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.

Actual Income Tax data for 2021-22 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 forecast of UK government Income Tax made by the Office for Budget Responsibility).

This reconciliation process for 2021-22 can now be undertaken as HMRC have published 2021-22 Income Tax outturn data, and the ONS have published revised population estimates that affect the calculation of the block grant adjustment:

• Welsh Rates of Income Tax is higher than forecast at the time of the 2021-22 Welsh Budget so this will increase Welsh Government self-funding by 320 million in 2024-25
• The associated block grant adjustment is also higher than forecast at the time of the 2021-22 Welsh Budget (driven by higher than forecast Income Tax revenue for the rest of the UK) so this will reduce the Welsh Governments block grant funding by 213 million in 2024-25
• The net effect is a 107 million increase in the Welsh Governments overall funding for 2024-25.