Council tax in Pembrokeshire could have to increase by nearly 16 per cent next year to balance the council’s books in “the most challenging financial situation to face Pembrokeshire County Council since its inception”.

Members of Pembrokeshire County Council’s Cabinet, meeting on December 2, are to receive a report on the outline draft council budget 2025-26, along with the outline draft medium term financial plan up to 2028-29.

The reports, the ’25-26’ budget of which projected funding gap for 2025-26 of £34.1m, will eventually inform a final decision on next year’s budget and council tax bills.

Part of the budget setting is the amount of money received from Welsh government through the Aggregate External Finance (AEF) funding, now expected to see a two per cent, or £4.4m, increase, which has been budgeted into the figures, the final amount for all Welsh councils being announced on December 11.

A report for members says: “The most significant cost pressure for the 2025-26 budget is demand for Social Care across both Adult and Children’s Services, with a projected total increase in pressure of £25.0m (most likely scenario) for Social Care for 2025-26 representing 58.8 per cent of the total council service pressures for 2025-26; and £64m across the remainder of the medium-term financial plan (MTFP).

“Based on the current projected funding gap of £34.1m, it is evident that major budget savings as well as a significant council tax increase will be required in order to deliver a balanced budget for 2025-26. The lower the Band D Council Tax increase, the higher the budget savings requirement will be, with the consequential adverse impact on the provision of council services.”

The current MTFP assumes a Band D Council Tax increase of 11.14 per cent in 2025-26, followed by a 7.5 per cent increase for the remainder of the MTFP.

The October decision to reduce the premium of the council tax levels for second homes in Pembrokeshire from 200 to 150 per cent has left a financial shortfall of £2.3m on its own, the report says, adding this would require a council tax increase of 2.79 per cent, to 13.93 per cent to make up the loss, subject to a later full council backing.

It says overall the 11.14 per cent council tax option would leave the council with a funding shortfall of £5.2m even after draft budget savings of £19.7m, some in the most severe categories, have been made, with a £2.9m shortfall for the 13.93 per cent council tax rise scenario.

It says: “Assuming use of all of the £19.7m Green to Red2 budget savings options and £1.3m use of reserves the remaining £13.1m funding gap will [need to] be met through the increase in council tax (including use of council tax premiums).

“A council tax requirement of £13.1m equates to an increase in council tax of £4.61 per week (15.92 per cent) for a Band D property.”

The council is to seek the public’s views on its Outline Draft Budget through public consultation running up to January 5; a final draft budget eventually considered by Cabinet on February 10 with a final decision by full council on February 20 of next year.