Welsh child payment stalled pending UK Treasury tax relief

The Welsh Government’s proposed child payment, Cynnal, cannot be launched until Westminster grants a benefit and tax disregard, the Senedd heard on Wednesday.

Deputy First Minister and Social Justice Minister Sioned Williams said the scheme is intended to lift families out of poverty, but without a UK Treasury concession families could see the payment clawed back through tax or benefit reductions.

“What we don’t want to do with Cynnal is make families worse off,” Ms Williams told the chamber.

She added, “We want to make them better off.” So, that means the UK Treasury has to give a benefit and tax disregard.”

Ms Williams confirmed she has met with Baroness Sherlock, the Department for Work and Pensions minister of state, who agreed to explore options that would protect the payment from tax and benefit impacts.

Reform MS Paul Marr pressed for clarity on the rollout, noting a discrepancy between the First Minister’s earlier pledge to pilot the scheme and the Programme for Government’s more cautious wording.

“The distinction there really matters, Minister, because ‘we’re going to’ is a commitment, while ‘seek to’ is not,” Mr Marr said.

He warned that the lack of a firm commitment could delay delivery to the children who need it most.

Conservative MS Natasha Asghar accused the government of seeking more powers and fostering dependency rather than creating opportunity.

“Households across Wales are ‘struggling with rising living costs’,” Ms Asghar said, adding there is a “fundamental difference of values” between her and the Conservative spokesperson.

Ms Williams rejected the narrative of dependency, insisting support must reach those most in need.

“People are eligible for those benefits because their income is currently not sufficient to make sure that they are able to live with dignity and meet their essential needs,” she explained.

“We will not be quibbling about who is eligible for that support.” If they are in need, if they are in poverty, if they are disabled and need our help, then we will help them.”

Plaid Cymru MS Carrie Harper urged the government to press ahead, pointing to Scotland as a model where child poverty rates are falling.

“Scotland acts as an example to all of us in Cymru in terms of what can be achieved when governments have the tools to do more for their own people.” “The Scottish child payment and their additional powers on welfare are making a tangible difference there.”

Harper highlighted that 12,786 children in her constituency of Ceredigion Penfro currently live in poverty, warning that early deprivation can lead to disengagement from education, employment and training later in life.

The Welsh Government’s Programme for Government states it will “seek to pilot” Cynnal, a phrasing that leaves the final decision in the hands of the UK Treasury.

Without a clear benefit and tax disregard, the payment could be treated as income for means‑tested benefits, eroding its intended impact.

Business Minister Vaughan Gething has previously said the scheme could cost up to £300 million a year, but the exact figure remains unconfirmed pending Westminster approval.

Welsh Treasury officials have been in ongoing talks with the Department for Work and Pensions, seeking a formal guarantee that the payment will be disregarded for both tax and benefit purposes.

Sources close to the negotiations say the UK Treasury is reviewing the request but has not yet committed to a timeline.

Opposition parties warned that further delays could see thousands of children miss out on vital support as inflation continues to erode household budgets.

Meanwhile, the Senedd’s Finance Committee is set to scrutinise the funding arrangements in the coming weeks, with a report due before the end of the month.

If an agreement is reached, the Welsh Government hopes to launch Cynnal in early 2025, targeting families with children under 18 whose income falls below the poverty line.

Until then, the scheme remains in limbo, caught between Welsh ambition and Westminster authority.