Cost of living crisis having ‘significant impact’ on Welsh council

Elgan Hearn, Local Democracy Reporter

The cost-of-living crisis will have a “significant impact” on Blaenau Gwent council finances if it continues for some time to come, a finance chief has warned.

At a meeting of Blaenau Gwent County Borough Council’s Cabinet on Wednesday, September 21, councillors looked at the authority’s financial position as it stood at the end of June.

The report by Rhian Hayden, the council’s chief officer for resources, forecast that by the end of 2022/23 financial year, Blaenau Gwent would be overspent by £570,000 on its £169.19 million budget.

This would need to be balanced out by a “net transfer” of £620,000 to departmental “specific reserve budgets.”

This, she explained, would leave the council’s budget £50,000 underspent by the end of March 2023.

Ms Hayden said: “Whilst the forecast financial out-turn is manageable this year, I think there are some significant cost pressures being seen across the council specifically as a result of the cost-of-living crisis.

“At the moment it does appear that most of (the costs) can be managed by using underspending budgets in other areas and appropriate use of some earmarked reserves.

“But those cost pressures are significant and will have a significant impact on future years if the cost-of-living crisis continues as it currently is.”

Major issue

Council leader Cllr Steve Thomas said that dealing with the cost-of-living crisis is the major issue being discussed amongst other council leaders and Welsh Government ministers.

The report outlines that money transfers between internal council budgets, known as virements and totalling over £1.1 million needed to be made to deal with the financial pressures.

These pressures include £500,000 for Home to School Transport due to the high costs of fuel this year.

The cost of producing school meals has also increased, and could end up being £965,000 higher than it was in 2021/22.

The council’s largest food supplier has said that the price of some commodities has risen by 54 per cent.

This could rise further with the introduction of universal free school meals for nursery and infant school children.

Cllr Thomas said that “it was assumed” the Welsh Government would fully fund this extra cost.

The forecast also considers the current local government employers pay proposal for 2022/23.

This is a £1,925 increase on all pay scales.

This will result in pay increases ranging from four to 10 per cent, with the average increase being 6.3 per cent.

The impact of the proposed pay award will increase the council’s costs by £3 million compared to 2021/22

The budget set by the previous Independent administration in February had assumed and budgeted for a four per cent increase in wages.

This means an extra £1.15 million is needed to cover the higher salaries.

Of this, £877,540 will come from a Pay Award Contingency Budget that had been set aside to deal with this issue, while the remaining £272,460, will come from departmental “underspending budgets.”

Cabinet noted the report and approved the money transfers.