Friday, December 13, 2024
Welsh councils still facing financial difficulties
The BBC reports that the Welsh First Minister, Eluned Morgan is confident that Wales will not see local authorities going bust, after the Labour leader of Flintshire council warned the threat of bankruptcy had not gone away.
They say that an average 4.3% funding increase for councils that was announced on Wednesday, a £253m increase for the next financial year, is less than half the budget shortfall councils are facing.
Speaking to BBC Radio Wales Breakfast, Morgan said she recognised the "massive pressure" facing local authorities, but that money was being made available for the first time "in a very very long time".
On the threat of bankruptcy, she said the government had been keeping a close eye on councils.
"We check their reserves, we check where they're at. We are confident that we are not in the situation that they are in England, where many, many councils have gone bust.
"So of course, we will keep monitoring that situation," she said.
Morgan also criticised what she called the "ridiculous system" to deal with funding to cover the increase in national insurance (NI) contributions for public sector employers.
Welsh ministers will not find out how much funding will be available until May or June next year, from the Treasury at Westminster.
The changes to NI begin at the start of next April.
She said she would be urging Chancellor Rachel Reeves to give the Welsh government better foresight.
She said she was "pretty miffed", but that she expected increased contributions for people employed directly by the public sector to be fully covered.
There is still uncertainty over whether private companies or charities who provide services for the public sector will be included.
The first minister said that the 4.3% average funding boost for councils would - to an extent - alleviate any shortfall.
Charities and voluntary groups, the private care sector as well as many GP and dental practices have warned of the potentially damaging affects of NI increases on them.
The financial pressures are bad enough, but the UK government is adding to them. The Chancellor may have said that she will cover the employers' national insurance for public sector employees but she has not specified that she will pay for all of it, while the definition of what exactly a public sector employee is in unclear.
This is a point covered by the Welsh Finance Secretary, here. He told the Senedd Finance Committee that the the UK Government plans to use the Barnett formula to decide how much Wales will receive based on the costs in England and that Wales' share may turn out to be less than we need. Furthermore Directors of Finance are unlikely to see any of that money until June.
The cost to councils that will not be met by the UK government is the additional employers NI and the minimum wage bill for external providers. This is particularly acute in social care where social service departments rely on these companies and will have to pay extra from April to meet additional costs.
The shortfall in meeting external providers' additional NI contributions could be about £60m across Wales with an additional £60m cost to meet the increase in the minimum wage. So in addition to the millions social service departments are overspent so far this year there will be an additional financial burden councils will need to find of about £120m.
That is not an insignificant amount. What a mess Labour have made of this so early in their administration.
