Financial crisis hits Welsh council with power of a ‘Tsunami’

Dale Spridgeon, Local Democracy Reporter

The UK-wide financial crisis is hitting a Welsh council with the power of a ‘Tsunami’.

Cyngor Gwynedd (Gwynedd Council) leader Dyfrig Siencyn is warning of “draconian” cuts to jobs, vital services and “significant” tax rises as the council looks to plug a £7.1 million financial hole this year which could rise to £18.5m next year.

Cllr Dyfrig Siencyn said the “unprecedented” situation could result in cuts to services such as of education and elderly care. He added: “Obviously we are going to do everything we can to protect our residents from the impact of all this, but I think it is inevitable we have to cut back on many of our services which are already struggling.

“It’s massive, the impact of this, it’s been like a Tsunami. It has been completely unprecedented.

“I think what has hit us in this crisis, with rising interest rates, rising costs and everything else that is going on, it is just the rate and speed of which it has hit us, and other Welsh local authorities. It has impossible to plan for this.”

Head of finance Dewi Morgan said “We have come into the situation in a good place, better than some of the other councils.

“But education and elderly care services are among some of our highest costs, but we may have no choice but to cut back further, but really there is not much fat left to cut back on our services.

The stark conclusions are revealed in a finance report which will be presented to the Cabinet on October 25. It describes how central Government policies, as well as UK-wide and international financial factors have had a “catastrophic” impact on potential outcomes for Gwynedd.

Issues include an 11% inflation rate, that is likely to rise further over the coming months. The cost of living crisis will also result in Gwynedd spending approximately £6million more on homelessness services this year.

Severe weather and illness this winter could also have an impact. Whilst the economic situation remains unclear, and may rapidly change, the report forecasts that Cyngor Gwynedd says it faces a £7.1million shortfall this financial year (2022/23).

But even worse, the council says it could face an £18.5m shortfall in 2023/24 rising to £22.3m shortfall in 2024/25. The council has put forward three options to reduce the shortfall, by increasing council tax – each 0.5% council tax increase will decrease the shortfall by approximately £400,000.

To deliver additional savings over and above the £33.4million delivered since 2015 and to impose service cuts; as well increasing the fees the council charges residents for certain services. It will consider those options over the coming months, leading up to a full council meeting in March 2023 when the council will set its budget for the 2023/24 financial year.

‘Bleakest outlook’

Cllr Siencyn added: “This is the bleakest financial outlook I have seen in my time in local government. The sheer scale of the shortfall is hard to comprehend, and coming as it does at the end of the Covid crisis and a decade in which Cyngor Gwynedd has already delivered massive financial savings the timing could hardly be worse.

“From discussions in the Welsh Local Government Association I know that all Welsh councils are facing similar or larger shortfalls with the total pressures on councils across Wales in the region of £500million. Given this context, it is only a radical change of direction by the UK Government that will enable councils to avoid being forced into draconian service cuts coupled with large council tax increases.

“Once again, local government is facing the brunt of central government decisions. Gwynedd will be uniting with colleagues from across local government to apply as much pressure as possible on Westminster to release the funds we need to protect vital services for our communities and our most vulnerable residents in particular.

“Even if we succeed, we will still unfortunately face a huge challenge in meeting our legal duty to set a balanced council budget for 2023/24. The only responsible course of action for us now is to make the most of the short period of time available and to carefully prepare for the extremely hard times and hard decisions that are ahead of us.”

‘Worse than austerity’

Finance Cabinet Member Councillor Ioan Thomas said: “It is no exaggeration to say that the circumstances created by the UK Government mean that councils across Wales are facing funding pressures that are significantly worse than those experienced during the ‘austerity’ period of the past decade and the recent Covid crisis.

“We will be lobbying the UK Government hard to take action and try to make them realise the hugely detrimental effect this situation will have on our communities.

“In the meantime, we have no option but to prepare for the worst, which will likely mean that we will be pushed into a corner and forced to combine significant service cuts with substantial council tax increases from April 2023 onwards.”