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Extra money for Newport’s public services is “positive news” but the city council still faces “significant cost pressures”, its leader says.

The Welsh Government will give councils an average funding increase of 4.3% in the next financial year, according to provisional figures published this week.

Newport’s estimated increase will be 5.6%, the highest percentage change of any council in Wales – and in cash terms equates to an extra £17.5 million.

This is the second year in a row that the city has claimed the biggest percentage rise in funding.

Cllr Dimitri Batrouni, the leader of Newport City Council, welcomed the provisional settlement for “the fastest growing city in Wales”.

He said the government’s proposal “recognises not only that demand” of population growth, “but also the potential Newport has in being the economic powerhouse” of the nation.

The local authority had been “facing the very real possibility of managing a £20 million shortfall due to demand on our services”, he added.

Like many other councils in Wales, Newport had anticipated a budget shortfall for 2025/26 because the cost of running statutory services – things like schools, waste and social services – have risen faster than central government grants in recent years.

Those settlement grants from the Welsh Government make up the bulk of councils’ funding.

In Newport, it accounts for more than three quarters of the income the council has available to spend on public services.

“The settlement recognises the essential role that local authorities play within communities,” said Cllr Batrouni. “However, there are still many challenges in play and the council is facing significant cost pressures. 

“We have experienced many years of challenging budgets, coupled with increasing demands for service and rising delivery costs, which have taken a considerable toll.”

Cllr Matthew Evans, who leads the Conservative opposition group in the council chamber, was cautious in his assessment of the settlement proposal.

“On the face of it, it does seem generous, but we need to look at a number of factors,” he said. “Newport is the fastest-growing place in Wales so it needs additional resources to pay for this, and there are other concerns such as the huge increase in homelessness across the city. 

“We have yet to see extra funding to pay for the millions of pounds extra in National Insurance contributions we will have to send to the UK Treasury, so we are robbing Peter to pay Paul.

“Hopefully, though, it will stave off the massive hikes in council tax we have seen in Newport over the past few years, because residents deserve a break.”

The council announced some initial money-saving proposals in November, ahead of drawing up its budget for next year.

Cllr Batrouni said: “The main focus is how we can modernise services and be more efficient. I am very keen that we look for opportunities through collaboration, innovation, income generation and the use of the latest technical solutions that will put us in a good place long-term.”