GUEST COLUMN:
Dr Edward Thomas Jones
Senior Lecturer in Economics
The Albert Gubay Business School, Bangor University
At the end of March, Welsh councils were owed £318 million in council tax arrears.
According to figures released by the Welsh Government in June, the amount outstanding had increased by more than a fifth in a year and was almost three times the level recorded as the pandemic began.
It is a striking statistic.
It would be tempting to interpret the increase simply as evidence that households can no longer afford their council tax. Financial pressure is clearly part of the story, but it is not the whole story. The Welsh Government also points to difficulties collecting council tax premiums and to properties moving from the non-domestic rates system into council tax.
Despite the increase, councils still collected more than 95 per cent of the tax due during 2025-26. This is not evidence that the collection system is collapsing, and arrears do not necessarily become permanent losses.
The growing stock of arrears nevertheless provides a useful warning about the wider financial position of local government in Wales.
At the same time as some revenue is becoming harder to collect, the cost of providing services continues to rise.
County and county borough councils have budgeted to spend 4.7 per cent more in 2026-27 than during the previous year. Budgets for education and social services, which account for much of council expenditure, are forecast to rise faster still.
These pressures are understandable. Social care is labour intensive and demand is rising. Schools face pressures around pay, buildings and additional learning needs. Homelessness, specialist placements and other statutory responsibilities cannot simply be suspended when budgets become difficult.
The result is that councils have less room for manoeuvre over an increasing share of their expenditure.
This is where another statistic becomes particularly important.
Across the local authority sector, budgeted spending on planning and economic development is forecast to fall by 19.4 per cent in 2026-27.
This follows a projected reduction of 18.1 per cent in the same category the previous year, with reduced UK Shared Prosperity Fund support contributing to both changes.
These figures require caution.
They do not mean that every council has deliberately cut its underlying economic development services by the same amount. The figures are affected by external grants moving into and out of council accounts. New Local Growth Fund transition arrangements are also intended to preserve projects and capacity as the Shared Prosperity Fund ends.
However, this does not make the issue less important.
It exposes how dependent local economic development has become on temporary funding programmes. When one scheme ends and another begins, councils may lose staff, relationships and projects that have taken years to build. Capacity cannot always be dismantled and then recreated when the next funding announcement arrives.
Planning and economic development can appear easier to reduce than social care or education because the consequences are rarely immediate.
A missed care visit creates an urgent problem. A delayed planning application, abandoned business support programme or regeneration project that never progresses may take years to appear in the economic statistics.
Yet these activities help shape the future economic base.
Councils prepare development plans and determine most planning applications. They support town centres, coordinate regeneration, bring organisations together and turn national funding programmes into projects that respond to local conditions.
They also understand the practical barriers that prevent national economic policies from working in particular places.
Weakening this capacity risks creating a vicious circle.
Where household incomes and business activity are weak, the local tax base grows more slowly, even as councils continue to face pressures linked to poverty, insecure housing and economic inactivity. They are left trying to meet substantial needs from a weaker economic base.
Protecting immediate statutory services can then mean reducing the very activities that might attract investment, support businesses and expand the future tax base.
Each decision may be rational within a single annual budget. Collectively, they can trap places in a cycle where economic weakness creates financial pressure and financial pressure makes it harder to address the economic weakness.
This raises a wider question.
If councils lose the capacity to drive local growth, who will take their place?
The Welsh Government can set national priorities and provide finance. Regional bodies can coordinate investment across larger areas.
Development agencies, universities and the private sector can all contribute.
But none automatically replaces the local knowledge, statutory powers, democratic legitimacy and convening role of councils.
Audit Wales recently warned that current funding arrangements do not always help councils secure value for money over the longer term. It called for earlier information about future funding and greater clarity over the costs of new responsibilities.
This is more than an administrative concern. Councils cannot retain skilled staff, prepare credible projects or build lasting partnerships when funding is short-term and uncertain.
The danger is not that Welsh councils suddenly run out of money. It is that they gradually become able to do little more than respond to immediate statutory pressures, while losing the capacity to change the economic conditions creating those pressures.
Local growth requires local capacity. Treating that capacity as expendable is not fiscal prudence. It is a decision to weaken the foundations of future growth.
