Councils braced for black hole in budgets

Councils in Wales are bracing themselves for a multimillion pound “black hole” when they prepare their budgets for next year.

Rises in central government grants have not kept pace with soaring costs to run and maintain essential services, opening up huge projected budget gaps in councils’ finances.

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Every council which responded to the Local Democracy Reporting Service (LDRS) this week reported they would have to make millions in savings next year.

Powys County Council estimates £17.4m savings will need to be made next year, and between £62m and £85m over the next five years. The council holds £13.6m in unallocated reserves.

The Welsh Local Government Association (WLGA) has warned pressure is “unsustainable” and urged decision-makers in the Senedd and in Westminster to “step up” with more investment.

Central government grants make up the majority of council funding in Wales.

Andrew Morgan, who leads the WLGA, warned this week that “without extra funding to maintain services, councils will struggle to maintain the services that our communities need”.

“The WLGA has emphasised that, despite these challenges, councils remain committed to supporting their residents and working with Welsh Government to help deliver their priorities, but with budget pressures on the rise, it’s really important for both the Welsh and UK governments to step up and provide the investment we need to keep these essential services running,” he added.

A Welsh Government spokesperson told the LDRS: “We recognise the very real challenges local authorities are facing.

“We meet regularly with local authorities to discuss these against the backdrop of the current financial climate, as we prepare our own draft budget for 2025/26.”

The LDRS contacted Wales’ 22 local authorities to find out how big of a budget gap they were anticipating for next year, and how much they currently hold in unallocated reserves.

The figures come amid the revelation the Welsh Government is drawing up plans in case Welsh councils go bust.