Plaid Cymru blames Welsh Government funding and NI hike

PLAID CYMRU on Carmarthenshire County Council has blamed inadequate Welsh Government funding and the Labour Chancellor’s National Insurance hike for creating a multi-million-pound shortfall in the council’s budget for 2025/26—forcing an increase in Council Tax of 9.75%.

Cabinet Member for Resources, Cllr Alun Lenny, said: “In my experience, this year is even worse than all those years of Tory austerity. Due to inflation, pay settlements, and growing demand, we needed an extra £55m to fund essential services like social care and education, but received just £25m in annual grants from the Labour Welsh Government. We’ve had to fill the gap with efficiencies and a far higher Council Tax rise than any of us would like.”

Cllr Lenny said only 16% of the council’s income comes from Council Tax, with each 1% rise generating £1m. He added that the council had initially anticipated a 4-5% rise, but the National Insurance changes introduced by Labour Chancellor Rachel Reeves would leave the council £4m out of pocket.

“The Labour Chancellor’s action has also hit local businesses hard, with lower-paid workers in retail and hospitality particularly worried about their jobs,” he said.

Cllr Lenny also criticised the disparity in UK Government funding, highlighting that councils in England are receiving extra money through the £4.7bn Local Transport Fund. He said Herefordshire—a county with a similar population and highways network to Carmarthenshire—was getting an extra £102m over the next seven years.

“That scale of spending on roads is something we can only dream about, and shows that we in Wales are the poor relatives when it comes to UK Government funding,” he said.

He also slammed Westminster’s refusal to allocate consequential funding from the HS2 railway development in England, stating that Plaid Cymru estimates Carmarthenshire’s share should be around £250m—enough to solve its budget issues overnight.

Why are council tax rises happening across Wales?

Carmarthenshire is not alone in facing a sharp increase in Council Tax, with many Welsh councils struggling to balance their budgets. Several key factors are driving these rises:

• Funding shortfalls for local authorities: Despite an additional £253m allocated to local councils in the Welsh Government’s draft budget, the Welsh Local Government Association has identified a shortfall of £560m. This leaves councils unable to meet rising demands without increasing taxes, cutting services, or making job reductions. For example, Wrexham Council is considering tax hikes of up to 15% to address these challenges.
• Inflation and service pressures: Councils are dealing with significant inflationary pressures and increased demand for public services, particularly in social care and education. These factors have exacerbated financial strains, forcing councils to consider tax increases to maintain service levels.
• Outdated tax system: Council tax in Wales is based on property values from 2003, making it increasingly outdated and regressive. This system creates disparities between councils and households, as property values and local needs have changed significantly over the last two decades.
• Delays in tax reforms: The Welsh Government had planned to reform council tax by revaluing properties and introducing new tax bands to make the system fairer. However, this has now been postponed until 2028, meaning councils must continue relying on an outdated system to generate revenue.
• Limited fiscal devolution: Welsh councils rely heavily on central government grants, restricting their ability to raise local revenue and adapt taxation to local needs. This dependency leaves them vulnerable to funding shortfalls when government grants fall short of rising costs.

Public concerns and Welsh Government response

Public opposition to rising Council Tax bills has been growing. A petition has been launched calling for Welsh councils to be limited to a maximum annual increase of 2% from April 2025. Meanwhile, Labour’s stance on Council Tax has shifted, with UK Labour ruling out changes to Council Tax bands. This contradicts the Welsh Labour government’s previous plans, creating a potential policy divide between Cardiff and Westminster.

A Welsh Government spokesperson said local authorities in Wales receive significantly more funding per capita than those in England and that difficult financial choices stem from wider economic factors, not just Labour policy.

A Welsh Labour source added: “We are committed to supporting councils, but the economic reality is that years of Tory austerity, inflationary pressures, and high interest rates have made local government funding more challenging.”

Carmarthenshire Council’s position

Despite financial pressures, Carmarthenshire County Council has committed to continued investment in education, housing, and adult and children’s services. Following public consultation, the council has scrapped plans to close public toilets unless asset transferred, will only increase car parking charges in line with inflation, and will invest more in highways, gully cleaning, and flood prevention.

As the Welsh Government finalises its budget, Plaid Cymru has pledged to lobby for fairer funding up until the last moment.