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A well-intentioned policy to restrict profits in children’s care in Wales has backfired, allowing remaining providers to “make hay” and double their costs, a committee has heard.

Jake Berriman, leader of Powys Council, warned an “unforeseen” consequence has left councils with no choice but to cough up because other providers have fled the sector.

In February, the Senedd passed a law aimed at “eliminating” private profit – with looked-after children only cared for by the public sector, charitable or not-for-profit organisations in future.

Cllr Berriman said the Welsh Government’s phased move to restrict profit has seen private providers leave the sector and others have simply doubled their costs.

“We have to pay because there is no choice within the market,” he warned. “I think they are making hay while it is there to be made and the sun is shining.

“We’re paying the price for that and that was unforeseen.”

‘Excessive’

Giving evidence on the Welsh draft budget to the Senedd’s local government committee on November 13, councils pointed to the increasing demand and complexity of social care.

Jane Gebbie, the deputy leader of Bridgend Council, said: “We’ve got one placement for one young person across Wales at the minute, that’s £20,000 per week – that is excessive.”

Mary Ann Brocklesby, the Labour leader of Monmouthshire Council, added: “We’d all like to say that’s unusual – it’s not, it’s becoming standard. I don’t think there is a local authority across Wales that is not facing that kind of singular cost pressure.”

Cllr Gebbie said people are rightly angry about council tax rises amid a cost-of-living crisis, with poverty increasing demand for public services across the board.

The Labour councillor warned funding for prevention and early intervention has been cut over the years, with councils forced to focus on statutory services.

‘At all costs’

Cllr Berriman said: “There’s a great deal of nervousness around the potential of a roll-over budget of around 2%. Even at the 2.5% that has been modelled, that is opening a gulf – a shortfall in budget projections due to in-year pressures.”

He warned of £560m of pressures, “which clearly won’t be covered” by the 2.5% average increase for councils proposed in the Welsh Government’s draft budget.

Cllr Berriman added: “We’re looking nervously across the border at authorities in England which have had section 114 notices [effective bankruptcy] on them and we’ve seen the devastating effects that has as those authorities lose control over their budgets.”

The Liberal Democrat stressed: “We want to avoid that at all costs.”

He called for a “meaningful” funding floor to ensure no council receives an increase less than a certain amount, “reducing the impact of winners and losers out of the settlement”. Ministers have proposed a 2.3% funding floor in the 2026/27 draft budget.

‘£400m gap’

Calling for an increase of at least 4%, Cllr Brocklesby told the committee council tax makes up nearly 40% of Monmouthshire council’s revenue and “we cannot keep increasing it”.

She said councils are expecting no let-up in constraints before the 2027 local elections.

The councillor told Senedd Members: “A roll-over budget, with a 2.5% increase, doesn’t give us confidence that we will be able to collectively meet all the challenges.”

The Welsh Local Government Association (WLGA) has warned of a funding gap of £436m based on a 2% increase, the equivalent of 14,000 jobs or a 22% average council tax hike. Adjusted for the proposed 2.5% increase, the budget shortfall would be about £400m.

Cllr Brocklesby also expressed concerns about increasing national insurance costs, which the Labour Welsh and UK Governments have only partially covered.

‘Painful picture’

She told the committee: “It does mean we have to consider various cost savings across the board, including looking at our workforce. For some councils, that will lead to redundancies… in others it will result in reduced services.”

Cllr Berriman added: “Those frontline services, as ever, are suffering this year and will be suffering next year as a result of this unexpected cost and other cost pressures.”

He warned of a “painful picture”, with every 1% less in the settlement from central government resulting in a 3% council tax increase in Powys.

The council leader told the committee: “The cost pressures… are such that we are diminishing the local government offer and we just can’t carry on on that basis.”

Asked how councils will bridge the estimated £400m gap, Cllr Gebbie bluntly said: “I think the Welsh Government needs to tell us what they don’t want us to do.”