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UK-wide financial crisis ‘having an unprecedented impact’ on Welsh council

19 Oct 2022 4 minute read
Money on a Welsh dragon

Government policies as well as UK-wide and international financial factors are creating unprecedented challenges for councils, and Gwynedd is unfortunately no exception.

This is the stark conclusion of a finance report that will be presented to Cyngor Gwynedd’s Cabinet on 25 October.

The report explains that a number of circumstances created by a combination of factors have resulted in catastrophic outcomes for Cyngor Gwynedd. These include:

  • 11% inflation that is likely to rise further over the coming months
  • a cost-of-living crisis which will result in Gwynedd spending approximately £6million more on homelessness services this year alone
  • factors such as the likelihood of severe weather and illness this winter

Whilst the situation remains unclear and may rapidly change, the report forecasts that Cyngor Gwynedd faces a £7.1million shortfall this financial year (2022/23). However, the real problem is that the council is likely to face an £18.5million shortfall in 2023/24.

Cyngor Gwynedd’s 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.”

‘Bleakest outlook’

Cyngor Gwynedd Leader Councillor Dyfrig 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.

“Coming as it does at the tail 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.”

Council shortfall

Despite Welsh Government stating that councils across Wales will receive on average an additional 3.5% in the grant it receives towards the cost of funding local services in 2023/24 and an additional 2.4% in 2024/25, it is forecast that Gwynedd will still face an £18.5million shortfall in 2023/24 and a £22.3million shortfall in 2024/25. 

The council has three options to reduce these shortfalls:

  • increase council tax – each 0.5% council tax increase will decrease the shortfall by approximately £400,000
  • deliver additional savings over and above the £33.4million delivered since 2015 and service cuts
  • increase the fees the council charges residents for certain services

All of these options will be considered carefully over the coming months leading up to the full council meeting in March 2023 when Cyngor Gwynedd will set its budget for the 2023/24 financial year.

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