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Call to use £2.75bn in Welsh Government reserves before letting councils go bankrupt

Welsh Conservative leader Andrew RT Davies has said the Government must use the £2.75bn it has in reserve to stop some local councils going bankrupt <i>(Image: Andrew RT Davies)</i>
Welsh Conservative leader Andrew RT Davies has said the Government must use the £2.75bn it has in reserve to stop some local councils going bankrupt (Image: Andrew RT Davies)

THE Conservative leader has said the Welsh Government should use their financial reserves in a bid to stop councils going bankrupt or cutting essential services.

Andrew RT Davies was speaking in reaction to comments made by Caerphilly Council leader Cllr Sean Morgan that some councils in Wales could be facing bankruptcy in the near future.

Cllr Morgan has said that some Welsh councils could be following in the footsteps of Nottingham City Council and declaring themselves bankrupt if they do not receive more funding or make drastic cuts to some of their most important services.

Mr Davies has expressed a “very real concern” that Welsh councils are struggling to deliver some essential services.

As a result, he claims the Labour Government, which holds the responsibility for funding the local councils, must use the £2.75 billion they have in reserve before allowing councils to cut these services.

He said in an official statement: “It is a very real concern that councils in Wales are struggling to deliver essential services.

“As we know, the funding of our councils in Wales is the responsibility of the Labour Government. Before councils talk of cuts to essential services, they must first use the £2.75bn they have available in usable reserves.

“The Labour Government has received the largest funding settlement from the UK Government in the history of devolution, before Labour blame Westminster for their own financial mismanagement, they must look at the decisions they have made over the past 25 years that has made Wales worse off.”

Some councils in Wales may be in this position, but one council in Gwent that potentially may have been at risk, Torfaen County Borough Council, has confirmed that they are not.

In response to the Welsh Conservative leader’s comments, a Welsh Government spokesperson said: “We have prioritised front line public services, including local government, in our budget decisions offering them greater protection by increasing funding this financial year by 7.9 per cent and 9.4 per cent in 2022-2023, contrary to what is happening over the border.

“Nevertheless, record inflation and economic mismanagement by successive UK Governments over the last 13 years has led to the most difficult financial situation since the dawn of devolution. The stark reality is our budget for next year has reduced in real terms. It is £3bn lower than it would have been if it had grown in line with the with the economy.

“We are preparing our draft Budget and, while we will do all we can to continue to protect the essential services our councils provide, the Chancellor’s short-sighted Autumn Statement makes a difficult process even harder.”

The Welsh Government Association highlighted that these financial reserves are held so councils can plan for the future and said using it to plug budget gaps “is not a sustainable solution” to the ongoing pressures local councils are under.

A spokesperson for the Welsh Local Government Association continued: “According to published data from Welsh Government, as of March 2022 around 9 per cent of usable reserves, or £253m, were available for general use.  The remainder is earmarked for specific projects, or for use by schools or housing.

“The pressure faced by councils in the next financial year is £809m, due to demand, pay and other inflation.  This is just over 3 times the amount in the general or unallocated reserve. Looked another way, unallocated reserves would cover 12 days spending.  Many councils hold less than this, and importantly, reserves can also only be spent once.”

Caerphilly County Borough Council, Monmouthshire council, Newport City Council and Blaenau Gwent County Borough Council have been contacted for comment.