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MSs approved a £4.5bn settlement for Wales’ 22 local authorities amid concerns that rural and north Wales councils are losing out due to an unfair funding formula.

Rebecca Evans told the Senedd the final 2024/25 local government settlement is 3.3% higher than in the current financial year, with a £184m increase in cash terms.

Wales’ finance and local government minister said no council will receive less than a 2.3% increase, emphasising that protecting core frontline public services has been a priority.

However, Ms Evans recognised the settlement does not match the impact of spiralling inflation nor the increasing demands on councils.

She said the Welsh Government’s budget is worth up to £1.2bn less in real terms than when it was set in 2021, which is insufficient to meet all the pressures public services face.

‘Winners and losers’

James Evans, for the Conservatives, said the Welsh Government’s funding formula for councils is not fit for purpose as he called for an independent review.

He warned: “We have a scenario in place where rural councils lose out, and so do those in north Wales. This creates a system of winners and losers by design.”

Mr Evans, a former councillor and council cabinet member, said huge increases to council tax are being proposed across Wales at a time when services are being slashed.

He raised the example of a proposed 16.31% council tax rise in Pembrokeshire – the largest increase across the whole of England and Wales since 2012-13.

Mr Evans reiterated the Conservatives’ call for a local referendum on any proposed council tax increase of more than 5% during the debate on March 5.

‘Ruinous’

Peredur Owen Griffiths warned that councils are facing an existential crisis, with the prospect of bankruptcy now looming large.

Plaid Cymru’s shadow minister said: “Fourteen years of Tory-driven austerity has left local government finances in Wales in an utterly ruinous state.”

Mr Owen Griffiths, who chairs the finance committee, told the chamber UK Government policies have led to a 12% real-terms erosion in councils’ spending power since 2010.

The South Wales East representative urged Labour MSs to call out the “inaction and silence” of their own UK party leader, Keir Starmer.

He said the Labour UK Government-in-waiting is offering nothing but the same: “A rehashed version of austerity and a pledge not to turn on the spending taps.”

Mike Hedges, a Labour backbencher and former council leader, pointed out that councils such as Northamptonshire and Birmingham have effectively become bankrupt.

‘Stealth tax’

Mr Hedges raised examples of English councils borrowing huge sums – in some cases, the equivalent of ten times their annual budget – to buy real estate.

He said: “In Wales, no council has gone bankrupt or gambled on property, at least in part because councils have been better resourced – not well resourced but better resourced.”

Peter Fox, the Conservatives’ shadow finance minister, described the real-terms cuts levelled at councils as nothing but a stealth tax on the people of Wales.

He said: “The government knew perfectly well that councils would have to pass on their pressures onto their residents through council tax or face cutting services.”

Janet Finch-Saunders, who represents Aberconwy, told members council tax in Conwy has increased by 256% since 2000, including 20% in the past two years alone.

‘Left to wither’

She said: “Once again, north Wales has had to contend with a harsh reality: a consecutive year of receiving a lower council funding settlement compared to those in south Wales.“

Warning north Wales is being “left to wither”, Ms Finch-Saunders said Conwy is set to see one of the highest council tax rises, adding insult to injury.

Carolyn Thomas, a Labour backbencher who represents North Wales, warned the pie is too small even if the funding formula is reviewed.

The former councillor said: “I know the council in Denbighshire has got much more funding than Flintshire – they play each other off against each other.

“That’s unfortunately what happens now. People are in-fighting, basically, so it’s not helpful any more – we just need more funding for public services.”

The motion was agreed 28-15, with Plaid Cymru abstaining and Tory amendments falling.