THE BUDGET gap facing Merthyr Tydfil for next year is down to just over half a million pounds with £3.5m worth of budget cuts planned.
A report that went before cabinet on Wednesday, January 14 shows the latest budget gap being £509,000 taking into account planned cost reductions of £3.58m.
Following the provisional local government settlement from Welsh Government the council was faced with £9m budget gap for 2026/2027.
But the new budget deficit for 2026/27, taking into account additional funding through the settlement, the budget agreement reached between Welsh Government and Plaid Cymru and increased costs arising from the pay award and unavoidable additional demands is £509,000.
To deal with the budget deficit for 2026/27, other measures are currently being developed to be brought before councillors in the coming weeks, the report says.
The budget deficit assumes a council tax increase of 5% but no decision has been made on this yet.
The provisional local government settlement in November resulted in a funding increase of 3.1% for Merthyr Tydfil for the 2026/27 financial year.
This placed Merthyr Tydfil 4th best of all 22 Welsh local authorities.
The budget deal between Welsh Government and Plaid Cymru included £112.8 more for local government which means Merthyr Tydfil will receive a 4.7% increase in funding which gives the council £9.07m extra.
The report says: “Although welcome, this better-than-expected settlement does not protect the council from making difficult decisions in setting a balanced budget.”
The impact of the settlement and council tax base reduced the budget gap from just over £9m to £1.11m.
But there are pay pressures of £534,000 and additional demands of £2.6m which includes things like demographic growth, legislative changes, new initiatives, loss of income and changes to grants terms and conditions.
Other costs include capital financing costs of £1.35m and an accountancy review costing £1.18m.
However, the council has saved £354,000 through its 2025/2026 transformation programme.
The review of the Rhondda Cynon Taf Pension Fund has resulted in a reduction in the employer contribution rate from the current year and budget savings of £2.35 million for 2026/27 for Merthyr Tydfil.
This reduced the budget gap to £4.09m and then the £3.58m worth of cost cuts has reduced it further to £509,000.
The £3.58m of cost reductions include general operational savings, the receipt of additional grant income, increased income generation and efficiency initiatives.
No additional savings from schools are included in the budget proposals for 2026/27 at this stage, the report says.
But due to the ongoing financial challenges faced by local government the draft budget proposal does not provide the funding required to fully support the schools funding formula.
The report says: “Following a better-than-expected local government settlement in December 2024, the council was able to set a balanced budget for 2025/26 without requiring additional budget reductions from schools.
“However, as the 2023/24 and 2024/25 budget reductions in schools continue to be applied there are ongoing financial pressures in schools.”
It later adds: “Schools across Merthyr Tydfil continue to face significant financial pressure through pay, pension and other costs particularly in relation to the increased number and complexity of Additional Learning Need.
“Governing Bodies, like other council services, will need to consider how they manage these resources and deliver a budget that complies with the scheme for the financing of schools.”
