Like all other councils in Wales, Conwy County Borough Council faces continued budget pressures and we will need to make further savings to set a balanced budget for 2025-26.
The budget gap for 2025-26 before any funding is applied was over £31 million, as the price of goods and the cost of delivering services continues to increase.
70% of the Council’s funding comes from Welsh Government. Following announcements made by the Chancellor in the Autumn Statement in October 2024 additional funding has been allocated to fund Public Services across the UK, including here in Wales.
Welsh Government announced on 11 December 2024 that Conwy will receive a 3.7% increase in funds towards our additional costs for next year. Whilst this funding is welcome and significantly more than the increase that we received in 2024-2025, it alone is not enough to bridge the financial gap, and we still need to find in the region of £19 million. Difficult decisions will still have to be made to balance the budget.
Reasons why the Council has a £31 million budget shortfall
Increasing demand for our services
The cost of living crisis and the long term effects of the pandemic mean that the demand for services is increasing.
More and more people are turning to the Council for support. Demand for social services and support for vulnerable children and adults has increased significantly, as has the number of individuals and families that are presenting as homeless.
It is only right that the Council supports people in their most difficult times, but it means that the cost of providing these services rises. Many of our services are ‘statutory’, which means that we have a legal duty to provide them and cannot turn people away because we haven’t enough budget left.
We estimate that the additional cost of this extra demand for services will be £7 million in 2025-2026
Pay pressures, including increased employer's National Insurance
Pay awards for teachers, Council employees and care workers, including those employed by our independent providers are negotiated and agreed nationally. We are proud to continue to honour our commitment to pay above the National Minimum Wage to lower paid staff who, along with rest of our workforce, deliver vital services across the county and should be paid fairly.
We therefore have to budget for any pay increases that have been agreed and estimate what pay awards for 2025-2026 will be. Pay related pressures accounts for over £15m of our £31m budget shortfall. Increases in the rate of employer's National Insurance and a reduction in the threshold at which National Insurance becomes payable take effect in April 2025 and add an estimated further £6.5m to our budget gap.
We are hopeful that that the majority of these additional pay costs for Conwy staff will be reimbursed, but there will still be financial pressures for contracted service providers.
General inflation
Whilst inflation has fallen significantly from its peak of 11% last year, it remains high in some areas and together with interest rates staying higher for longer than many analysts had predicted, inflation continues to drive up the cost of the services that we provide.
Around £3 million of our pressures are as a result of general price inflation.
North Wales Fire and Rescue Authority
Along with the other five North Wales councils, Conwy provides the funding for the Fire Service, even though it is a separate organisation. The Fire Authority is planning to increase its levy (its bill to each Council) because their costs have also increased.
This increased bill from the Fire Authority will further add to Conwy’s budget pressures with every 1% increase costing approximately an additional £80,000.
How is the Council going to address the shortfall?
The allocation we receive from the Welsh Government doesn’t cover all of our budget requirements. Welsh Government expect us to bridge the budget gap locally. However, we understand the financial pressures everyone is feeling.
How we meet the budget gap will be influenced by any further funding that we receive from Welsh Government beyond what has already been announced, how much extra income we can generate, how we can reduce the growing demand for services, what we can save by cutting back further on spending and what percentage increase Councillors decide to raise via Council Tax.
There are three main ways we can address the shortfall.
Service changes
Over the last twelve years, Conwy has successfully made budget savings of £94 million by changing services and modernising the way we work, to be as efficient as possible. The opportunities to do this are getting increasingly harder to find, but we are committed to protecting vital services that protect our most vulnerable.
So, we are working hard to reduce costs further through the use of technology and by continuing to reduce the number of buildings, as well as making further changes to our services
Council Tax
For every 1% we increase Council Tax we expect to raise an additional £795,000 and increase a Band D property by £17.33 a year, or 33p a week.
Therefore it is not possible to close the budget gap using Council Tax alone. Conwy has a long history of keeping Council Tax low, but this is no longer possible.
We are mindful that Conwy residents had a 9.67% increase in Council Tax last year and the Cost of Living Crisis continues. However, given the pressures that we face and the shortfall in funding, it is inevitable that Council Tax will need to increase in 2025-2026.
It’s important to note that even with an increase in Council Tax, we will still need to make significant cuts to services. Depending on the increase in Council Tax, based on a Band D dwelling, every 1% increase adds an additional 33p a week to the Council Tax bill. (A person who receives single person discount or council tax reduction will pay less per week).
Reserves
The Council needs to be very careful when using its reserves (savings) as Conwy does not hold a high level of reserves and many of them are put aside for specific reasons. Reserves are also one off - once they have been used they are gone, so this approach doesn’t address regular year-to-year costs.
The Council also needs to make sure that it holds sufficient reserves for responding to emergencies, e.g. the recent storm Darragh.
The Council currently has £4.288 million in its general reserves, which represents just 1.5% of the Council budget. Given the Council’s financial position, using reserves is not a solution for balancing the 2025-2026 budget.
Further information
If you want to read in more detail about how we manage the budget please read these reports: