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NHS Wales faces an exceptionally low funding settlement by historical standards in the Welsh Government’s spending plans for next year, finance experts have warned.

Taking evidence on the outline draft budget, the Senedd’s finance committee heard the health service would receive a lower increase than the average over the past 15 years.

Ed Poole, a lecturer and part of the Wales Fiscal Analysis team at Cardiff University, said the health and social care budget is rising by about £261m – 2.1% before inflation or 0.5% in real terms – “and that’s way below the historical growth rate in health spending”.

Dr Poole told today’s (October 22) meeting: “It’s below the 3.6% real-terms annual increase that we’ve seen in the NHS, it’s below the 2.1% real-terms increase we’ve seen since 2010 which includes, of course, the austerity budget years.”

He added the increase would be significantly lower than that planned for NHS England.

‘It’s not totally neutral’

Dr Poole explained headroom has been left for negotiations with other political parties, with about £380m said to be unallocated in the budget, but cautioned “that’s probably unrealistic”.

“If that were to be brought forward then we’d have an historically low settlement for the NHS,” he said. “So, I think the amount of additional money from those unallocated funds is quite a bit smaller than is presented.”

Guto Ifan, also a lecturer and part of the Wales Fiscal Analysis team, said: “It’s not totally neutral. So, for example, it’s a political decision to increase every part of the budget… in the same way and protect budgets from… projected inflationary costs.”

Mr Ifan pointed to UK Treasury transparency data, which showed consequential funding from NHS spending in England next year will be about £518m, saying: “The increase to the NHS is going to be below that, so that again is a political decision.”

He said even if the entire £231m extra available for day-to-day spending – as part of the unallocated £380m – went to the Welsh NHS, it would equate to a 2.5% real-terms rise.

‘Tough choices’

David Phillips, an associate director at the Institute for Fiscal Studies who leads the research institute’s work on devolved finance, echoed the academics’ evidence.

He said: “Even if all this unallocated money… was put into the NHS, that would still be only roughly in line with the estimate of what you need to just keep things steady in terms of performance – let alone see the improvements we want.”

Labour needs support from other parties to pass its spending plans and has held talks with the Conservatives over a budget deal this week.

The Tories have called for land transaction tax to be scrapped on people’s primary homes, with experts estimating the cost at about £200m and warning it would push house prices up.

Mr Phillips stressed: “There really isn’t this money for the next Senedd to do as it pleases with – unless it’s willing to make tough choices on things like the NHS.”

He added: “If you want to start to use some of that money for new initiatives, that means either difficult decisions for the NHS… other services or difficult choices on tax.”

‘All bets are off’

The economist set out the context of a difficult year – with the Welsh Government’s funding going up by less in the coming financial year than in the past couple, Labour lacking a majority to pass spending plans, and a competitive Senedd election looming in May.

He told the committee funding in the 2026/27 draft budget would increase just above current forecasts of whole-economy inflation, adding: “The Welsh Government has in the past described this as a neutral or business-as-usual budget, I don’t think that’s really the case.”

Mr Phillips argued a business-as-usual budget would give different increases to areas such as health and schools to account for the differing pressures facing each.

He said: “At first glance, it seems laudable to do a neutral budget then give the next Senedd more choice about how to allocate funding. I don’t think framing the existing allocations that have been proposed as neutral or business as usual has been that helpful.”

Dr Poole warned: “If the Senedd is unable to pass a budget, that is a whole other level of magnitude of uncertainty… it’s all bets are off at that point.”