Merthyr Tydfil Council will have to tackle a budget gap of just under £6m for next year with savings “inevitably” affecting staff and services. The provisional local government settlement announced by the Welsh Government on December 11 resulted in a funding increase of 5.1% for Merthyr Tydfil for the 2025-26 financial year.
The council had previously indicated a budget deficit of £8.77m for next year (2025-26) and a cumulative budget deficit of £18.9m between 2024-25 and 2026-27. The revised budget deficit for 2025-26 is £5.98m taking into account the impact of the settlement worth £6.69m, pay pressures worth £2.09m, adjustments to the council tax base worth £95,000, additional service demands worth £2.93m, an accountancy review of assumptions worth £1.32m, and £95,000 in savings not achieved in 2024/2025.
A report going before cabinet and full council on Wednesday, January 8, said: “Although welcome, this better-than-expected settlement does not fully protect the council from making difficult decisions in setting a balanced budget.” In terms of pay awards all staff under the National Joint Council (NJC) have seen their full-time equivalent annual salary increase by £1,290 which represents a national pay award ranging from 2.5% to 5.5%. To get all the latest news from Merthyr Tydfil, sign up to our newsletter here.
The pay agreement will also see the full-time equivalent pay for senior managers increase by 2.5%. In-line with the JNC chief officers pay award the chief executives’ pay grade will increase by 2.5% and the teachers’ pay award was agreed at 5.5% from September 2024.
For non-teaching employees a 4% increase is projected for 2025-26 and a projected 4% increase for teachers’ pay award from September 2025 has been used for 2025-26 financial year. The council tax increase for 2025-26 is currently modelled at 5% reflecting the medium-term financial plan 2024-25 to 2026-27 but no decision has yet been made for 2025-26.
Every 1% increase or decrease to the budgeted council tax increase has around a £300,000 net impact on the revised budget deficit. The report said that senior managers are currently looking to identify measures to address the revised budget deficit of £5.98m for 2025-26.
It said the budget gap for 2025-26 highlights the challenge faced by the council in addressing unavoidable external financial pressures. Business cases are being developed and will be brought before cabinet and council within the coming weeks. For our free daily briefing on the biggest issues facing the nation, sign up to the Wales Matters newsletter here
The report said: “Given the size of the budget deficit the setting of a balanced budget for 2025-26 will be incredibly challenging. The size and scale of the challenge cannot be underestimated with difficult decisions needed to achieve the necessary savings. These savings will inevitably impact on staff and services.” Welsh Government announced a total revenue funding increase for all Welsh councils of 4.3% (£253m) and Merthyr Tydfil’s revenue settlement is ranked third-best of the 22 Welsh councils.
The report said that former specific grants previously held outside of the revenue settlement are being transferred into the settlement with Merthyr Tydfil’s proportion totalling £3.09m. The report said there are ”no new responsibilities” but added no indicative revenue settlement for the following year is provided by the Welsh Government.