Elgan Hearn Local Democracy Reporter
Alarm bells will be ringing in the corridors of a Welsh council’s headquarters as the council budget for this year is forecasting a massive £4.33 million deficit by the end of the financial year.
The situation could be even worse as the papers show that this deficit follows a planned transfer of £1.96 million to the budget from “specific reserves”.
At a meeting of Blaenau Gwent County Borough Council’s Labour Cabinet on Monday, October 19, senior councillors will receive an update report on how the budget was performing during the first quarter of the year, from April to the end of June.
The prediction is that the council will spend £217.77 million on its 2026/27 budget when it has allocated £213.43 million for running council services.
The report explains that a black hole has appeared in the council’s budget due to financial issues in schools and Social Services, which are being partly offset by other departments underspending.
Children’s Social Services are reporting a forecast deficit of £2.3 million, which is “largely driven by increasing demand and complexity across external residential placements, support/independent living placements, alongside reduced market capacity linked to the Welsh Government’s Not for Profit agenda.
“The council has taken proactive steps to reduce reliance on external placements, including the opening of two children’s residential homes; however, the pace and scale of financial benefits have been slower than originally anticipated.”
The papers show that a comprehensive “Children’s Social Services Improvement and Financial Sustainability Plan” has also been developed and that an internal “Accelerated Improvement Board” has been set up to address the problems.
Adult Social Services are also predicting a £1.48 million overspend, which is being “primarily” driven by increasing placement costs.
The report says that “close monitoring and active management” will take place on this for the rest of the year.
Schools in Blaenau Gwent are already carrying a deficit of £2.976 million from last year, and the situation is predicted to get worse, with a further £1.4 million set to be added to the deficit.
This means the cumulative deficit in schools could rise to £4.381 million.
The report said: “This forecast deterioration highlights the ongoing financial pressures facing schools, despite the additional funding provided by the council during 2025/26 and 2026/27 to support schools with the impact of previous years’ pay and energy inflation.
“The forecast position reflects a combination of ongoing inflationary pressures, demographic changes, declining pupil numbers in some schools and increasing demand and complexity associated with Additional Learning Needs (ALN) provision.
“The council will continue to work closely with schools to strengthen financial management arrangements, support the delivery of deficit recovery plans and implement measures aimed at improving longer-term financial sustainability, including school reorganisation and rationalisation to reduce surplus places and reduce operational costs.”
A further headache for finance chiefs is that the council has only budgeted for a three per cent teacher pay award.
If the Welsh Government doesn’t fund any pay award above three per cent, the council will need to find the money itself.
Overall, the report suggests the Cabinet will need to agree to use more money from reserves to plug the gaps.
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