21/2/25

What's a budget gap?

A budget gap is calculated by comparing funding (the Council's general grant funding from Welsh Government and council tax) from its predicted spend on delivering services like education, social care, libraries and hubs, street cleansing, street lighting, road maintenance etc. Currently Cardiff Council delivers around 700 services to residents across the city.

Why is the Council Facing a Budget Gap?

For 2025/26, funding is expected to increase by £39.5m and costs by £67.2m. This leaves a £27.7m budget gap to address. There are several reasons for cost increases. These include:

Increasing Demand for our Services:

Cardiff's growing population, the legacy of the COVID 19 pandemic and cost-of-living crisis, has seen more and more people turn to the Council for support. We know, for example, that costs of care for vulnerable children and adults, and for education services are all rising. With more people seeking to access Council services, the cost of delivery is going up. Costs also increase because the needs of people accessing services are sometimes more complex.

Inflationary Pressures:

Although inflation is now lower than recent historic highs, prices for commissioned services are still expected to increase in 2025/26, as providers seek to pass on workforce and other cost pressures. This is likely to increase the price we pay for services like domiciliary care, home to school transport and care home placements.  

Pay:

We believe public sector employees - who deliver vital services across the city - should be paid fairly. Pay awards are being negotiated for teachers, social workers, and other public sector staff which - due to inflation - are likely to see the council's wage costs rise.

Other Cost Pressures:

These include things like increases in the levies we pay to other bodies, including the South Wales Fire and Rescue Service, and amounts linked to funding the Council's capital investment programme.

 How we propose to close the Gap

The budget gap of £27.7m will be closed through a combination of:

 Efficiency Savings and Service Change Proposals:

The Council is committed to protecting frontline services and will generate the majority of savings through back-office efficiencies. This means driving down the running cost of our buildings, reducing the amount of office space we need, and using new technology where it can save us money. The scale of the financial challenges also means that savings include a managed reduction in the number of staff employed, through voluntary severance and review of vacant posts, to generate savings whilst keeping compulsory redundancies to a minimum. Unfortunately, efficiency savings will not be enough, and some changes to services are also necessary to balance the books.

Council Tax:

Council Tax accounts for around 26% of the Council's budget, with the remainder coming from the Welsh Government. Each 1% increase in Council Tax generates around £1.9 million, so closing the budget gap through Council Tax alone would not be possible. The Council Tax increase to support delivery of the 2025/26 Budget is 4.95%, which generates net additional income of £9.4 million. The increase will enable some of the Council's key services to be protected. Those eligible, will receive support through the Council Tax Reduction Scheme.

Use of Reserves:

The Council must be very careful when using its financial reserves, there is only a limited amount available and once they're gone, they're gone. Most of the Council's reserves are earmarked for specific purposes and are therefore already committed in support of delivering services, for example funding one-off community initiatives and supporting Homelessness Prevention Services. The Council does maintain a level of General Balance totalling £14.2M to cover unforeseen costs and this equates to less than 2% of the Council's overall net budget.