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Caerphilly County Borough Council is facing a “sobering” financial outlook despite an increase in Welsh Government funding, senior councillors and officers have warned.

An extra £25 million in funding is “welcomed” but the “picture remains extremely challenging”, said Cllr Eluned Stenner, the cabinet member for finance.

The council estimates it has to make around £47.5 million of savings by the spring of 2028.

This is generally because the cost of running services has risen faster than any increases in the government funding that makes up the bulk of the council’s income.

Interim chief executive Dave Street said costs of providing emergency and temporary accommodation, as well as social care, had grown.

The number of children in the care system is “on the rise” and the complexity of cases is “causing us real concern”, he told cabinet members at a meeting on Thursday January 17.

Similarly, demands on the health service are having a knock-on effect on councils, which are often responsible for getting patients back into the community with support at home or in a care facility.

Mr Street said that pressure on councils “feels like it is growing by the hour”.

The council has proposed a range of savings measures and a 7.9% council tax rise in its draft plans to deliver a balanced budget.

Cllr Stenner claimed Caerphilly was “still likely to have the lowest level of council tax in Wales”, even if the proposed rise is approved.

She warned it was “inevitable further difficult decisions will need to be made” on spending in the future.

Cllr Jamie Pritchard, the deputy leader, said the budget plans also included “creative” uses of grants to fund some projects and staff, including the team which secured the funding to keep Blackwood Miners’ Institute open.

“If we work creatively, it is perfectly possible to maintain and improve services, without relying solely on the council’s core budget,” he added.

Despite the proposed savings and tax rise, the council is also proposing to dip into its reserves for £4.3 million, to help balance the books for 2025/26.

Head of finance Stephen Harris said that approach “is not sustainable moving forward”, however.

While the council held £190 million in reserves as of the end of March 2024, around £16 million was unallocated and “available”, he added.

“That is a very small amount,” Mr Harris said, explaining “we would not be able to run this council for more than ten days” with that money.

Cllr Sean Morgan, the council leader, also warned the council may have to rethink other projects if its unallocated reserves were depleted.

The council’s draft budget proposals will go out for public consultation on January 22, giving residents a chance to have their say.