Tuesday, December 02, 2025
Will the Welsh government allow councils to go bust?
The auditor general told Radio Wales that councils face a "real squeeze" as costs spiral for children's care and other services, while at the same time local authorities have reacted with concern after the Welsh government announced an extra £169m in funding for next year, less than a third of what they said they need. The settlement could mean major cuts if a council failed to balance the books:
There have been warnings for years that some Welsh councils could face serious financial difficulties, in the way some authorities have in England.
While councils cannot go bust like companies, they can declare what is known as a section 114 notice - a legal instrument which says the authority is about to spend money beyond its means.
The notice usually means the council will meet in a few weeks to discuss how to avoid that - usually resulting in significant cuts to services.
Ministers have previously drawn up plans for what to do if this happened in Wales, but no Welsh authority is yet to issue a section 114 notice.
Adrian Crompton did not name the councils when he spoke to Vaughan Roderick's Sunday Supplement programme on BBC Radio Wales.
"What we're seeing now is that one or two local authorities are very, very close to the edge in terms of their financial sustainability," he said.
"It wouldn't take very much to push them over that edge as we've seen happen to some local authorities in across the border in England."
He said councils have a statutory duty to deliver a lot of their services - meaning they are required by law to provide them.
"Some areas of service where we're seeing really sharp cost growth, areas like children's services or the provision of temporary accommodation. These are largely demand-led areas, so not within the gift of local authorities to control directly.
"They have to deliver those services, and if they're faced with some unexpected cost in those areas that could be sufficient in a few cases to tip them over the edge."
Last week the Welsh government announced it planned to boost council coffers by 2.7% to £6.4bn.
But the £169m increase was less than a third of the £560m shortfall local authorities think they will face.
Unless the Welsh government put a substantial amount of extra cash into the pot, all twenty two Welsh councils will face some very difficult decisions next year. Will any find that they need to issue that section 114 notice?
