Early discussions are set to take place between the Welsh Labour Government and the Conservatives in the Senedd, as both sides explore the possibility of reaching a deal on next year’s £27bn budget.
The first minister is due to meet Darren Millar, leader of the Welsh Conservatives, on Tuesday afternoon for what are described as “initial talks” aimed at avoiding a political impasse that could trigger automatic spending cuts.
First Minister Eluned Morgan, who is steering the Welsh Government’s financial plans through the Senedd, will need backing from at least one opposition party to secure approval when the budget comes before members in January.
Last week, ministers warned that failure to pass the budget could lead to “disastrous cuts”, including the threat of “mass redundancies”, as required under the legislation that governs the Senedd’s finances.
Although both the Conservatives and Plaid Cymru have said they want to avoid that outcome, the Tories are the first to publicly confirm that discussions are taking place.
Conservatives push for stamp duty reform
Mr Millar has called for the abolition of the Welsh version of stamp duty — the land transaction tax — arguing that such a move would help “get the economy moving”.
He said: “It is essential that the Welsh Government’s budget gets our economy moving and reflects the priorities of the people of Wales, not the priorities of politicians in Cardiff Bay. A key part of our plan to fix Wales includes cutting taxes, including stamp duty. This will form part of the discussions which will now take place.”
The Conservatives’ decision to enter into budget talks is an unusual one, as the party has typically stayed outside of such negotiations in the Senedd.
The first minister and Mr Millar exchanged letters last week following his initial proposal. In her reply, Eluned Morgan invited him to meet and discuss his ideas further, adding that “the finance secretary and your party’s finance spokesperson [Sam Rowlands]” should hold more detailed discussions.
Finance Secretary Mark Drakeford has already ruled out completely scrapping land transaction tax, though he indicated a willingness to consider amendments.
Labour looks beyond the Lib Dems
The Welsh Government has so far only published a broad outline of its spending plans, setting aside £380m for negotiation with opposition parties.
Until now, Labour had relied on the support of Welsh Liberal Democrat leader Jane Dodds — the party’s sole Senedd member — to pass key votes. Earlier this year, she backed a government deal which included a ban on greyhound racing.
However, the political arithmetic could shift if Labour loses the Caerphilly by-election on Thursday, potentially forcing ministers to look beyond the Lib Dems for additional support.
Ms Dodds confirmed there had been no fresh budget talks between her party and Labour but said she was “open to see how we can work together to ensure the full budget is passed.”
Door remains open
A Welsh Government source reiterated that “the door is open for all parties” to take part in discussions aimed at securing the 2026–27 budget.
“The first minister said in the Senedd she was open to talking to all parties to avoid the devastating consequences of no budget deal,” the source said. “The Conservatives have taken up the offer to talk. The Lib Dems have frequently been in contact with the Welsh Government through their budget deal last year. The door is open to all parties who feel they can put their values into practice in setting the Welsh Government budget for 2026–27.”
While few expect Tuesday’s meeting between Eluned Morgan and Darren Millar to produce an immediate breakthrough, it marks a significant moment in what could become an increasingly complex round of negotiations over Wales’s financial future.
