Budget pressure catastrophe warning by Welsh councils

Current estimates of budget pressures on Welsh councils have "exploded" since the summer

There is a "potentially catastrophic" impact of rising inflation on council budgets in Wales, local authorities have warned.

Even with council tax rises, they estimate there will be a £802m black hole in less than three years.

The Welsh Local Government Association (WLGA) said every council was reporting an overspend in this financial year and budget gaps in future years.

It said councils faced "impossible decisions" with services at risk.

Rising costs, including energy, have added £257m to this year's budgets.

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Inflation is the increase in the price of something over time so it means the cost of everything a council pays for, from fuel bills in schools to building materials, is going up by more than 10% a year at the current rate.

In an analysis, following a survey of all 22 local councils, the WLGA estimated another £527m of pressures will follow in 2023-24, rising to a cumulative £1.2bn by March 2025.

Home to school transport, school catering and energy costs were already causing pressure on budgets, with one council saying inflation had seen its school transport budget spike by £950,000.

Some councils had negotiated fixed-priced energy contracts which will help this winter but these are due to run out next year.

What does the picture look like?

• Inflationary pressures on schools are estimated to be £291m over two years (2023-24 and 2024-25). Issues including energy costs, food costs and transport

• In social care, the cumulative pressure is estimated to be £361m over two years, with the sector fragile, particularly in home care services and a rising cost of children's placements

• Funding to help homeless people is under considerable pressure, with a "consistent upward trend" in people needing emergency temporary accommodation

• Uncertainty over future funding for refugees, such as the Ukrainian scheme

• Inflation was hitting building costs of existing projects and the WLGA warned it seemed likely that council capital programmes will be "downsized"

"Other than the experience of the early months of the pandemic, there is no precedent for pressures of this scale escalating so quickly," said report co-author Jon Rae, the WLGA resources director.

"Without additional funding the risks to all local government services, including the larger ones of education and social care, cannot be understated."

• Cost challenge for councils 'cannot be overstated'

• Councils look at cuts amid 'grim' budget shortfall

His report said that current estimates of pressures have "exploded" since the summer and, without further funding, local authorities face "impossible decisions".

"Any return to austerity would be disastrous for the preventative services that local government provides and the people who rely on them, catastrophic for the NHS which relies on a well-funded care system and utterly demoralising for our workforce."