Auditors have questioned the sustainability of local authorities in Wales despite the improved financial position Welsh councils have experienced as a result of pandemic support.
The Welsh government allocated £660m additional funding to help councils cover their loss in income and their extra expenditure over 2020-21. Public borrowing also increased due to the pandemic.
According to Audit Wales, this extra short-term funding means that councils’ financial positions have improved, the costs of COVID-19 have been mitigated, and councils have not generally relied on their reserves to balance their 2020-21 budgets.
However, prior to the pandemic councils were facing a financial squeeze and the auditors warned that the 22 Welsh local authorities face uncertainty over future funding levels.
The core funding from the Welsh government has fallen by 17% over the past decade. Councils have partly offset that cut by a 35% increase in money raised through council tax, but overall council spending fell by 8% in the last decade.
Audit Wales warned that the demand for local services is rising, while budgets across the public sector are set to remain tight. They concluded that councils will struggle to manage these pressures while also recovering from the pandemic and responding to the global challenge of climate change.
Auditor General, Adrian Crompton said: ‘The pandemic has highlighted the importance of local government services and local government plays a key part in the recovery of the pandemic.
‘Though councils have been supported financially through the pandemic, they need to implement strategies to improve their longer-term financial sustainability to ensure they are able to provide essential services that keep communities safe and healthy.’
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