Ceredigion may have to raise council tax higher than five per cent to balance the budget next year if Welsh Government funding is at its expected level, councillors heard.

At Ceredigion County Council’s full council of October 24 received a report on the Medium Term Financial Strategy, highlighting expected pressures on the authority, down from a £18.6m peak for 2024/25.

The average Band D council tax (including police and town & community council precepts) in Ceredigion is currently £2,104 following an 11.1 per cent increase in council tax, slightly above the Welsh average of £2,060.

Ceredigion had modelled a five per cent council tax increase in the forthcoming financial year, but this may not be enough to balance the books if Welsh Government funding  - which makes up 70 per cent of the council's overall funding - is at an expected low level of a 0.5 per cent increase, a report for members said.

The report, presented by Cabinet Member for Finance and Procurement Services Cllr Gareth Davies added: “The 24/25 budget had a Welsh Government funding increase of 2.9 per cent, yet still resulted in an 11.1 per cent council tax increase due to cost pressures running at an inflation rate of over 10 per cent.

“Given how heavily geared and reliant the council is on WG funding (70 per cent of the net budget), a scenario of WG core funding only increasing by 0.5 per cent will only lead to a greater burden falling on the local taxpayer – therefore the modelled five per cent council tax increase will not be sufficient to balance the budget.”

Ceredigion achieved “a broadly breakeven position” for its 23/24 accounts, despite considerably challenges that were very proactively managed during the year, with “cost pressures now starting to recede from the £18.6m peak for 24/25”.

Pressures identified for future years are: £11.6m for ‘25/’26, £8.3m for ‘26/’27, and £8.4m for '27/'28.

The report says: “The indicative budget shortfall for 25/26 is £5.2m (based on five per cent council tax modelling), £2.6m (based on 10 per cent council tax modelling) or £1.6m based on 12 per cent council tax.

“The indicative budget shortfall over the medium term is £14.3m (based on five per cent council tax modelling) or £5.5m (based on 10 per cent council tax modelling). Every one per cent increase in WG core funding is worth c£1.35m. Every one per cent in council tax generates c£500,000. Every additional one per cent pay award across all employed staff costs c£1.27m.”

The report illustrated the effects of any increase in council tax levels for Ceredigion residents.

The County Council element of the average Band D Council Tax bill in Ceredigion – excluding the police and town/community council precepts - is currently £1,726.

Scenarios highlighted were increases of one percent, five per cent, 10 per cent, 12 per cent, and 14 percent, which would see annual increases of £17.26, £86.30, £172.61, £207.13, and £241.65 respectively.

The report stressed the strategy “should not be seen as a formal detailed budget or a tablet of stone,” but “instead provides an overarching approach that the council will need to adopt in aiming to achieve its priorities”.

The final figures on the council’s financial position will depend on the level of Welsh Government funding, expected to be known in December.

Members backed a recommendation to approve the updated Medium Term Financial Strategy.