Councils across Wales have a collective hole in their finances amounting to £326.7m for the coming financial year, Unison research has found, as Ceredigion County Council’s Chief Executive warns of an “unfair” “two-tier funding system” between rural and urban areas.

As the Cambrian News reported last week, Ceredigion County Council has been forced to look at closing schools, a care home, and bring in parking charges on Aberystwyth promenade in a bid to ease its financial.

Those plans, though deeply unpopular, are necessary to balance the budget despite an 11.9 per cent council tax rise for residents in April because the funding “just isn’t there” to operate services at the level required.”

Ceredigion County Council Chief Executive Eifion Evans told members during a marathon meeting on the proposed school closures that “the dynamic across Wales is, at the moment, in my opinion – and I’m probably going to get a rap across the knuckles for saying this – a two-tiered funding model and urban-centric areas get far more generous settlement than rural areas.”

Council leader Cllr Bryan Davies told the same meeting that when he is “banging the drum for Ceredigion” in meetings with the Welsh Local Government Association he “gets branded by more urban leaders that I’m being racist against them.”

“That is the narrative,” he said.

The council has already warned that if the Welsh Government doesn’t adequately fund councils in rural Wales, projections for 2025/2026 already mean that further council tax rises and service cuts are on the cards.

The council wants the Welsh Government to recognise the “unique challenges” rural authoirties face when allocating funding.

Funding to Ceredigion County Council from the Welsh Government rose by less than three per cent for 2024/2025, lower than the national average and the lowest increase per head of population across all of Wales, and well below any inflationary pressures on costs.

A report suggests that at least £10m in savings through cuts and tax rises will need to be found in Ceredigion until at least 2027.

In the past 10 years, figures show, Ceredigion County Council has had to find more than £60m in budget savings, as austerity kicked off a “considerable period of real term decreases in funding”.

That figure is likely to rise until a revamped Welsh Government funding formula which improves the outlook for councils in rural Wales – repeatedly called for by Ceredigion council leaders – is introduced.

Ceredigion is not the only council in Wales facing a bleak financial future in the Cambrian News area, with Powys, Carmarthenshire, Pembrokeshire and Gwynedd all warning of further cuts and council tax rises in the future on top those seen in April.

Gwynedd Council raised council tax by more than nine per cent in April and has already had to find £70 million of savings and cuts over the past four years.

The council was forced to find an additional £15 million in 2024/25 after receiving the lowest uplift in funding of any authority in Wales.

Councillor Dyfrig Siencyn, Leader of Cyngor Gwynedd, said ahead of budget discussions earlier this year that the authority has “been warning the Government for a long time that a lack of money year on year is putting services for local people at risk.”

“I'm gravely concerned that things have reached a tipping point and we no longer have an option but to cut services and increase Council Tax,” he said.

Councillor Ioan Thomas, Cyngor Gwynedd’s Cabinet Member for Finance, said: “We continue to call on the Westminster Government to fund local councils fairly and echo the Welsh Local Government Association's message that consequential funding derived from additional funding for English councils should be passed on in full to Welsh councils.

“As things stand, we anticipate that the situation over the coming two years will be critical.”

Powys County Council said that it is currently forecasting a funding shortfall, based on national fiscal analysis, of more than £9.6 million for the next financial year “with that figure rising to £50.9 million or more over the next four years.”

“This leaves a considerable gap in our available finances and means we can't afford to continue delivering our services in the same way,” the council said.

“In previous years we have looked to our services to become more efficient.

“Whilst changes have been made, this approach is not sustainable in the long-term and we now need to be more radical and change our approach.”

Pembrokeshire County Council is projecting a funding gap of between £36.3m (best case) and £67.1m (worst case) for 2023-24 to 2026-27.

The council warned that the next three years “will be the greatest challenge ever faced by the council.”

“There are going to be some extremely difficult decisions to be made and it is virtually inevitable that in order to balance the budget and ensure financial sustainability for 2025-26 and beyond,” the council said.

Carmarthenshire raised council tax by 7.5 per cent in April amid pressure to plug a £22m shortfall in finances.

The council said that the uplift in council funding from Welsh Government “fell well short of the contribution needed by the council to maintain services as they are at present.”

Cabinet Member for Resources, Cllr Alun Lenny said at the time of budget discussions: “The huge pressure on local councils due to inadequate funding of public services has increased year on year for over a decade, and is now at an unprecedented level.

“In Carmarthenshire, we’re about £120m worse off than we were in 2010.

“That’s £120m less to spend on social care, schools, highways etc.

“This year’s Revenue Support Grant allocation - upon which we depend for 75 per cent of our income - increased by 3.3 per cent, which is below inflation and comes nowhere near meeting our increased costs.”

The Welsh Local Government Association (WLGA) has been lobbying hard to protect financial settlements for Wales’ councils, but said that the outlook is “bleak”.

Councillor Mark Pritchard, WLGA Independent Group Leader said: “Since the onset of austerity, councils have lost over £1bn from their budgets. That is £1bn lost from essential everyday services such as social care, schools, economic development, and environmental services to name but a few.

“It is clear that a long-term, sustainable funding commitment is urgently needed from both Welsh and UK Governments to seek to protect vital council-run services which support and enhance so many people’s lives in our communities.”

Councillor Llinos Medi, WLGA Plaid Cymru Group Leader said: “Councils have worked hard to find efficiencies and reduce costs, but the easy savings have long gone.

“Local government cannot continue to be expected to make significant budget cuts without seriously impacting the viability of our services.”

Handing out an average funding uplift of 3.1 per cent earlier this year, Finance Minister Rebecca Evans said it was “an incredibly tough financial situation.”

“Our overall funding settlement is not sufficient to meet all pressures,” she said.

“This has meant taking difficult decisions elsewhere in the budget to honour our commitment to councils last year of a 3.1 per cent rise in their funding for next year.

“I appreciate the pressures local government is facing and recognise that demand for services, along with the recent very high rates of inflation, mean local government will still need to make difficult decisions on services, efficiencies, and council tax in setting their budgets.”

The New Wales-wide funding gap figures compiled by Unison, based on information from local authorities across the county, show council funding is in a dire state with massive cuts likely to essential services and jobs, the union said.

The national report, Councils on the Brink, warns that failure to rectify the growing problem soon risks ‘the widespread collapse of local government’.

The report warns that local authorities in Wales could be forced to sell land, buildings and other capital assets, as well as cut back vital community services like rubbish collection and recycling, libraries, public toilets and leisure centres even further.

According to Unison’s research, the councils across Wales with the biggest predicted shortfalls for 2025/26 are Cardiff Council (£44.3m), Caerphilly County Borough Council (£33.7m), and Swansea Council (£28.5m).

Figures show Ceredigion is facing a £7.5m shortfall for the coming year, with Powys needing to find £19,311,950.

Gwynedd’s funding gap will reach £13.5m in 2025/26 with £8.421m in Carmarthenshire.

Last year, Cardiff University’s Wales Governance Centre warned councils in Wales face an “unsustainable” funding gap of £744 million by 2027.

Financial challenges for 2024/25 have already led to larger council tax increases, further service cuts and use of cash kept in reserve in a bid to balance the books among many councils.

The funding gap measures the difference between each council’s income and the amount needed to maintain promised service levels.

But as the shortfall grows between the cash local authorities need and what they actually have to spend, crucial services and jobs are being slashed.

Earlier this year Ceredigion MP Ben Lake said that “public services in Wales need urgent financial support” and called for a fresh “consistent, transparent and fair” funding formula for Wales in a bid to tackle the problem.

The challenging financial situation is already having a potentially catastrophic and far-reaching effect upon Wales, Unison said.

Without urgent government support, the union is warning that the combined funding shortfall across England, Scotland and Wales could balloon to £8.5bn by 2026/27, leaving many councils struggling to provide essential local services and protect jobs.

Unison’s figures, based on freedom of information requests and councils’ own financial forecasts, paint a far bleaker picture than other estimates.

In England alone, the gap is expected to reach £3.4bn by 2025/26, significantly surpassing the £2.3bn projection published by the Local Government Association for English councils in June.

Years of austerity mean services have already been cut substantially, with widespread job losses and a reduction in vital support for some of the UK’s most deprived areas, Unison said.

“Many local authorities are now on the brink of financial collapse and the union says this new data suggests many more could soon follow suit,” the report warns.

“Since 2018, eight councils – including Birmingham, Croydon and Thurrock – have issued section 114 notices, meaning they risk failing to meet the legal requirement to balance their books.”

Unison Cymru/Wales regional secretary Jess Turner said: “Councils are teetering on the brink of financial disaster.

“Countless essential services and very many vital jobs are at risk, with terrible consequences for communities across Wales.

“After 14 years of ruthless austerity, the very fabric of local society is under threat.

“Councils are quite simply the linchpin of local areas, so when services go, many people are left vulnerable, with no one to pick up the pieces.

“Local authorities were clobbered by the Westminster government, whose harsh financial settlements left councils with no option but to sell off the family silver, auction off green spaces, close key community facilities and let thousands of workers go.

“Only swift and decisive action to stabilise local finances will do.

“Labour has inherited a mess, with essential services battered and bruised.

“The new government in Westminster understands the value of healthy public services and the role they can play in generating economic growth, in a way its predecessors simply didn’t.

“So as tough as the financial situation may be, ministers cannot ignore the terrible plight of authorities of every political persuasion.

“There’s an unquestionable need to turn the page on the destructive cuts of the past and invest in services and staff to help councils rebuild Britain.”

Unison said that it “welcomes the commitments by the new Labour government to introduce multi-year funding settlements to allow local councils to better plan their spending and end wasteful competitive bidding for funding.”

While council funding in Wales is devolved, the Welsh Government should receive additional resources from Westminster that can be passed to their councils as part of those plans.