Could the Welsh government solve the crisis in council funding in Wales?
January 9, 2023

The financial crisis being faced by Newport Council is being faced by all councils in the UK. A major increase in demand for services such as social care, together with the hike in inflation has created a large hole in council budgets. 

Over 80% of the money for the Welsh government comes in a grant from the UK government. This has not been increased to cover the shortfall in council budgets. 

Opposition parties in Wales have called on the Welsh government to increase income tax in Wales to fund the shortfall in council budgets.

The shortfall in Welsh council budgets is £500 million. A penny on income tax in Wales would raise £200 million. Therefore, if the Welsh government raised income tax in Wales by 2½ pence and spent all of this on funding council budgets, this would cover the shortfall.

 Increasing income tax in Wales would hit working families, very many of whom are already struggling to make ends meet. The Welsh government believes that to do this would be unacceptable. 

Gas, oil and electricity companies are predicted to make £17 billion in excess profits over the next two years. Only the Westminster government can tax these companies. An effective windfall tax on these would not hit working families and would easily raise enough money to cover council budgets and more.

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