Biggest Funding Gap In History

Pembrokeshire is facing the largest budget funding gap in its history, increasing to £28.4m, with bleak warnings of a need for substantial council tax rises.

At the January 8 meeting of Pembrokeshire County Council’s Cabinet, members received a report on the Provisional Local Government Settlement for 2024-25.

On December 20, the Welsh Government said that core revenue funding for local government would increase by 3.1 per cent, on average.

Pembrokeshire will receive a 2.5 per cent increase in the Aggregate External Finance (AEF) rate, some £5.372m.

When the Outline Draft County Council Budget 2024-25 was reported to council on December 14, the projected funding gap was £27.1m, based on an expected 3.1 per cent AEF  increase, which in itself had led to bleak warnings of a need for substantial rises in council tax to balance the books.

That gap has now increased to £28.4m.

At the January 8 meeting, Cabinet Member for Corporate Finance Cllr Alec Cormack said the lower-than-expected settlement had increased the county’s projected budget funding gap to £28.4m, describing it as “by far the highest funding gap in our history”.

He said there would be “very, very difficult choices to balance the budget,” adding: “bridging a gap of £28.4m will require council to make some extremely difficult decisions on March 7 [full council discussion of the budget for the next financial year].”

Cllr Jon Harvey asked why the situation had become so difficult, citing inflation and historically low council tax levels, Cllr Cormack replying: “All of those things; we are in an extended period where central government funding is in decline.

“Each year, the percentage of revenue paid for by council tax increases and the AEF goes down, there is no sign of that reversing.

“We will have to get to a position where we find more of that budget from council tax, because we are the lowest council tax in Wales that puts us in a difficult position.”

He later added: “Welsh Government has done as much as they could,” saying it had its own ‘funding gap’ following a reduction in UK Government funding.

“The Welsh Local Government Association will make representations on our behalf but there’s no way this can be reversed, we need to take steps to balance income and expenditure, there’s not any likelihood of this changing in the near future, regardless of the results of any general election; it’s a difficult situation for the next few years.”

Leader Cllr David Simpson said any below-inflation settlement was “a backwards step,” adding: “It’s not the fault of Welsh Government, they can only pass it on.”

He said increased pressures in adult and children’s services, to the tune of an extra £9m alone, would equate to a council tax rise of 12.5 per cent just to cover that.

“On top of everything else we are in a pickle, and every local authority in Wales is also in a pickle, a £400m deficit [across Wales]; hence we’re looking for cuts, hence we’re looking for increased council tax.

“As Leader, there’s no way I took this job on to make cuts, we’re here to make Pembrokeshire a better place for people.”

Cabinet considered the Provisional Local Government Settlement and its effect on the projected funding gap for 2024-25, a consultation response from the council to be returned to Welsh Government.

Welsh Government will debate and announce the final Local Government Settlement for 2024-25 on February 27, with a six-week formal consultation period on the Provisional Local Government Settlement ending on January 31.

A public consultation on the 2024-’25 budget in Pembrokeshire was recently undertaken by the council, including options of increasing council tax, to as much as 25 per cent.