Ceredigion council has warned of “unprecedented financial challenges” to come despite a “strong balance sheet and is financially resilient” status currently.

Council leader Cllr Bryan Davies presented the latest controllable revenue budget performance report for 2022/23 to cabinet this morning (Tuesday) and while confident about the current financial situation warned “without additional core funding” all local authorities faced significant shortfalls.

Cllr Davies said that a small overall underspend of £71,000 was projected but wide financial challenges were emerging with reserves being used to mitigate “elevated levels of inflation.”

“What were initially financial headwinds coming down the track, are now strengthening in both scale and impact.

“The council has a strong balance sheet and is financially resilient, but all indications currently point to a downward trend on the level of reserves, in order to provide temporary mitigation on a number of fronts during the current financial year, unless there is one-off grant funding that becomes available as the year progresses.

“There is also a clear case for higher levels of core funding being needed from Welsh Government. In the absence of this there will be some very difficult decisions needed as part of the 2023/24 Budget process,” Cllr Davies told cabinet.

A report to cabinet notes that not taken into account in the current position are pay award announcements for teachers and other local government staff that could cost an extra £3million.

“With inflation biting, covid impacts on services still being seen and now the level of pay awards proposed, the current and future financial challenges are substantial. The level of cost pressures going into the 2023/24 budget setting process are likely to be as considerable if not more than at any stage seen previously under the decade of austerity,” said Cllr Davies.

Cllr Gareth Lloyd highlighted the need to convey a message to Welsh Government that increasing costs were having an impact, adding “I have had more people than ever asking for advice,” from all backgrounds and areas.

“Everything is increasing and their salaries remain about the same, it’s a very difficult time for everybody,” said Cllr Lloyd, concluding that discussions on next year’s budget should be starting as soon as possible.

Cabinet agreed to approve a change in budget assumptions relating to resolving £1 million of funding from Cardiff used to reduce the council tax increase in the 2022/23 budget, further consideration of the impact of pay awards and it will lobby Welsh Government to ensure all are fully aware of financial challenges being faced by the council and residents.