Welsh ministers ‘create crisis protocol’ for cash-strapped councils

The Welsh Government is currently developing a protocol in case cash-strapped local councils across Wales face financial emergencies such as bankruptcy, a committee has heard.

Jayne Bryant, who was appointed local government secretary over the summer, said: “I have already met with local authority leaders… and I clearly understand the seriousness of the situation. »

She highlighted the pressures from years of austerity, the pandemic, inflation and growing demand when she appeared before the Senedd local government committee on October 10.

Pressed on financial resilience, Ms Bryant said: “We are jointly developing, with local authorities, a protocol to apply in the event of a significant financial challenge. »

Last year a report warned that Welsh councils could face a funding gap of £744 million by 2027/28.

“Serious risk”

Ms Bryant told the committee: “Services have had to be changed, some have faced cuts and councils have had to prioritize. Elected officials and leaders have been under considerable pressure for a long time.”

Referring to Audit Wales reports into the council’s finances, the Conservatives’ Altaf Hussain warned that some were facing fundamental problems which seriously endangered their financial viability.

Ms Bryant responded to Dr Hussain: “If necessary I have powers to intervene but of course this would be a step I would not take lightly. »

She said the Welsh Government would have more clarity after the UK budget on October 30.

The Welsh Government’s draft budget for the 12 months starting in April will be published on December 10, with the interim local government regulations expected to follow soon after.

“No surprises”

Judith Cole, local government’s deputy director of finance, said if a council faced a Section 114 bankruptcy notice it could seek help from the Welsh Government.

But she cautioned: “Moral hazard means we wouldn’t suggest to the cabinet secretary that we open the bank because we don’t have one. »

She added that councils could use an improvement fund awarded to the WLGA before moving to the stage of a Section 114 notice.

She said: “No one has officially come to us and said ‘we need help’ at this stage. What we are aware of is that the sector as a whole is saying this is really difficult.”

Ms Cole told the committee the protocol aims to ensure a “no surprises” approach.

“Open and frank”

Reg Kilpatrick, director of local government, said the Welsh Government had an “open and frank” dialogue with councils on finances throughout the year.

He acknowledged the “concerning messages” coming from Audit Wales’ reports.

Asked about council reserves and the important distinction between usable and allocated reserves, he said the Welsh Government collects data but has no role in managing the reserves.

Mr Kilpatrick warned it will be “some time” before the Welsh Government can provide indicative allocations to councils for next year.

The Conservatives’ James Evans asked about the formula used to allocate council funds, joking that only about four people in Wales understand it.

Ms Bryant said the complex formula includes more than 4,000 data points and the Welsh Government is looking at the most important areas such as social care and education.

“Pedestrian pace”

Plaid Cymru’s Siân Gwenllian criticized the U-turn on the creation of a community property commission, “suggesting, perhaps, that it will not receive the specific attention it needs”.

Ms Bryant said the Welsh Government had set up a task and finish group rather than a commission, reflecting financial constraints.

Labour’s Lee Waters pointed to an Audit Wales report, which found half of councils do not have a digital strategy, and said he was concerned about a “pedestrian” pace of change.

Mr Kilpatrick said the Welsh Government had dedicated more than £7 million to support the local government digital lead team, with an annual grant of £1.3 million.

Mr Waters suggested that spending on digital is relatively low in the context of council budgets, warning: “It’s really not high on the agenda. »