North Wales councils warn of imminent financial crisis in joint letter to First Minister

In a unified appeal, leaders from six North Wales councils have warned the Welsh Government of an impending financial crisis, describing the current local government funding model as “unsustainable.”

The leaders of Flintshire, Denbighshire, Conwy, Gwynedd, Wrexham, and Anglesey councils have written to First Minister Eluned Morgan, highlighting severe financial pressures that threaten the viability of essential public services across the region.

The councils stress that they are struggling to meet the rising costs of implementing new legal requirements, such as Additional Learning Needs (ALN) reforms, which have been introduced without adequate funding.

Policies related to asylum seekers and homelessness have also added to their financial burden, alongside increased operational costs from higher National Insurance contributions and the National Living Wage.

They also highlight that pay awards for teachers, council employees, and care workers—agreed nationally—have not been fully funded, creating additional strain.

The demand for social care services continues to grow, placing even more pressure on council budgets.

The leaders argue that decisions at the national level have created an imbalance between health and social care funding, leaving local authorities to pick up the shortfall.

They emphasise that without urgent action, some councils may become financially unsustainable within a year, with the situation worsening for others within two years.

A recent report by the Welsh Local Government Association (WLGA) revealed that councils are facing financial pressures of £563 million next year, rising to £1.5 billion by 2027/28 if no changes are made.

Addressing this gap would require an untenable 26% increase in council tax, which the leaders argue is simply not viable for residents.

Among their proposed solutions, the councils are seeking significant increases in the Revenue Support Grant (RSG) for the next financial year and beyond.

They are also calling for additional funding to address new cost pressures, such as recent rises in National Insurance and wage rates.

Furthermore, they advocate for a restructuring of health and social care budgets to bring funding parity and reduce the strain on local government services.

Emergency funding

Emergency funding is also being requested to address financial gaps caused by unfunded policies and legislative changes.

The letter stresses the importance of capital investment to address critical areas, including the creation of care homes for children and the elderly to address demographic challenges and reduce long-term costs.

It also highlights the need for immediate investment to address the backlog in road maintenance.

The leaders are calling on the Welsh Government to ensure that future policies do not impose additional financial burdens on local councils without proper funding and to review the funding formula to reflect current data, such as population growth and an aging demographic.

Welsh Conservative Shadow Minister for North Wales, Darren Millar MS, welcomed the joint appeal and criticised the Labour-led Welsh Government for what he described as “poor settlements” for councils in the region.

He said: “I am pleased to see the North Wales local authorities working together on the funding challenges that all councils in our region have in common. Under Labour, North Wales Councils are overstretched and underfunded.

“The poor settlements for local government in the region in recent years have been damaging, resulting in unsustainable council tax rises for residents, and cuts to school budgets, libraries, public toilets and other important public services.

“We desperately need urgent action from the Labour Welsh Government to address these issues in the forthcoming budget round and the Welsh Conservatives will do all that we can to press for a new, fair funding formula, improved engagement and additional investment in the next financial year.

Bankruptcy

The collective plea follows Flintshire County Council’s recent warning of a potential budget crisis as it facing plugging a £38m budget black hole.

Council Leader Councillor Dave Hughes described the situation as so dire that the council is at risk of issuing a Section 114 notice, effectively declaring bankruptcy.

He said, “We have a massive task ahead of us with a 114 notice staring at us down the barrel of a gun.”

The council has launched a public consultation to gather input on how to address a significant financial shortfall for the 2025/26 fiscal year.

The North Wales council leaders have requested an urgent meeting with the First Minister to discuss their proposals.

They warn that failure to act now will not only jeopardise vital public services but will also have a long-lasting impact on local communities and the well-being of residents across the region.

A Welsh Government spokesperson said:

“We recognise the challenges local authorities are facing and we continue to meet them regularly to discuss these.

“Last week’s UK Budget provided a welcome investment in Wales, but the position inherited by the Chancellor and the damage inflicted over the last 14 years cannot be turned around in just one budget. It will take time for public finances to recover.

“We are in the process of developing the Draft Budget 2025-26 against the backdrop of a challenging financial situation and it will be published next month.”