Budget deficits could see residents pay more in council tax for reduced services

Alec Doyle, Local Democracy Reporter

People could face the harsh reality of paying more in council tax for reduced services next year, according to new data which reveals that two councils are facing multimillion-pound shortfalls.

A report on local authority budget gaps – where councils are spending more than their income – indicates that Flintshire County Council will have the third-largest budget gap in Wales next year despite recent council tax increases and cost savings.

Meanwhile in Wrexham the council is projected to more than double the amount is saves in spending per person to balance it’s anticipated budget gap of £11.77 million

The data doesn’t take into account potential increases in council tax – which is one way councils can reduce their deficit position – but after increasing its portion of council tax by 7.9% in 2024/25 and 8.93% in 25/26 the authority will need to consider whether people can continue to afford to pay.

Leader of Wrexham Council Cllr Mark Pritchard said councils needed the Welsh Government to stand up and make a change to the funding model.

“Over the last 10 years, we have lost more than £60 million from our financial budget as a result of cuts from the Welsh Government,” he said.

“The new Welsh Government has said it will support the 22 local authorities through the financial process, which is something we welcome. We hope that commitment comes to fruition and provides us with the support we need to continue delivering vital services across Wales.”

Balancing the budget

The report, produced by the BBC’s Shared Data Unit, reveals that while Flintshire Council has this year increased council tax by 5.46% and found savings of almost £11 million – or £70.57 per person – its financial situation is predicted to get worse.

For 2027/28 projections show that Flintshire is facing a potential budget deficit of £26.58m.

To balance that it will need to reduce spending by a further £170.52 per person.

Wrexham County Borough Council is not facing the same scale of deficit as Flintshire but it is facing a similar problem.

To balance its predicted £11.77m deficit – again, without including the AEF settlement or council tax rise for 26/27 – it will need to find savings of £85.16 per person – more than double the £37.61 per person savings it has made this year.

In a statement Flintshire County Council said its discussions over what service cuts might be made to balance the books next April needed to wait until the Welsh Government’s draft funding statement.

“It is too early to be specific on this as the scale of any potential cost reductions will not be known until we have certainty on our own national funding settlement from Welsh Government this autumn,” said a spokesperson for the council.

“At this stage we have not included in our future financial forecast any estimated increases from our two main funding streams – the Welsh Government Grant Aggregate External Finance (AEF) Grant and Council Tax – which will significantly reduce the budget gap figure reported.”

What the Welsh Government decides to allocate to local authorities under the AEF – the annual budget given to every council to fund its core spending and determined by the local government funding formula – will be critical in how determining how challenging next year will be for families.

A spokesman for the Welsh Government said: “We regularly work together with councils to understand the pressures on local government, particularly in areas such as homelessness, social care and education.

“Before the election, Plaid Cymru secured an additional £112.8m for local government in the 2026-27 budget.

“This means every authority is receiving an increase of at least 4% this financial year supporting councils to protect services and limit council tax increases.

“Local authorities will be planning a range of scenarios at present and we will set out our budget proposals this autumn.

“We are committed to reviewing the local government funding formula, working with local government, to better reflect the cost of delivering services in different parts of Wales.”

‘The economic environment remains volatile.’

Wrexham Council said the economic environment remained unpredictable and the impact on residents and services would depend on how much support came from Welsh Government to local authorities.

“Wrexham Council’s current Medium Term Financial Plan identifies a potential budget gap of £11.7m in 2027/28, with a similar gap projected in subsequent years,” said a council spokesperson.

“These figures are based on a number of informed assumptions, including the anticipated level of funding from Welsh Government, alongside estimated inflationary pressures and increasing demand for services.

“The economic environment remains volatile. Inflationary increases over the last four years are now baked into our costs. There is a significant and continuing increase in demand pressures, particularly in respect of Additional Learning Needs, specialist care provision for children, adult social care, schools and school transport. To meet these service demands alone, the council has increased the budget requirement by £28.6m over the last four financial years.

“The rise in demand and cost of specialist and complex provision, particularly for children, is a key cost driver and the greatest risk to financial sustainability. These are statutory provisions the council has to fund, at the expense of other services.

“Funding from Welsh Government is a key element of the Medium Term Financial Plan. The demand for services and the pressure to increase pay drives up expenditure significantly.

“If these pressures are not reflected in the settlement from Welsh Government, then the council will have to implement further cuts to services or a higher increase in council tax in order to set a balanced budget.

“The level of national financial settlement to councils in Wales for 2026/27 only accounted for half of the calculated cost pressures. Within this context, councils continue to face the risks of rising in-year cost pressures until a more sustainable funding model is put in place.

“We recognise the significant pressures facing services, particularly as demand continues to increase. As our budget planning progresses, we will continue to consider the needs of residents who rely on essential council services, including our most vulnerable residents.”

---

Get more trusted Welsh news

Choose Nation.Cymru as a preferred source in Google News to see more of our journalism.