GovWire

Under the fiscal framework agreed between the UK and Welsh governments in 2017, the Welsh Governments funding is initially based on forecasts of Income Tax and updated once actual Income Tax revenues are available.

In short, actual Income Tax data for 2020-21 replaces forecasts of Welsh Rates of Income Tax (made by the Office for Budget Responsibility) and forecasts of the associated block grant adjustment (based on forecasts of UK Government Income Tax made by the Office for Budget Responsibility).

This reconciliation process for 2020-21 can now be undertaken as HMRC have published 2020-21 Income Tax outturn data today:

• Welsh Rates of Income Tax is lower than forecast at the time of the 2020-21 Welsh Budget so this will reduce Welsh Government self-funding by 30 million in 2023-24
• The associated block grant adjustment is also lower than forecast at the time of the 2020-21 Welsh Budget (driven by lower than forecast Income Tax revenue for the rest of the UK) so this will increase the Welsh Governments block grant funding by 78m in 2023-24
• The net effect is a 48 million increase in the Welsh Governments overall funding for 2023-24.