Council faces £45m budget gap as service costs continue to rise

Mark Mansfield

Wales’ largest council is facing a £45m hole in its finances next year as rising costs and growing demand for services put further pressure on its budget.

Cardiff Council estimates it will cost an additional £60.3m to maintain services at their current level in 2027/28, with only £15.3m of additional funding currently expected to offset the increase.

The resulting £45m projected shortfall is £1.2m higher than the council estimated in March.

If the forecast remains unchanged, the authority says it would need to find around £34.6m of savings as part of the budget it will set next spring.

However, there remains significant uncertainty over how much money Cardiff will receive from the Welsh Government.

The council’s current calculations assume a 2% increase in its general Welsh Government funding, but it has not yet received an indicative allocation.

Every one percentage point change in that funding would be worth almost £7.2m to the council.

Of the £60.3m increase in costs, £22.4m is attributed to inflation, including higher prices for commissioned care, home-to-school transport and education placements.

Another £17.4m is expected to be needed for workforce costs, while £11.3m relates to increasing and more complex demand for council services.

A further £9.2m covers capital financing, existing commitments, budget changes and other emerging pressures.

Education and social services account for much of the pressure, with the council highlighting increasing costs associated with Additional Learning Needs (ALN).

These include specialist placements, education provided outside council-maintained settings and home-to-school transport.

Children’s and adult social services are also facing higher costs as the complexity and price of care packages increase.

Financial pressure

Council leader Chris Weaver said: “Like councils across the country, Cardiff continues to face significant financial pressures. The cost of delivering services is increasing, while demand in areas such as social care and Additional Learning Needs remains exceptionally high.

“Our priority will be to protect the services residents rely on and to support the children, adults and families who need us most. However, we do not underestimate the scale of the challenge ahead.

“These are initial forecasts and not a final budget. We will continue to make the case for a fair funding settlement for Cardiff, while working across the Council to identify savings, reduce costs and deliver services as efficiently as possible.”

Transparent

Cabinet member for finance, modernisation and performance Leonora Thomson warned that efficiency savings alone were unlikely to close the gap.

She said: “This report provides an early and transparent assessment of the financial position facing the Council as we begin preparing next year’s budget.

“The £45 million gap is based on the information currently available, but there remains considerable uncertainty around inflation, staff costs, demand for services and, crucially, the funding Cardiff will receive from Welsh Government.

“We will continue to prioritise efficiency savings and income generation, alongside the Council’s change programme. But the size of the gap means efficiencies alone are unlikely to be sufficient, and some proposals affecting the way services are delivered may also need to be considered.

“No decisions have been made. Detailed proposals will be developed, assessed and subject to consultation before the final budget is considered.”

The financial pressures are expected to continue beyond next year.

Cardiff’s medium-term financial plan forecasts a cumulative budget gap of £163.7m between 2027/28 and 2030/31, which the council estimates could require almost £119m of savings over the four-year period.

Investment

Pressure on the council’s day-to-day budget and higher borrowing costs are also expected to restrict capital spending.

New expenditure will largely be focused on meeting essential legal and regulatory requirements, while other projects would generally need external or grant funding, proceeds from agreed asset sales or developer investment.

The council also intends to concentrate on completing projects already included in its investment programme.

Senior councillors will consider the budget strategy update on September 17.

Further work on potential savings and additional income will take place during the autumn, with the Welsh Government’s draft Budget expected on November 17.

The council intends to consult residents on its detailed budget proposals from January, before councillors consider the final 2027/28 budget in March.

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