Welsh Council Faces Potential £25.7m Financial Gap Next Year

A Welsh council is currently facing a potential £25.7m gap in its finances for next year.
Based on a 2% increase in funding from Welsh Government in 2027-28 and before any increase in council tax Rhondda Cynon Taf (RCT) council is currently looking at a £25.72m budget gap.
The council has modelled a range of scenarios for the next three financial years with potential Welsh Government settlements of 2%, 3%, or 1%.
The change of the potential level of the settlement from Welsh Government
has a significant impact on the budget gap at £5.6m per 1%, a council cabinet report says.
2027-28
For 2027-28 with an additional budget requirement of £36.852m the base case the council is using of a Welsh Government settlement of 2% (£11.128m) would leave a remaining budget gap for next year of £25.724m and with a council tax rise of 3% this would reduce by £4.459m to £21.264m.
With a Welsh Government settlement of 3% (£16.692m) the remaining budget gap would be £20.159m.
And with 1% (£5.564m) the remaining gap for next year would be £31.288m.
2028-29
For 2028-29 with an additional budget requirement of £36.902m the base case the council is using of a Welsh Government settlement of 2% (£11.351m) would leave a remaining budget gap of £25.551m and with a council tax rise of 3% this would reduce by £4.593m to £20.958m.
With a Welsh Government settlement of 3% in 2028-29 (£17.193m) the remaining budget gap would be £19.709m.
And with 1% (£5.62m) the remaining gap for 2028-29 would be £31.282m.
2029-30
For 2029-30 with an additional budget requirement of £33.25m the base case the council is using of a Welsh Government funding settlement of 2% (£11.578m) would leave a remaining budget gap of £21.672m and with a council tax rise of 3% this would reduce by £4.731m to £16.941m.
With a Welsh Government settlement of 3% in 2029-30 (£17.709m) the remaining budget gap would be £15.54m.
And with 1% (£5.676m) the remaining gap for 2028-29 would be £27.574m.
The three-year budget gap based on the different potential funding levels
These figures mean that the cumulative budget gap for all three years at 2% would be £72.947m but this reduces to £59.164m with council tax rises of 3% each year.
The three-year deficit with a 3% Welsh Government settlement would be £55.4m and at 1% it would be £90.144m.
Council tax increases are currently being modelled at 3% per year while specific grant funding from Welsh Government is assumed to continue including the Social Care Workforce Grant and the Eliminate Profit/Radical Reform policy (at current year levels) and fees and charges are assumed to be increased by inflation only (other than where exceptions have already been agreed by cabinet).
Other assumptions are that service area pressures are reflected which arise from things like statutory requirements, demand-led pressures and demographics, modelled uplifts are included for pay and non-pay inflation, authority-wide requirements are reflected including capital financing, levies
and the council tax reduction scheme and the schools budget is modelled to cover forecasted pay and non-pay inflation and other cost pressures.
The report says that “all of our planning assumptions result in a significant budget gap being faced by the council,” adding: “The extent of the impact on our services is clearly going to be largely and directly determined by the level of funding the UK Government provides to Welsh Government and thereafter the settlement level local authorities in Wales receive from Welsh Government.”
A cash-flat or 0% Welsh Government funding increase would result in a £36.852m deficit in 2027-28, a £36.9m deficit in 2028-29, and a £33.25m deficit in 2029-30.
The report says the council’s average settlement level over the last four financial years has been 4.7%, against which it has had to balance budget gaps which have averaged £33m per year.
A settlement at this level would provide the council with additional resources of over £15m compared to its base case scenario enabling it to protect its key services, the report says. ‌​‌​‌​​​‍‌​‌​​‌‌‌‍‌​‌‌​​‌​‍‌​‌‌‌​‌‌‍‌​‌‌‌‌​​

By BBC LDRS ‌​‌​‌​​​‍‌​‌​​‌‌‌‍‌​‌‌​​‌​‍‌​‌‌‌​‌‌‍‌​‌‌‌‌​​