Audit Wales: Urgent action needed to save Welsh Councils’ Finances

A new report by the Auditor General has highlighted significant financial sustainability risks across local government in Wales, with Flintshire County Council emerging as one of the most at-risk councils.

The report warns of an urgent need for action to address growing funding gaps and spiralling costs.

Flintshire County Council’s financial position is particularly precarious, with the report citing low reserves, escalating service costs, and a lack of long-term strategic transformation plans.

In September, the leader of Flintshire Council warned the local authority could face being effectively declared bankrupt due to significant financial issues.

The Auditor General report found that, despite having a clear understanding of its financial pressures and effective councillor engagement, the Council’s short-term approach to financial planning has left it vulnerable.

An Auditor General spokesperson stated: “Flintshire County Council’s short-term financial planning, combined with low reserves and escalating service costs, places its financial sustainability in serious jeopardy.”

This finding forms part of a broader review conducted over spring and summer 2024, which assessed the financial strategies, oversight, and planning arrangements of Wales’ 22 councils.

While many councils face challenges, the report emphasises that Flintshire’s inability to implement transformative changes could have serious long-term consequences.

Key Challenges for Flintshire

The report identified several factors contributing to Flintshire’s financial struggles:

• Short-Term Planning: The Council’s financial planning focuses on immediate needs rather than long-term solutions, resulting in weaknesses in identifying and achieving necessary savings.
• Low Reserves: Flintshire’s reserves are critically low, leaving the Council with limited flexibility to manage unexpected costs.
• Rising Service Costs: Increasing demands on key service areas, combined with limited funding, are exacerbating the Council’s financial difficulties.
• Strong Reporting, Limited Impact: While the Council has good arrangements for regular financial reporting to councillors, these have not translated into meaningful improvements in its financial position.

The findings underline the challenges facing Flintshire and other councils as they strive to provide essential services within constrained budgets.

Broader Implications for Welsh Local Government

The financial challenges highlighted in Flintshire reflect a wider crisis across Welsh councils. Local authorities have faced years of financial pressure, compounded by the 2008 financial crisis and subsequent austerity measures.

The report points to increasing responsibilities being placed on councils without matching resources, alongside concerns about the local government funding formula and settlement process.

Adrian Crompton, the Auditor General, stressed the importance of long-term solutions: “Councils have taken difficult decisions to manage their finances through a long period of financial constraint. But as the cumulative impact of that restraint builds, we cannot assume that local government will remain financially sustainable.”

The report calls for a transformative shift in how Welsh councils approach financial sustainability.

Moving beyond balancing annual budgets, councils must adopt innovative, long-term strategies to ensure value for money and sustainable services.

Mr Crompton concluded: “Local government is financially unsustainable over the medium term unless action is taken, by those who support and interact with the sector as well as councils themselves. Though a difficult message, I hope that this report helps councils, the Welsh Government, and all of those committed to the sector to chart a path to a sustainable future.”