Labour-Plaid budget deal brings relief to council facing 6.5% tax rise

Richard Youle, Local Democracy Reporter

A grim financial outlook including the need for a 6.5% council tax hike has been eased by the budget deal between Welsh Labour and Plaid Cymru, a senior councillor said.

As well as proving a week is a long time in politics the national deal offers some respite for authorities in Wales as they crunch the numbers before finalising their 2026-27 budgets.

A report before Carmarthenshire’s cabinet on December 15, written before the agreement was announced last Tuesday, said the council would need to increase council tax by 6.5% in 2026-27 and make savings £9.6 million – and still need to find a further £3.5 million to balance the books.

This was based on the council getting a relatively low funding increase of 2.3% – worth £17.1 million – from the Welsh Government combined with ongoing spending pressures.

Last week’s national Labour-Plaid deal has three elements, including extra cash for councils, and Carmarthenshire’s relieved cabinet member for resources, Cllr Alun Lenny, said this would equate to almost an extra £7 million for the county next year.

“A sum on that scale would enable us to wipe out the draft budget deficit of £3.5 million, lower the proposed increase of 6.5% in council tax, provide funding to maintain or enhance specific services, and remove some of the savings proposals under consideration – although I emphasise that the financial pressures are still huge and ongoing,” he said.

However, the Welsh Government’s budget hasn’t been passed yet and the cabinet report as it stands – which is a three-year budget strategy – will be the basis of a public consultation and final proposals.

Council leader Linda Evans encouraged residents to respond to the consultation before the Plaid-Independent cabinet finalised its budget plans, including council tax, in the new year. “We do take their opinion into consideration and this is their opportunity to have their say,” she said.

Like most authorities Carmarthenshire is spending more and more on social care – partly the result of an ageing population – and staff costs. School budgets are also under significant pressure. This means Carmarthenshire Council is currently forecast to be £2.6 million in the red at the end of the 2025-26 financial year – a figure which leaps to £11.8 million when school overspends are included.

Furthermore, cabinet plans to provide an extra £1 million in 2026-27 so that the council can meet its employer’s national insurance costs, which Chancellor Rachel Reeves increased in 2024.

Cabinet also wants to set aside £500,000 every year to meet the costs of storm damage. Speaking on the day of another amber weather warning in South Wales, Cllr Lenny said: “What we’re experiencing at present is not bad weather but climate change.”

On the plus side Cllr Lenny announced a £5 million windfall in the form of a higher-than-expected local Government pension scheme fund valuation. “This allows us to reduce employer contributions and make a saving of £5 million on next year’s budget, without any impact on jobs, services, or the retirement benefits of our staff,” he said. “This is very welcome news indeed.”