£1.3m Worse Welsh Government Funding Fears

Pembrokeshire could be facing a Welsh Government settlement of £1.3m lower than last year, adding to an expected £2.6m pressure following a decrease in the second homes council tax premium, councillors heard.

Second-home owners, since this financial year, have been paying a 200 per cent premium on their council tax, effectively a treble rate.

At the October meeting of Pembrokeshire County Council’s full council, a call by Independent Group leader Cllr Huw Murphy to lower the premium to 150 per cent was successful, despite dire warnings such a drop would lose the council £2.6m in revenue.

It was warned this could lead to service cuts or the shortfall potentially made up by an increase in general council tax rates of some three-and-a-half per cent, on top of an expected rise of 11.14 per cent next year.

Cllr Murphy’s 150 per cent call followed on the heels of a failed 100 per cent call by Conservative group leader Di Clements, which it was said would have led to £5.2m pressures.

Cabinet member for finance, Cllr Joshua Beynon had warned: “Every 25 per cent reduction [in the premium] would reduce the amount raised by the council by £1.3m; already we have a very difficult financial situation, that is the reality of local government finance, we are stretched in terms of demand for services.”

While council tax makes up a proportion of the council’s annual revenue, a crucial area of funding is the Aggregate External Finance (AEF) rate from Welsh Government, normally announced in December ahead of councils setting the final budgets the following Spring.

While discussing potential changes in the second homes premium and the effect it could have on the council budget setting, Cllr Mike Stoddart stressed the AEF settlement figure from Welsh Government was the “most important aspect of our budget,” which would not be known until later in the year, asking what the assumed figure was.

Director of Resources Jon Haswell said a ‘flatline’ rate had been previously assumed, but the authority was now fearing a potential £1.3m reduction on what was forecast, leading Cllr Stoddart to say: “We’re making a decision [on second homes tax premiums] based on guesswork”.

Last year, Pembrokeshire received a below-inflation 2.5 per cent increase on its AEF rate, lower than the Welsh local authority average, amounting to an extra £5.372m on top of the £212.626m received for the-then current financial year.

The previous year, Pembrokeshire had received a higher-than-expected AEF settlement of 7.9 per cent, against an expected 3.5 per cent.

Awards are made using a formula intended to take account of need and the ability of councils to raise extra funding from council tax.

A call for higher central government funding is to be heard at neighbouring Ceredigion’s full council meeting, taking place on October 24.