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Council tax bills in Caerphilly could go up by 6.9% in April.

Caerphilly County Borough Council has announced a proposed council tax hike, a range of savings and a plan to dip into its reserves in a bid to address a reported shortfall of £46 million over the next two years.

It blamed inflation, interest rates and an increased demand for services as contributing to “unprecedented financial challenges”.

“It is inevitable that some difficult decisions will need to be made at pace to ensure that balanced budgets can be delivered in the forthcoming years,” the council’s deputy chief executive warned in a report to the cabinet.

The majority of funding for councils comes from settlements by the Welsh Government, which in turn receives its own settlement from Westminster.

Caerphilly will receive one of the lowest settlement increases in Wales for the next year, set at a 2.3% rise, which was below the UK inflation rate of 3.9% at the time the settlements were announced in December.

But local authorities can also raise money by setting council tax rates, and the 6.9% increase for bills in the next financial year will give Caerphilly Council an extra £5.9m to cover the cost of services.

In real-terms, a 6.9% rise would mean people living in council tax Band A properties would pay an extra £1.20 a week, rising to £1.80 for people in Band D and £4.19 in Band I.

Three-quarters of households in Caerphilly are in Bands A, B or C, meaning they will see bills go up by £1.20, £1.40 or £1.60, respectively, if the council approves the 6.9% rise.

Additionally, one-fifth of households in the county borough receive a degree of financial support with their bills via Caerphilly’s council tax reduction scheme.

The council’s cabinet will debate the budget proposals at a meeting on Wednesday January 17, and residents will be able to take part in a public consultation on the plans that is scheduled to open on Monday January 22.