The Government of Wales Act 2006 (Increase of Capital Borrowing Limits) Order 2026

The Government of Wales Act 2006 (Increase of Capital Borrowing Limits) Order 2026 marks a significant, albeit incremental, adjustment to the fiscal powers of the Welsh Government. This Order, made under section 122A(2) of the Government of Wales Act 2006, increases the statutory capital borrowing limit for the Welsh Ministers from £1,000 million to £1,100 million. This amendment reflects the ongoing evolution of the Welsh devolution settlement, providing the Welsh Government with enhanced financial flexibility to fund crucial capital expenditure projects across Wales. For legal practitioners, this development underscores the dynamic nature of devolved finance and its implications for public sector contracting, infrastructure development, and the broader Welsh economy.

The landscape of devolved governance in the United Kingdom is characterised by continuous evolution, particularly concerning the fiscal powers granted to its constituent nations. A recent manifestation of this ongoing development is The Government of Wales Act 2006 (Increase of Capital Borrowing Limits) Order 2026 (the “Order”). This statutory instrument directly amends section 122A(1) of the Government of Wales Act 2006 (c. 32) (the “2006 Act”), elevating the Welsh Ministers’ capital borrowing limit from £1,000 million to £1,100 million.

This increase, though seemingly modest, carries substantial implications for the Welsh Government’s capacity to invest in critical infrastructure and public services. It provides a timely opportunity for legal professionals to re-evaluate the parameters of Welsh fiscal autonomy, understand the mechanisms of such changes, and anticipate the potential for new public sector projects and associated legal work. This article will delve into the legislative background, analyse the practical effects of the Order, and consider its broader significance within the context of Welsh devolution and public finance.

The Government of Wales Act 2006 serves as the foundational legislation for the current Welsh devolution settlement, establishing the Senedd (formerly the National Assembly for Wales) as a fully-fledged legislature and creating a distinct Welsh Government. Initially, the financial powers of the Welsh Government were more constrained compared to those of Scotland. However, a series of legislative reforms, notably the Wales Act 2014 (c. 29) and the Wales Act 2017 (c. 4), progressively enhanced Wales' fiscal autonomy.

Section 122A of the 2006 Act, which deals with lending for capital expenditure, was inserted by section 20(10) of the Wales Act 2014. This provision initially set the aggregate outstanding principal sum for capital borrowing at £500 million. Subsequently, section 18 of the Wales Act 2017 doubled this limit to £1,000 million, reflecting a continued commitment to strengthening the Welsh Government's financial capabilities. The power to vary this limit is explicitly granted to the Secretary of State, with the consent of the Treasury, under section 122A(2) of the 2006 Act, subject to approval by a resolution of the House of Commons. This framework underscores a balance between devolved financial responsibility and ongoing oversight by the UK Parliament and Treasury.

The Government of Wales Act 2006 (Increase of Capital Borrowing Limits) Order 2026 directly implements a commitment made at the UK Government's Autumn Budget, increasing the Welsh Government's cumulative capital borrowing limit by 10%. Specifically, it amends section 122A(1) of the 2006 Act, substituting “£1,000 million” with “£1,100 million”. This £100 million increase provides the Welsh Government with additional headroom for capital investment, supplementing its primary funding sources of the block grant from the UK Government and devolved taxation.

This enhanced borrowing capacity is crucial for the Welsh Government's ambitious infrastructure agenda. The Welsh Government has a ten-year Wales Infrastructure Investment Strategy and supporting Infrastructure Finance Plans, allocating billions to projects in areas such as housing, transport, and health. For instance, recent plans have seen significant capital funding allocated to the Core Valley Lines Transformation Programme, housing, and regional transport infrastructure. The ability to borrow more for capital expenditure allows for greater flexibility in financing these long-term projects, potentially accelerating their delivery and mitigating reliance solely on annual budget allocations.

It is important to note that while the cumulative capital borrowing limit has increased, the Welsh Government also operates under an annual capital borrowing limit, which was set at £150 million as of April 2019, within the previous £1 billion overall cap. The Institute for Fiscal Studies noted that these limits for Wales were set to increase by 10% in 2026–27 and then in line with forecast inflation. The borrowing can be sourced from the National Loans Fund (via the Secretary of State) or commercial banks, though the Welsh Ministers are prohibited from mortgaging or charging any property as security for such loans. This contrasts with the Scottish Government, which has higher capital borrowing limits and plans to issue its own bonds.

The increase in borrowing powers reflects a broader trend of deepening fiscal devolution within the UK, moving towards a 'reserved powers' model where the Senedd can legislate on any matter not explicitly reserved to Westminster. While this provides greater autonomy, the UK Treasury maintains oversight, and orders such as this one require parliamentary approval, ensuring a degree of central government control over the aggregate debt of devolved administrations. The Explanatory Note to the Order indicates that no significant impact on the voluntary, private, or public sector is foreseen, suggesting the increase is viewed as a measured adjustment rather than a radical shift.

For practitioners, this means a continued need to monitor Welsh Government procurement pipelines and funding announcements. The additional £100 million, coupled with the existing annual borrowing capacity, could translate into new opportunities for firms involved in construction, engineering, consultancy, and other sectors supporting public infrastructure. Understanding the nuances of Welsh fiscal powers and the specific limitations on borrowing remains critical for advising clients on potential engagements with the Welsh Government.

The Government of Wales Act 2006 (Increase of Capital Borrowing Limits) Order 2026 represents a pragmatic adjustment to the Welsh Government's financial toolkit, providing an additional £100 million in capital borrowing capacity. This incremental increase is a testament to the evolving nature of the UK's devolution settlement, granting greater fiscal flexibility to the Welsh Ministers to pursue their strategic investment priorities in areas such as housing, transport, and public services.

For legal practitioners, this development reinforces the importance of staying abreast of changes in devolved finance legislation. Those advising on public procurement, infrastructure projects, and public sector contracts in Wales should recognise the potential for increased activity and new opportunities arising from this enhanced borrowing power. Monitoring the Welsh Government's Infrastructure Finance Plans and budget allocations will be key to understanding how this additional capacity is utilised and identifying areas of future investment. The Order underscores a continuing trajectory towards greater financial autonomy for Wales, albeit within a framework of UK parliamentary and Treasury oversight, necessitating a nuanced understanding of both devolved and reserved powers.