Welsh council set to overspend by £300,000 on social services budget

Anthony Lewis, Local democracy reporter

The social services budget at a Welsh council is forecast to overspend by more than £300,000 by the end of this financial year.

Latest figures from the end of September 2025 show a projected overspend for social services in Merthyr Tydfil of £360,000 by the end of 2025-26.

A report to the Healthier Merthyr Tydfil scrutiny committee on Tuesday, January 6, says this pressure is mainly driven by additional costs associated with increased demand, partially offset by increased grants and other savings.

The figures from September 2025 show a projected budget overspend of £983,000 on looked-after children residential placement services.

The main cause of the overspend is external placements with increasing volatility in the market.

This is due to both average placement costs and numbers of children exceeding the assumptions built into the 2025-26 budget.

There is also a projected overspend of £300,000 within independent residential establishments (within independent external care provision) driven by higher placement costs compared with the budget assumptions.

There is another projected overspend of £434,000 within independent domiciliary care which reflects an increase in both the care hours provided and average costs.

But overspends have been partly offset by savings such as £771,000 by using the eliminate profit grant and a further £50,000 saving in youth management due to increased grant funding.

There have been further savings where demand has been lower than assumed in the budget and these include a £159,000 saving in children’s residential services, a £149,000 saving on direct payments, an £80,000 saving on unaccompanied asylum-seeking children, a £44,000 saving in adoption services, a £58,000 saving in homes for the elderly, a £53,000 saving in the extra care facility, a £22,000 saving in specialist family support, a £60,000 saving in early years, and a further £35,000 saving from the social services share of the Welsh Government grant for the pay award.

In the last two years, the budget has been underspent due to grants received, not from reductions in services.

At the end of 2024-25 social services was in a positive position and showed an underspend overall.

This was due to re-tendering of services at reduced commissioned rates as well as slippage in regional grants which needed to be used by the end of the year, along with further funding from Welsh Government for winter pressures and the non-residential care fee cap grant.

The report says ongoing cost-of-living issues, higher costs for commissioned services, and Welsh Government strategies such as eliminating profit has significantly affected some budget lines.

It says demand for services and levels of need have also changed over the past few years, especially following the pandemic, and this can affect the budget significantly.

It adds: “Budgets within social care can be unpredictable in the sense that the children looked after rates and adults requiring support for their care needs can both change in a short space of time.

“At present there is a growing demand for packages of care within adult services, for example, particularly focusing on adults being discharged from hospital.

“There has also been an increase in the need for mental health services and more complex needs in children being referred in.

“Safeguarding adults and children will always be a priority and these costs cannot be avoided.

“We will endeavour to support children, families, and adults within the community and their own homes but in some cases this is not possible.”

The report says meetings are held with social care management, the cabinet member for social services, and finance officers to discuss the budget position, medium-term financial planning, and how they can ensure a balanced budget moving forward.

The corporate management team and the section 151 financial officer are monitoring the budget and challenge officers when there are areas of overspend, it adds.

The report also says the council continues to work regionally with neighbouring authorities and the health board on the transformation of services both in adult and children services.

There is ongoing regional funding and money has been secured in children services for the future development of services and continuation for the stay well at home service in adult services but the future of this fund is currently unknown after 2026.

The council works with the Association of Directors of Social Services (ADSS) and WLGA (Welsh Local Government Association) to prepare business cases around future funding for eliminate profit and connecting care systems which are both areas of ongoing demand in the coming years.

The report says the council will continue to review demands within children and adult service and review structures to ensure it can meet the needs identified.

It says the council will meet the priorities set out within the annual social services report and within the improvement plan which will include looking at areas of transformation and possible efficiencies.

The council will also continue to look at opportunities for invest to save projects.