Welsh council’s issue warning over funding settlement

Welsh councils have warned that next year’s funding settlement falls far short of what is needed to protect vital services, despite welcoming the stability offered by the Welsh Government’s draft budget for 2026–27.

The provisional settlement sets out £6.4bn for local authorities next year, a cash increase of £169m, or 2.7%.

Ministers have also introduced a funding floor to ensure no council receives less than a 2.3% rise, with Newport receiving the largest uplift at 4.3%.

Alongside core funding, more than £1.3bn will be provided through revenue grants and a further £1.08bn through capital investment. But council leaders say the figures pale in comparison to mounting pressures on social care, homelessness, education and workforce costs.

The Welsh Local Government Association (WLGA), which represents all 22 local authorities, said the settlement was welcome but would not prevent difficult budget decisions.

WLGA Labour Group Leader and Rhondda Cynon Taf council leader Andrew Morgan OBE said the increase “offers a degree of stability at a time when local services are under sustained pressure,” but warned stability alone would not solve structural challenges.

“Social care, homelessness, education and workforce costs continue to rise faster than resources can keep up,” he said. “Councils will still need to make tough choices, and that remains a concern. We’ve been clear that additional funding to increase the final settlement will be required to help protect and maintain services.”

WLGA Independent Group Leader Mark Pritchard went further, saying the gap between demand and resources was becoming “untenable”.

“Without additional support, the strain on councils to deliver essential services will become untenable. The pressures on workforces will only get worse and redundancies will be inevitable,” he said.

WLGA Plaid Cymru Group Leader Gary Pritchard said local government had long warned that financial pressures were structural, not temporary.

Funding formula

“This increase simply doesn’t keep pace with the underlying forces driving demand,” he said. “Many councils are already operating at the limits of what is safe or sustainable. Even with a funding floor, the gap between need and resource continues to widen, particularly in rural areas. The funding formula really needs to be reformed.”

Liberal Democrat Group Leader Jake Berriman echoed concerns about rising service costs and uneven pressures across Wales.

“Demand is rising far faster than resources, particularly in social care and services for vulnerable residents,” he said. “Rural and semi-rural areas face higher delivery costs that a flat percentage uplift simply doesn’t reflect.”

Separate WLGA modelling suggests even a 3% settlement — slightly higher than what councils are receiving — would still leave authorities with a £373m shortfall, equivalent to a 19% council tax rise or the loss of 12,000 staff. A 2% increase would leave a £436m gap.

Start of negotiations

Opposition parties seized on the figures. Plaid Cymru warned of “double-digit tax hikes” and “thousands of job losses”, while the Welsh Conservatives said the settlement showed the need for “fundamental change” to the funding system.

A Welsh Government spokesperson said the draft budget marked only the start of negotiations ahead of a final vote in March, adding: “It is our firm ambition to secure a Final Budget which uses all the resources available, safeguards jobs and protects frontline services.”