Welsh Government using data from 1991 to calculate council funding, watchdog finds

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The formula used by the Welsh Government to fund local authorities is based on data up to 35-years-old, a spending watchdog has revealed.

A report by auditor general Adrian Crompton found the current system fails to deliver value for money and makes long-term financial planning difficult for local authorities.

The formula used to distribute the majority of council funding has not been independently reviewed for more than 20 years. Some indicators still rely on census data from 1991 and 2001, despite significant demographic shifts across south Wales.

The report also criticised the Welsh Government’s use of specific grants. It warned that councils often receive these funds too late in the financial year, leading to rushed decisions and a risk that public money is wasted.

Mr Crompton has made five recommendations to the Welsh Government. These include an urgent review of the funding formula, providing councils with clearer future funding estimates, and improving how grants are distributed.

He said: “The way the Welsh Government funds councils does not always help them to achieve value for money – particularly over the longer term.

“Addressing these themes is essential if the Welsh Government and local authorities are to navigate today’s extreme financial and demand challenges and deliver sustainable public services.”

The Welsh Government has welcomed the report and said it will “carefully consider” the recommendations.

A Welsh Government spokesperson said: “We are committed to working with local authorities, to ensure funding is allocated fairly and effectively, and we recognise the importance of providing councils with greater certainty to support their long-term financial planning.

“We have already committed to reviewing the funding formula to better reflect the real costs of delivering services across Wales, and to reducing fragmented grant funding that creates unnecessary bureaucracy for councils.”