Carmarthenshire warns of service cuts and 6.5% council tax rise amid £25m gap

The authority has opened a public consultation as it tries to plug the gap in its draft 2026/27 budget, warning that rising demand, inflation and national pay awards have pushed its finances to breaking point. More than three‑quarters of its day‑to‑day spending is funded by Welsh Government, while just 17% comes from council tax.

£15m already saved — but £3.5m still missing

Carmarthenshire has already identified more than £9.5 million in operational savings across departments, alongside a further £5 million in recurrent savings thanks to reduced employer contributions to the Dyfed Pension Fund.

Despite this £15 million in efficiencies — and a proposed 6.5% council tax rise — the council still faces a £3.5 million hole in its draft budget.

The figures are based on Welsh Government’s provisional settlement of a 2.3% funding increase. A later budget deal between Welsh Labour and Plaid Cymru could raise this to 4.1%, but councillors say they must consult residents on the lower figure until the Senedd confirms the final settlement.

Cuts planned across social care, education and infrastructure

Last year, the council made more than £8 million in reductions, including cuts to school transport, public conveniences and some cultural and leisure services. A further £9.5 million in savings is now proposed for 2026/27.

The plans include expanding in‑house care services, supporting greater independence for residents, increasing local fostering provision, extending the Families Together programme and finding efficiencies across highways and transport.

A major financial boost comes from the Dyfed Pension Fund’s strong investment performance, which allows employer contributions to fall from 16.2% to 12.5% between 2026 and 2029 — saving £5 million a year without affecting jobs, services or pension benefits.

‘Extremely challenging’ year ahead

Cllr Alun Lenny, Cabinet Member for Resources, said:

“Carmarthenshire County Council, like all local authorities across Wales, is facing very difficult budget decisions due to factors largely outside our control, including inflation, nationally agreed pay settlements and the level of funding provided by the Welsh Government.”

He said social care, children’s services and education were all under intense pressure, with rising demand, higher placement costs, school overspends and growing levels of need among children and young people.

Cllr Lenny added:

“On the basis of Welsh Government’s initial 2.3% provisional settlement, we are still faced with a significant shortfall in our budget for next year, despite identifying £9.5 million of operational savings. That is why it is important that our residents, visitors and stakeholders have their say on how we bridge this financial gap.”

Residents warned to expect higher bills and leaner services

Carmarthenshire’s leaders say the scale of the financial challenge means the coming year will bring “difficult and unavoidable” decisions, with higher bills for households and further pressure on frontline services.

The authority has already stripped more than £15 million from its spending through efficiencies and pension savings, but insists the remaining gap cannot be closed without a mix of cuts and a steep rise in council tax.

Councillors will now spend the coming weeks weighing up which services can absorb reductions and where the impact on residents will be felt most sharply. The final budget will be set in March, with the 6.5% council tax rise still on the table.

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The authority says it is facing £9.2m in rising costs next year and will still need to make £2.4m in cuts, despite receiving a better‑than‑expected 4.6% funding increase from Welsh Government.

The draft budget goes before Cabinet on 13 January, with a final decision due in February.

Schools protected but other services face pressure

Schools will be shielded from savings targets next year, with extra money also going into children’s services and adult social care. But the rest of the council’s operations will feel the squeeze as inflation, demand and long‑term financial pressures continue to bite.

The council says council tax — which makes up only around 20% of its income — will need to rise by 4.95% to help balance the books.

Council turns to AI to cut costs and modernise services

One of the most striking elements of the draft budget is the council’s plan to expand its use of digital technology and AI to deliver services more cheaply and efficiently.

Bridgend says the shift is essential to keep services sustainable as costs rise faster than funding, and forms part of a wider transformation programme aimed at making the authority “more resilient” in the long term.

Leaders say settlement ‘better than expected’ but challenges remain

Cllr John Spanswick, Leader of Bridgend County Borough Council, said:

“The funding settlement from Welsh Government for 2026/27 was better than anticipated and this has helped us to ensure that the draft budget proposals clearly align to our corporate plan which focuses on key objectives such as protecting the most vulnerable, helping local people to meet their potential and providing thriving communities for residents and businesses.”

