards the NHS to have faced a fairly easy ride. It hasn\u2019t quite worked out that way.<\/p>\n<p>Labour and Reform have both criticised the budget for not setting aside additional funding for local government in Wales. They argue that money arising from SEND-related spending in England should be largely passed on to Welsh local authorities to help with rising demand for additional learning needs (ALN) provision.<\/p>\n<p>The Welsh Government isn&#8217;t obliged to directly pass on consequentials in this way \u2013 after all, that\u2019s the reason that devolved institutions have independent budget-setting powers in the first place. Broadly speaking, previous Welsh government budgets and different rules over ALN eligibility mean that local authorities in Wales are in a different starting position to those in England \u2013 although they still face enormous cost pressures relating to ALN and adult social care. Given this different background there\u2019s at least a case to be made that at least some of the additional funding could be allocated to other areas of the budget. Whether that&#8217;s a strong enough argument to satisfy Labour and Reform is a different question, and one the vote on Tuesday should help answer.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>What might happen with the remaining \u00a3247 million?<\/strong><\/h3>\n<p>Given the relatively large amount of funding still unallocated and the broadly uncontroversial nature of much of the spending already proposed in the Supplementary Budget, we would expect Plaid Cymru to be able to use the remaining funding to try and secure an agreement with at least one other party.<\/p>\n<p><strong><em>Figure 3: options for the remaining unallocated resource funding.<\/em><\/strong><\/p>\n<figure id=\"post-2254 media-2254\" class=\"image align-none\">\n<figure id=\"post-2264 media-2264\" class=\"image align-none\"><img decoding=\"async\" src=\"http:\/\/blogs.cardiff.ac.uk\/thinking-wales\/wp-content\/uploads\/sites\/509\/2026\/07\/Rplot.png\" alt=\"\" \/><\/figure>\n<\/figure>\n<p><em>Source: Analysis of Welsh Government budget documents<\/em><\/p>\n<p>&nbsp;<\/p>\n<p>A few ways this could play out:<\/p>\n<p><strong>Go all-in on the NHS.<\/strong> Allocating the full \u00a3247 million of resource funding to the NHS would result in real-terms growth of around 1.6% &#8211; better than nothing, but still less than half the historic average of 3.6%. Just keeping the NHS budget flat in real terms, meanwhile, would only require about \u00a346 million, leaving it exposed to any inflation shocks that come along.<\/p>\n<p><strong>Split the difference with local government.<\/strong> If NHS spending were held flat, that leaves around \u00a3200 million free for local government \u2013 a real-terms increase of about 5.6% for 2026\u201327. That&#8217;s a big jump by recent standards, but it still falls short of the \u00a3340 million increase Labour is calling for, which would require cutting the NHS budget by at least 0.6% in real terms.<\/p>\n<p><strong>Make a start on childcare.<\/strong> Plaid Cymru might also want to put some of the remaining funding towards its \u00a3400 million childcare offer. Labour has a childcare commitment of its own, but with opposition MSs currently laser-focused on local government funding, a childcare-led deal looks like a tough sell right now. Reform UK didn&#8217;t include a childcare pledge in its manifesto at all, and while the Conservatives did set out plans to expand provision, it doesn&#8217;t seem to be top of their list of priorities. Securing support around childcare in the Supplementary Budget looks like an uphill battle for the new government.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>The longer game<\/strong><\/h3>\n<p>It&#8217;s also worth looking beyond Tuesday. As we have <a href=\"https:\/\/blogs.cardiff.ac.uk\/thinking-wales\/2026-senedd-election-analysis-the-fiscal-outlook\/\">previously highlighted<\/a>, the outlook for 2027\u201328 remains very challenging, with the Welsh Government\u2019s resource budget currently projected to shrink in real terms. That said, there&#8217;s genuine uncertainty in both directions \u2013 for example, a future UK Government under Andy Burnham could loosen the purse strings in a way that increases funding available for Wales, or rising inflation and new pressures (including recent defence spending commitments) could make things tighter still.<\/p>\n<p>Given this uncertainty, there is a case for holding back some of the \u00a3247 million back rather than allocating it all now. The trouble is, a deal with no obvious &#8220;win&#8221; attached may be a hard sell to opposition parties who&#8217;ll want something to show for their support.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>The First Test of Minority Government<\/strong><\/h3>\n<p>The First Supplementary Budget is therefore about more than allocating an unexpected \u00a3411 million windfall. It is the first real test of how Plaid Cymru intends to govern as a minority administration, and whether it can build the cross-party support needed to do so. Whatever the outcome of next week&#8217;s vote, it is unlikely to resolve the underlying fiscal pressures facing Wales. The more difficult spending choices are still to come.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> <em>Local Government Aggregate External Finance taken from Final Local Government Settlements.<\/em><\/p>\n<p><em>NHS services line includes Budget Expenditure Lines supporting the NHS in Wales (excludes BELs related to social service and integration, early years, CAFCASS, Food Standards Agency and the inspectorates)<\/em><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"Owain Cynfab and Ed Gareth Poole A lot has changed since the outgoing Welsh Labour government set out its Final Budget for 2026\u201327. 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