What are the key election issues in Wales?

Labour will comfortably win the general election in Wales. But there may be economic, fiscal and political troubles ahead. Welsh voters cite public services as their main concern – yet while health, education and housing are devolved, the next UK government will play a key role in their funding.

If the opinion polls are to be believed, this general election in Wales is perhaps the most predictable in living memory, with only a small handful of Welsh seats ‘in play’.

Despite the overall number of Welsh constituencies falling from 40 to 32, Labour are on course to increase their number of Welsh MPs, from the 22 returned after the 2019 election.

Meanwhile, five years on from an historic election result in Wales, the Conservatives look set to lose almost every one of the 14 seats they won in 2019. And Plaid Cymru, the Welsh nationalist party, will be hoping to create some electoral momentum of their own, by winning more than the two seats they notionally won in 2019.

This comes despite a turbulent time for the governing Welsh Labour party in Wales. Recently elected first minister Vaughan Gething has faced persistent questions about campaign donations received from a man convicted of environmental offences – and he even lost a vote of no confidence in the Senedd during the election campaign.

While this story is unlikely to bite during the general election, Labour usually outperform their UK-wide vote in Wales by a wide margin – that is not the case on current polling. And recent polling on Vaughan Gething’s popularity, as well as Senedd voting intentions, suggest that there may be some trouble ahead for the party as it gears up for the devolved election in 2026.

‘No return to austerity’?

Welsh voters cite public services (particularly the NHS) as the most important issue that will determine how they vote at this election.

Although most public services like health, education, local government and housing are devolved, the next UK government will have a key role in their funding. This is because the Welsh budget receives additional funding (termed consequentials) as a result of spending decisions made on these services in England.

On presenting annual devolved budgets since 2010, every Welsh government finance secretary has derided the effects of austerity policies pursued by successive UK Conservative governments.

Labour have promised ‘no return to austerity’. But given the current outlook for spending on public services, difficult budgetary choices are here to stay for the Welsh government.

Under the Labour party’s manifesto, the Welsh government budget for day-to-day spending is set to grow by 1.1% per year, only slightly above the 0.9% implied by current UK government policies.

This means that post-election Welsh government budgets will follow a familiar pattern to post-2010 budgets – increases in the NHS budget resulting in cuts to non-protected services.

Wales Fiscal Analysis estimates that an additional £683 million would be required on top of Labour’s manifesto plans to avoid real terms cuts across all Welsh government spending areas by 2028/29.

In terms of additional consequentials for the Welsh budget, the 2024 Labour manifesto promises just 5% of its 2019 offering.

Meanwhile, although additional investment spending is promised under Labour’s Green Prosperity Plan, the Welsh government’s capital budget also faces a difficult outlook and would fall by 5% in real terms between 2024/25 and 2028/29. Even with a change of governing party at Westminster, upcoming Welsh budget rounds promise to be no less difficult than they have been in recent years.

Economic growth to the rescue?

Neither Labour nor the Conservatives have pledged to loosen the fiscal rules imposed by the current chancellor – and both parties have ruled out increases to the three main revenue-raising taxes: income tax, national insurance contributions and VAT (value-added tax).

Labour argue that the scope for public spending increases will be improved by stronger economic growth. But the public finances outlook is underpinned by Office for Budget Responsibility (OBR) forecasts, which are already significantly more optimistic than most other forecasters, including those from the Bank of England and the International Monetary Fund (IMF).

Changing the spending outlook for public services without changing taxes or borrowing will therefore require a sharp break from the UK’s dismal growth trajectory since the global financial crisis of 2007-09.

The economy is cited as the second most important election issue for Welsh voters, over which most levers remain reserved to Westminster.

Productivity rates and incomes in Wales have been persistently low, and recent years have seen inactivity rates climb to the highest levels across the UK, driven by the number of people who are long-term sick.

Stability and a renewed focus on economic growth will be welcome, but delivering and transforming the Welsh economy will be difficult given the wider economic and fiscal context.

The future of devolution

Levelling up has featured less prominently in this election campaign compared with 2019. But post-Brexit regional funding – of which Wales was the largest beneficiary – has emerged as a potential hot topic during the campaign.

Under the Conservatives’ plan to redirect funding from the Shared Prosperity Fund towards its national service plan for 18-year-olds, Wales could lose out on £275 million a year.

Meanwhile, first minister Vaughan Gething has repeatedly assured Welsh voters that control over the Shared Prosperity Fund would be returned to Wales under an incoming Labour government at Westminster.

But the Labour manifesto says that decision-making over the allocation of structural funds will be restored ‘to the representatives of Scotland, Wales and Northern Ireland’. Comments made by the shadow secretary of state for Wales, Jo Stevens, suggest that this means the Welsh Office would play some role in the delivery of such funding.

This, however, raises serious questions around the capacity of the Welsh Office to play such a role. This also perhaps hints at a wider apathy towards devolution among Welsh Labour MPs.

The Labour manifesto promises to strengthen the relationship between the governments in Westminster and Cardiff Bay, and to ‘consider’ and ‘explore’ devolving some further control over youth justice and probation. But these commitments fall well short of the views of the Welsh Labour government, who want control over policing and the criminal justice system.

Alongside the difficult fiscal and economic outlook, these constitutional questions could be a further point of tension within the Labour party after the election. Having long wished for a change of government at Westminster, the Welsh Labour government in Cardiff Bay may not find having a co-partisan UK government entirely plain-sailing.

Where can I find out more?

Manifesto analysis: An assessment of the tax and spending changes proposed in the main parties’ general election manifesto from the Institute for Fiscal Studies (IFS), including Plaid Cymru, the Welsh nationalist party, and Labour.
Change: Welsh Labour manifesto 2024.
Wales Governance Centre, Cardiff University.
Institute of Welsh Affairs – IWA.
Welsh Economy Research Unit – WERU.
Wales Institute of Social and Economic Research and Data – WISERD.