Budget cuts could make councils 'go bust' says senior councillor

Councils in Wales could "go bust" next year due to on-going budget cuts, warns a senior Cardiff councillor.

Russell Goodway said Wales' largest authority was itself finding it hard to absorb £20m in cuts this year let alone another £50m in 2014-15.

His comments came after Finance Minister Jane Hutt unveiled cuts for councils in her draft budget.

She said councils knew tougher times were on the way and she had been cushioning them for three years.

Local government spending will fall from £4.648bn this year to £4.466bn next year, a cut in cash terms of 3.91% or 5.81% in real terms.

The minister stressed the priority was to protect health, schools and universal benefits such as free prescriptions, school breakfasts and bus passes for older people.

But Labour councillor Mr Goodway, Cardiff's cabinet member for finance, said the future looked "very dark".

"I think there will be some local authorities in Wales that will go bust in the next two or three years. They will run out of money," he said.

"From where I am sitting we are in a very dark place this morning.

"I don't think that some local authorities are going to survive."

Mr Goodway said he had heard of two unnamed councils which were in serious trouble.

'Tough budget'

He said 60% of Cardiff council's £500m budget has to go on statutory services - such as roads cleaning - leaving cuts to be found from the balance.

"Even if we stopped spending every single penny that we spend on discretionary services that would not be enough to cut our spending," he said.

Under the Welsh government draft budget, councils' own budgets will be around 9% lower in real terms between now and 2015-16.

Some council have already announced closures affecting leisure centres, public toilets and libraries as well as cuts in bus travel subsidies and other areas to tackle on-going austerity measures.

Steve Thomas, chief executive of the Welsh Local Government Association, said council tax could rise.

"It's a very tough budget and it's £175m coming out of council services," he told BBC Wales.

'Take stock'

"We can't keep delivering the range of services that we're currently delivering so it will impact on things such as leisure services, libraries, refuse collections and the conditions of our roads.

"We run something like 735 services so there's going to be a massive impact for the Welsh public.

"We've yet to see the local government settlement but once we see it, I think there will be more pressure on the council tax," he said.

But Mr Goodway said that even if Cardiff council tax could be raised by 20% it would still leave the authority £27m short of the cuts it needs to make.

"Council tax is going to have to go up but government has made it clear the maximum is 5%," he said.

"We have got to find different ways of doing things."

He said Wales' 22 local authorities and seven health boards could be reduced in number to cut overheads.

The Conservatives said councils should open up their books to consider how they can deliver more for less.

Shadow Local Government Minister Janet Finch-Saunders AM said: "Local authorities should resist the easy route of cutting frontline services or forcing up council tax bills for hardworking families, but should consider whether they can improve transparency, eliminate wasteful spending and look at different ways of working."

Ms Hutt said the Welsh government has been "supporting and cushioning" local government over the last three years in anticipation of the cuts.

"They know, and they have said quite clearly over the last 24 hours, that they recognise that tougher times are on the way," she said.

"What we are doing in this budget is putting more money in local services which will benefit local councils."

She was referring to £600m in spending on new projects.