A WELSH council leader has said there is still a “challenging and difficult” period ahead but that his local authority is in one of the better positions compared to others.
Councillor Andrew Morgan was speaking in response to a financial update report that went before Rhondda Cynon Taf (RCT)’s cabinet on Monday, September 23.
It says that a cash-flat level of settlement from Welsh Government over the next three years would result in a budget gap of £35.7m next year, a £34.7m gap for 2026-27, and a £31m gap for the year after that (2027-28).
If there was a 0% increase this year but a 1% increase in the following two years the council could face budget gaps of £29.9m for 2026-27 and £26.1m for 2027-28.
If Welsh Government funding were to increase by 1% in each of the next three yeas the budget gaps could be £30.8m (2025-26), £29.8m (2026-27), and £26.1m (2027/28).
And if Welsh Government funding were to increase by 1% next year and then by 2% in the following two years the budget gaps would be £30.8m next year, £24.9m in 2026-27, and £21m in 2027-28.
The potential different levels of Welsh Government settlement have a “significant impact” on the budget gap with that impact being worth £4.9m per 1%.
As part of these potential scenarios council tax increases of 4% a year have been modelled, the council has assumed specific grant funding from Welsh Government will continue in respect of the social care workforce grant, and the eliminate profit/radical reform policy and the assumption is that fees and charges are increased by medium-term 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 with the pending teachers pay award for the 2024-25 academic year included on the basis that it is fully funded by the Welsh Government.
Authority-wide requirements are reflected including capital financing, levies, and the council tax reduction scheme and the schools budget is modelled to cover, in full, forecasted pay and non-pay inflationary pressures.
The report highlights that to balance the budget using reserves alone, based on a 0% increase in funding from Welsh Government next year and a 1% increase over the following two years, would require the use of over £193m of reserves and the council would still have a need to reduce its base budget by around £92m at the end of this period.
In the previous two financial years the council has needed to address the most significant budget gaps it has ever faced with these being £38m for 2023-24 and £36m for 2024-25.
The report said that, subject to the level of funding from Welsh Government, a “significant budget gap” is likely to be faced in 2025-26 and for the following two years.
The report also sets out that the UK Government’s budget for next year is scheduled to be announced in October, the outcome of which will be a “key driver and determinant” of any additional funding being made available to devolved nations for 2025-26 and also the prospects for settlement levels over the medium term.
The report said that based on the significance of the budget gap faced by the council for the next financial year, and over the medium term, Rhondda Cynon Taf CBC must once again embark on further reviews across all its services to urgently identify options which can be considered to close the budget gap being faced and enable the council to set a balanced budget for the financial year 2025-26 by March 11, 2025.
The council said it will continue the proactive strategy it has adopted in recent years to identify a range of budget-saving options for consideration and reporting to members as part of the 2025-26 budget-setting process.
Councillor Christina Leyshon said: “The council has constantly demonstrated over many years that we have that we have the capability to respond to unprecedented challenges such as the major flooding throughout RCT, the Covid outbreak, and the cost of living crisis which we are all still living through.”
She said that as well as responding to these challenges they’ve still delivered essential public services and made significant additional investment in priority areas.
Councillor Gareth Caple praised the finance officers for “presiding over a long history of prudent financial management during 14 years of Tory austerity measures which have left residents facing the ongoing challenges of the cost of living crisis and significant household budget problems”.
He said the legacy of a post-Covid pandemic era has led to increasing demands on social care which is “on its knees and at breaking point”.
He said it’s to the credit of officers that the council is able to protect and support residents, communities and businesses, safeguard jobs and services and invest in transforming services and infrastructure.
Cllr Caple said: “It is also through prudent and robust financial management that this council has not served a section 114 notice as is the case with many other councils in England in particular.”
Council leader Andrew Morgan said they still have a challenging and difficult period ahead but hopefully the October budget will give some signals of more funding for public services. But he said the pressure on spend is significant with huge hikes in inflation especially in construction where they’re doing a lot of work.
He said they’ve seen significant increases in pay costs because of inflation and that pay pressures will continue.
He said: “We are fortunate as a council probably Rhondda Cynon Taf is in one of the better positions of councils in Wales to kind of get us through the storm that has been raging for over a decade but I do hope that calmer waters are ahead.”
Cllr Morgan said the impact of a statutory notice is “a whole lot worse” than anything they could decide on in terms of managing finances.