Cllr Hywel Williams, Cabinet Member for Finance and Performance, said:

“Like all local authorities across Wales and the United Kingdom, we are still facing many ongoing financial challenges. However, it’s pleasing that we have received an increase in funding of 4.6% from Welsh Government this year and this has helped to reduce our funding gap for the forthcoming financial year.”

The proposals will be examined by councillors over the coming weeks before a final vote next month, with the spotlight firmly on the council’s near‑5% council tax rise and its growing reliance on AI to keep services running.

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Cabinet members were told the council’s £648m budget is being tightly managed at a time of soaring demand for social care, home‑to‑school transport and homelessness support.

Cllr Stewart said the financial picture is “better than in previous years” thanks to careful management across the organisation.

He said:

“Like other councils, our main pressures are in social services where demand for care and support continues to rise and in areas such as home‑to‑school transport and tackling the homelessness crisis.

At this time of year, despite the challenges, the council remains committed to delivering on its promise to find a bed for all homeless people who need one.”

Underspends in other departments, including Education and Finance, are helping to offset the pressures.

Cabinet also heard that of the £13.97m in savings agreed for 2025/26, a remarkable 94% are forecast to be achieved — a milestone officials say reflects the “commitment and creativity” of staff in finding new ways to work more efficiently.

Alongside balancing the books, the council says it’s continuing to invest in Swansea’s future. More than £52m has already been spent on capital projects this year, ranging from school improvements and city centre regeneration to highways upgrades and housing.

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Councils warn £6.4bn Welsh Government funding plan still leaves schools and care services under pressure

The provisional figures, published today, promise an average 2.7% increase in funding for local authorities, with a guaranteed minimum uplift of 2.3%. Newport receives the largest rise at 4.3%, reflecting growth in its school‑age population. But the Welsh Local Government Association (WLGA) says the overall £169m cash increase falls far short of the £560m shortfall councils expect to face next year.

Education and social care at the sharp end

Education already accounts for nearly 40% of council spending in Wales, and the strain is visible locally. Carmarthenshire, which will receive £384.8m next year — up £8.9m, or 2.3% — has embarked on a programme of school closures and mergers in recent years, citing rising costs and falling pupil numbers.

Swansea, meanwhile, will receive £494.1m, an increase of £16.1m, also at the minimum 2.3% uplift. Neither council has yet commented publicly on the draft settlement, but WLGA modelling suggests that even a 3% increase would still leave councils hundreds of millions short, raising the prospect of further cuts or tax hikes across Wales.

Leaders warn of structural pressures

WLGA Labour Group Leader Andrew Morgan OBE said the settlement “offers a degree of stability” but warned that “social care, homelessness, education and workforce costs continue to rise faster than resources can keep up.”

Independent Group Leader Mark Pritchard described the gap between demand and resources as “untenable,” warning redundancies would be inevitable without additional support. Plaid Cymru’s Gary Pritchard said many councils were already operating at the limits of what is safe or sustainable, and called for reform of the funding formula. Liberal Democrat Group Leader Jake Berriman added that rural and semi‑rural areas face higher delivery costs that a flat percentage uplift “simply doesn’t reflect.”

Political pressure mounts

Plaid Cymru’s Heledd Fychan MS warned the settlement could lead to “council tax increases of 22% or 14,000 job losses,” while Welsh Conservative shadow local government secretary Joel James said the figures showed the need for “fundamental change” to the funding system.

The Welsh Government said the draft budget marked only the start of negotiations. Cabinet Secretary for Housing and Local Government Jayne Bryant said the settlement was designed to give councils “the stability they need to set budgets which protect and deliver core frontline services.” Finance Secretary Mark Drakeford added that ministers would work closely with councils and opposition parties to ensure the final budget “safeguards jobs and protects frontline services.”

The final settlement is expected in January following consultation and Senedd negotiations.

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