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The Conservatives called on councils to utilise “usable” reserves of more than £2bn, with taxpayers in Wales facing an average bill increase of 7.3% next year.

Laura Anne Jones warned council tax has “skyrocketed”, rising by 200% or £1,400 over the past two decades, as she blamed Welsh Government “mismanagement”.

The shadow local government secretary pointed out councils hold £2bn in so-called usable reserves, with Rhondda Cynon Taf “sat on” £269m and Caerphilly “hoarding” £222m.

She said: “Let me remind Labour that reserve funding is meant to be used for desperate times: those rainy days. Well, I would argue this is a rainy day, yet Labour is still hesitant to encourage councils to use reserves. It’s completely immoral.”

But others accused the Tories of being disingenuous about usable reserves, which include individual school reserves, housing and capital funds, and grants for specific projects.

‘Inherently unfair’

Urging ministers to commission an external review of the “inherently unfair” council funding formula, Ms Jones said it favours Labour-controlled areas over rural and north Wales.

She reiterated her party’s calls for a referendum on council tax rises of more than 5%.

Leading a Conservative debate on local government finance on March 5, she argued councils need to be run more like businesses to keep taxes low.

Peredur Owen Griffiths, her Plaid Cymru counterpart who also represents South Wales East, accused the Conservatives of underfunding councils for 14 years.

“Their sudden concern for council tax rises is a bit hypocritical when they created the financial crisis councils now face,” he said.

Mr Owen Griffiths called on the UK Government to ensure councils are fully reimbursed for the extra cost of national insurance increases which has been estimated at £109m.

‘Woeful finances’

The Conservatives’ Janet Finch-Saunders raised concerns about the “woeful” state of council finances, warning the decision to raise national insurance will compound a crisis.

Pointing out that reserves have grown from £1.4bn in 2013, she said: “These reserves have been held, rolled over, year after year after year, not spent on capital projects.”

Ms Finch-Saunders contrasted Conwy council’s £15m reserves with the £180m “stockpiled” by Cardiff, saying: “Clearly, money is being unfairly distributed.”

She echoed calls for reform of the “outdated” funding formula as she criticised councillors’ increasing allowances “at a time when they’ve kicked the residents in the teeth”.

Carolyn Thomas said the Labour UK Government has “turned a page” when it comes to funding but the scars of a decade-and-a-half of cuts cannot be healed overnight.

Joyce Watson, a fellow Labour backbencher and ex-councillor, added: “In terms of reserves … it isn’t for this chamber or central government to interfere with local decisions. Setting budgets, council tax and levels of reserves are a matter for local members in each council.”

‘Too simplistic’

Jayne Bryant, who was appointed local government secretary in July, said the overall settlement for 2025/26 is more than £1bn higher under the new UK Government.

She raised the announcement of a “funding floor”, which will see all 22 councils receive at least a 3.8% increase, as part of a budget deal with Welsh Lib Dem leader Jane Dodds.

Ms Bryant accepted that £2bn is a large sum but stressed it is “too simplistic” to take the technical description of “usable” reserves.

Rejecting calls for a review of funding mechanisms, she said: “The formula is free from political agenda, driven by data, and balances relative need and relative ability to raise income so that authorities across Wales are treated fairly and even-handedly.”

Senedd members voted 37-14 against the Tory motion. Plaid Cymru’s amendment was also defeated before the Welsh Government’s amended version was agreed, 26-25.