Half a billion cash boost for Wales in Chancellor Rachel Reeves’s Budget

The chancellor’s budget will see extra £505m cash for the Welsh government over next four years, an end to the two-child benefit cap and significant tax rises in years to come.

Rachel Reeves’ tax and spending package will see the rates that people start paying income tax frozen until April 2031, while Welsh ministers will be able to borrow more.

First Minister Eluned Morgan said the chancellor’s tax and spending plans will “help people right across Wales”.

The Welsh Conservatives said it was a £28bn “tax bombshell” on working people.

Plaid Cymru said nothing had been announced that “changed the fundamental unfairness facing our nation”, while Reform said the budget will take taxes to post-World War Two highs.

The UK government said the Welsh government will get an extra £320m to spend on day to day services, and £185m on infrastructure over the course of the next four years.

It was not clear on Wednesday afternoon how that breaks down per year.

The Welsh government has £27bn to fund the NHS, schools and councils in Wales, and will decide how to spend the money.

The UK Treasury plans to make tweaks to the way the Welsh government is funded, allowing ministers in Cardiff to borrow more cash and giving them more flexibility in how they manage their budget.

The Treasury says this will give Welsh ministers an extra £425m to spend.

Reeves announced that the two-child benefit cap will be removed from from April.

In Wales, 21,610 households claiming universal credit have had a third child or more since the two-child cap was introduced by the Conservatives in April 2017.

The state pension will be increased by 4.8% from April 2025.

A number of tax changes will affect people across Wales.

National Insurance and income tax thresholds will be frozen for an extra three years beyond 2028 – meaning more people will go into higher bands.

And the amount that under-65s can put into cash ISAs will be capped at £12,000 a year, with another £8,000 reserved for investments.

Meanwhile the amount that people can sacrifice from their salary to avoid paying national insurance in pension contributions will be capped at £2,000 a year from 2029.

A new mileage-based tax for electric vehicles and plug-in hybrid cars will be introduced from 2028.

A planned council tax surcharge for high value properties will not apply in Wales.

A decision to impose inheritance tax on farming assets worth more than £1m has been controversial among Welsh farmers.

The FUW farming union welcomed a decision to allow the threshold to be shared among spouses, but said many families risk facing unaffordable tax bills.

By Gareth Lewis, political editor, BBC Wales

The decision to cut the two-child cap on certain benefits will be welcomed by the Welsh Labour government and Plaid Cymru.

Labour First Minister Eluned Morgan has been pushing for it, keen to show voters she has influence with colleagues in Westminster ahead of the Senedd election next May.

Welsh Labour MPs also back the change.

More than 26,000 Welsh children – who were not eligible for universal credit – now will be.

The Welsh Conservatives think voters are on their side and that taxpayers shouldn’t be footing the bill for more generous welfare.

First Minister Eluned Morgan welcomed the scrapping of the two-child limit.

She said the budget “will mean more money in the pocket of people who need it the most, support for energy bills, a raise in the minimum wage and good news for pensioners.”

Plaid Cymru leader Rhun ap Iorwerth said Wales had “weaker fiscal powers than any other devolved nation”, and claimed the Treasury “continues to withhold over £4 billion owed to Wales in transport funding”.

“There was no action on increased National Insurance or Inheritance Tax costs which are pushing the Welsh public and private sectors to breaking point. Labour promised change but today proves there is none,” he said.

Welsh Conservative shadow cabinet secretary for finance, Sam Rowlands, said: “Labour’s claim that they wouldn’t raise taxes on working people has been exposed for the second Budget in a row, Labour seem to relish spending other people’s money.

“Wales and the UK deserve better than a government that leaks its own budget and punishes the very people who keep our economy running.”

A Reform UK Wales spokesperson said: “It’s now clear that having Labour governments at both ends of the M4 has been a disaster for Welsh businesses, farms, and communities.

“This Budget will take taxes to post-WW2 highs, putting enormous pressure on employers and employees up and down Wales.”