Leaked letter raises local authority bankruptcy fears

Richard Evans Local Democracy Reporter

A council leader has written to the Welsh Government’s finance minister, warning local authorities are at ‘crisis point’ and teetering on the edge of bankruptcy.

Conwy Councillor Charlie McCoubrey’s fears are highlighted in a leaked letter to Welsh finance minister Rebecca Evans in which he describes the financial position as becoming unmanageable.

Meanwhile a council report this week proposed another council tax rise, modelling for up to a 10% increase raising another £7.1m from rate payers.

The letter to the finance minister has been sent ahead of the Welsh Government announcing the provisional local government settlements for 2024/25 on December 20.

The final settlement will be announced in early March 2024, but Conwy expects a rise of just 2.5% or £4.9m – again less than the Welsh average.

In the letter, Councillor McCoubrey goes on to describe service cuts made by the council during the previous budget as unpalatable.

Councillor McCoubrey asks the MS to consider Conwy having one of the oldest populations in the UK – and a rising social care bill.

The leader says the formula used to calculate the sum of money Conwy receives from Welsh Government is unfair, pointing to Denbighshire and Gwynedd receiving a higher annual percentage increase.

Councillor McCoubrey then states Conwy anticipates a funding gap of around £24.5m next year.

“We have all seen the situation in England, with several authorities having issued a s114 notice (for bankruptcy), with countless others teetering on the edge,” said Councillor McCoubrey.

“From discussions with leaders and chief executives across Wales, Welsh local authorities appear to be in a very similar position. It is something that is in the forefront of our minds in Conwy.

“As a result of the above, we feel we have little choice but to engage with the Chartered Institute of Public Finance and Accountancy in order to further consider the options available to us.

“I would, however, make the points that the funding formula has a significant effect on Conwy and our residents – demographically our population is becoming older, with a significant strain on our resources.

“In my view, this is not captured within the formula, and this needs to be addressed as a matter of urgency. I would draw comparisons with our neighbouring authorities, who received between 10-15% additional money per head of the population through the settlement than Conwy – given the social and geographical similarities between the authorities, I cannot accept that this is fair on the people of Conwy.

“While I fully accept that there are many competing and worthy calls for additional funding within the public sector, local government is at crisis point. Therefore, I would implore you to prioritise local government when setting the Welsh Government budget for 24/25.”

Difficult decisions

Speaking at a finance scrutiny committee at Bodlondeb earlier this week, Conwy’s head of finance Amanda Hughes warned councillors about using its £35m of reserves to plug the funding gap – of which £10m belongs to schools.

Ms Hughes warned Conwy had one of the lowest reserve levels in Wales. She said: “I would have to urge caution in regard to reserves and balances.”

“The biggest reason that members will have to be very cautious of the use of balances is that ultimately it is one-off money. If the budget is plugged by one-off money, then all that does is mean the gap the following year is even bigger.”

Ms Hughes went on to reiterate that Conwy councillors should make difficult decisions, rather than go down the bankruptcy route, which would see non-elected commissioners make decisions without the benefit of local knowledge or context. Councillors at the meeting backed the report.

A table contained within a financial report discussed by the scrutiny committee modelled for 5%, 7.5%, and 10% increases in council tax next year, raising £3.5m, £5.3m, and £7.1m respectively.

Conwy’s council tax rise was the highest in Wales last year at 9.9%.