Senior Pembrokeshire councillors are expected to call for a council tax increase as high as 21% this week, against a backdrop of the council facing its worst-ever financial position. Pembrokeshire currently faces a projected funding gap of £31.9mn, by far the largest ever seen by the council.
This figure is even bleaker for the next few years. The projected funding gap for its Medium Term Financial Plan 2024–25 to 2027–28 is £82.2mn.
Funding gap options
A report before Pembrokeshire County Council’s cabinet, meeting today, says: “This projected funding gap will need to be bridged through a combination of an increase in council tax, use of council tax premiums, and budget savings. Any use of reserve funding will only be considered where there is a clear plan in place to reduce base budgets by the levels required for 2025–26 onwards. And to replenish the reserve balances over the term of the Medium Term Financial Plan, in line with the strategy for holding and utilising reserves.”
Pembrokeshire faces financial pressures totalling £41.3mn, partly offset by funding – some of which is yet to be confirmed – bringing that figure down to £31.9mn. Simple options to address this gap are to cut expenditure, which would require £31.9mn in savings; increase funding through a council tax rise alone, which would need an eye-watering 42% rise; or through a combination, which is proposed.
Cabinet members are asked to recommend one of three options for a council tax increase, along with large budget savings. Increases range from 16.31%, 18.94%, and 20.98% increases. These would raise the annual council tax bill by £219.02, £254.34, and £281.73 respectively for the average Band D property. Associated savings needed for the three levels would be £12.8mn, £10.9mn, and £9.3mn.
A report for members states: “Any Band D Council Tax increase below 16.31% will have very significant impacts, including statutory failure in some service areas, and so is not considered to be a financially sustainable option.” It says options for 15% and 12.5% council tax increases were modelled, but “would have resulted in very significant budget savings being required and some services no longer being able to meet their statutory requirements”.
One reason for the financial situation in Pembrokeshire – and in neighbouring Ceredigion – is a lower-than-expected Provisional Local Government Settlement from the Welsh Government. Every year it allocates funding for each local authority. For 2024–25 Pembrokeshire will only receive a 2.5% increase in that funding, against a 14.4% increase in service costs. This equates to £5.3mn additional Aggregate External Finance (AEF) funding for Pembrokeshire County Council, £1.3mn lower than assumptions of a 3.1% increase.
This lower than-expected settlement is part of a general decline in central government support for councils, council leader David Simpson says. “During the past decade, funding levels from the UK government to the Welsh Government and on to councils have not kept pace with the ever-increasing pressures. Due to this, we have had to make significant budget savings of £96.7mn over this time, supported by your suggestions in our annual budget consultation. We have always endeavoured to minimise the impact to service users, especially the most vulnerable in our communities.”
Council tax accounts for 26.05% of the council’s general funding, with more reliance on council tax funding due to AEF reductions during the austerity period while council tax increased. It accounted for only 18.4% in 2013–14. Pembrokeshire is also facing an “unprecedented” increase in demand for both adult and children’s social care, which has added more than £23mn in pressures. In five years, children’s social care costs have risen from 6% of the budget to 10.3%.
Social care and education costs now make up 78% of overall pressures, with social care costs exceeding education costs for the first time this year, Simpson says. In 2024–25 the budget for social care will be more than all other services combined, excluding schools.
No immediate solutions
There has also been a huge increase in the number of people needing temporary accommodation, from 78 in March 2019 to 507 in March 2023, leading to a £1.145mn pressure for 2024–25.
Another issue in Pembrokeshire has been historically low levels of council tax, the county still having the lowest rate in Wales, despite having increases of 12.5%, 9.92%, 5.00%, 3.75%, 5.00% and 7.50% since 2018–19. The average Band D base council tax for Pembrokeshire is £1,342.86, compared to Ceredigion and Carmarthenshire at £1,553.60 and £1,490.97 respectively.
If the council had Ceredigion’s level of council tax for 2023–24, it would have had an additional £11.758mn income. And if it had that of Carmarthenshire, it would have had an additional £8.264mn. The Ceredigion County Council cabinet has proposed a 13.9% increase in council tax, which would take a Band D property to £1,769.55 per year. If Pembrokeshire increased its Band D rate to £1,769.55 it would generate an additional £23.902mn.
The final decision on the council tax level – and any savings – will be made by the full council when it sets the annual budget on 7 March. Neighbouring Ceredigion will make its final decision on 29 February.
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