PEMBROKESHIRE COUNTY COUNCIL’S financial future is under scrutiny following an extremely critical report by Audit Wales, which warns of mounting risks due to the authority’s reliance on reserves and failure to address underlying budget pressures. The Financial Sustainability Review, published in October 2024, raises concerns about the council’s ability to deliver services and secure long-term financial stability.

The council’s decision to reduce the planned Council Tax increase for 2023-24 from 16.3% to 12.5% is highlighted as a key issue. Paragraph 22 of the report states:

“The revised 2023-24 budget was therefore balanced using reserves to fund the shortfall between income and expenditure. This has implications for the sustainability of the Council’s finances, as the approach does not address the underlying causes of the funding gap.”

Short-term fixes, long-term consequences

Audit Wales identifies several factors contributing to the council’s precarious position:

• Depleting Reserves: Reserve balances are projected to fall sharply, undermining the council’s financial resilience.
• Unaddressed Funding Gap: The Medium-Term Financial Plan (MTFP) for 2024-28 outlines projected deficits but lacks clear solutions to close these gaps.
• Low Council Tax Rates: Pembrokeshire has some of the lowest Council Tax rates in Wales, limiting revenue growth.
• Future Tax Burden: Reduced tax increases in the short term may result in steeper hikes in future years to recover lost revenue.
• Challenging Budget Decisions: The decision to suspend standing orders to amend the MTFP raises questions about governance and transparency.

Audit Wales warns that without a robust, long-term strategy, the council will struggle to prioritize funding and address the structural challenges threatening its financial sustainability.

Impact on residents and services

The report underscores the implications of the council’s financial approach for local residents and services. While reducing the tax increase may have provided short-term relief to taxpayers, it comes at the cost of further reliance on reserves and the potential for drastic measures in future budgets. These could include severe cuts to essential services or substantial tax hikes, placing significant strain on the community.

Additionally, overspending in key service areas adds to the challenges, as rising costs and demand continue to outpace available funding. Audit Wales emphasizes that the council’s reliance on reserves only delays difficult decisions, creating greater risks in the years ahead.

Cllr Mike Stoddart countered the report by saying: “Since the present administration came to power in 2017, Band D council tax has risen from £883 to the present £1561.

“That is an almost 80% increase compared to the rate of inflation (CPI) according to the Bank of England’s calculator of less than 30%.

“In addition they have diverted most of the second and empty homes council tax premiums into general funds.

“Their appetite for taxpayers’ money seems insatiable.

“I accept that there are service pressures in adult and children’s social care, but nowhere near enough to account for these eye-watering increases.

“So, instead of Audit Wales (AW) encouraging ever larger council tax bills, I would like to see proposals for the more efficient delivery of services – plus a dramatic reduction in the bureaucracy imposed on the council by the Welsh Government and Audit Wales, itself.

“Where I do agree with Audit Wales is with regard to its concerns about the way Standing Orders were manipulated to allow last-minute changes to last year’s council tax rate.”

Call for urgent action

Audit Wales recommends urgent steps to develop a comprehensive financial strategy that addresses these issues and ensures sustainability. The council must reduce its dependency on reserves, identify alternative funding sources, and implement measures to close the funding gap.

Pembrokeshire County Council has yet to respond publicly to the report. Residents and stakeholders now await clarity on how the authority plans to address these critical concerns and safeguard the county’s financial future.

This report highlights the challenges local authorities face amid rising costs and limited income, placing Pembrokeshire under the spotlight as it navigates turbulent financial waters.