The Welsh Government and Plaid Cymru have reached an agreement which will allow the budget for 2026-27 to pass and secures almost £300m of additional investment in Wales’ public service.

The agreement will avoid the potential of no budget being passed at all and the consequences that would flow from that.

There are three elements to the agreement:

The agreement will be reflected in the Final Budget – together with other allocations to be made by the Welsh Government, which do not form part of the agreement – which is published on 20 January 2026.

Wales’ First Minister Eluned Morgan said: "This agreement shows the strength of the Senedd parties working together on shared priorities to deliver for Wales. Through this agreement we have secured the passage of the budget and prevented potentially catastrophic cuts to funding next year.

“This agreement unlocks a further £300m of extra investment for Welsh councils and the NHS, on top of more than £27bn secured through the Draft Budget.”

Rhun ap Iorwerth, leader of Plaid Cymru said: “Our aim in negotiating with Welsh Government was to look after public services, protect jobs and keep council tax bills as low as possible.

“By securing £300m of additional funding for front line services, it avoids the potential of a cliff edge for public spending in Wales and, in May 2026, puts the next Welsh Government on a firmer footing than would otherwise have been the case.

“Whilst I recognise that councils and the NHS will continue to face challenges this marks a significant increase in funding compared to the draft budget.”

Plaid Cymru had previously warned that Labour’s draft budget would deal a serious blow to Wales’ public services - pushing councils towards thousands of job losses, forcing steep rises in council tax, and leaving the NHS with a historically low funding uplift.

Local Authorities and the NHS will now receive substantially more funding because of Plaid Cymru’s intervention with local authorities set to receive an average uplift of 4.5% with all councils receiving increases above 4%, compared to Labour’s original 2.2%, and the NHS will see a 3.6% uplift compared to 2.1% previously.

Plaid Cymru will not vote for the budget but will abstain to allow it to pass.

Rhun ap Iorwerth said that by allowing the budget to pass in return for the necessary increases in health and council budgets, Plaid Cymru ensured that Labour’s ‘catastrophic’ proposed cuts were avoided.

While this remained Labour’s budget to own, Mr ap Iorwerth said without Plaid Cymru stepping in, the next Welsh Government after May’s Senedd election would inherit far weaker foundations and that his party had “acted to protect services now” and to “create a more sustainable position for a new government”.

Mr ap Iorwerth said his party was ready to lead the Welsh Government after May with the ‘new leadership’ required to turn things around.

“Plaid Cymru always acts in the best interests of Wales and that is exactly what we are doing on the budget,” he said.

“Labour’s draft budget would have led to sky-high council tax, unprecedented job losses in our public sector, and a historically low settlement for the NHS. Plaid Cymru will simply not allow this to happen.

“We asked for two things - to protect public services and prevent unaffordable council tax rises, and to correct the inadequate NHS settlement caused by Labour’s rollover budget. We have secured both.

“By abstaining in return for the necessary increases in health and council budgets, Plaid Cymru ensures that Labour’s catastrophic proposed cuts are avoided.

“Councils and the NHS will now receive substantially more funding because of Plaid Cymru’s intervention. Local authorities will receive an average uplift of 4.5% with all councils receiving increases above 4%, compared to Labour’s original 2.2%, and the NHS will see a 3.6% uplift compared to 2.1% previously.

“This remains Labour’s budget to own but without Plaid Cymru stepping in, the next Welsh Government would inherit far weaker foundations. We acted to protect services and council tax bills and to provide a more sustainable position for a new government.

“If Plaid Cymru can achieve this in opposition, imagine what we can deliver with the opportunity to lead the next Welsh Government in May - real change and new leadership that puts the people of Wales first.”

Plaid Cymru Group Leader on the WLGA, Gary Pritchard said: “This is a welcome intervention and we’re grateful that Plaid Cymru has stepped in where Labour did not. The additional support won’t remove every pressure, but it prevents a disastrous outcome for our communities and gives councils the breathing space we urgently need.

“For years, councils have been forced to do more with less, and the point has come where that approach simply isn’t sustainable.

“What is needed now is long-term planning, fair funding, and leadership that works with us, not against us. Today’s announcement is a step in the right direction, and we look ahead to May as a real opportunity for new leadership and a fresh, constructive partnership for the future.”

Wales Central Conservative Senedd Member, Andrew RT Davies though has slammed Plaid Cymru separatists’ Senedd budget deal with Labour.

Commenting on the backroom deal, Mr Davies pointed out the deal marked a continuation of the coalition between the two parties and ensured both parties’ worst policies would remain.

He said: “Plaid Cymru separatists have once again done a Senedd backroom deal with Labour that will leave Wales with more of the same.

“Both parties wasted hundreds of millions on 36 more Senedd members, a Nation of Sanctuary for asylum seekers and an Anti-Racist Wales Action Plan.

“Thanks to this continuation of the coalition between Plaid and Labour, all these damaging policies will remain.”