Pembrokeshire County Council is expected to overspend in its annual budget by nearly £4m, with the potential for huge budget pressures next year, senior councillors have heard.

Members of Pembrokeshire County Council’s November meeting of Cabinet received a report on the quarter two figures for the 2024-25 budget, highlighting an expected overspend of £3.9m by the end of the financial year.

The budget for 2024-25 was approved by council on March 7. This is the second budget monitoring report for 2024-25, with the predicted overspend up from £2.9m in the quarter one figures.

A report for members, presented by Cabinet Member for Corporate Finance and Efficiencies Cllr Joshua Beynon said the budget for 2024-25 is “set against a backdrop of increased level of demand, complexity and cost of packages within our School ALN provision, Children’s Services, Adult Services and Homelessness”.

It continued: “This increase in demand, complexity and cost of packages has continued into 2024-25 with material projected overspends within social care & housing totalling £8.8m.

“Although work is being undertaken to try to reduce the cost of packages, it should be noted that these demand levels are projected to continue into 2025-26 and future years, creating further additional permanent budget pressures that will either need to be met through additional budget savings, income generation or increased council tax.

“The projected outturn at Q2 2024-25 is £307.1m, representing a projected overspend of £3.6m. There is also a projected shortfall in 2024-25 council tax collection which will result in a £0.3m reduction in funding received. The resulting £3.9m shortfall will need to be funded from reserves in 2024-25.”

In the report, Director of Resources Jon Haswell stated: “It is worrying that the projected overspend for 2024-25 has increased to £3.9m, which will have to be funded from reserves at the year end, reducing further the limited reserve balances. The projected overspend is due to Social Care (Children’s Services and Adult Services) projecting to overspend by £8.6m in 2024-25.”

Cllr Beynon said a hoped-for increase in funding from Welsh Government following increased funds from Westminster announced in the UK Budget which was not confirmed at the moment, but was expected to lead to an increase in funds to Pembrokeshire of one or two per cent; with that funding figure due to be announced next month.

Members also noted a predicted funding gap scenario of £33.6m for 2025-26, which, with the current medium term financial plan budgeted council tax increase for 2025-26 of 11.14 per cent would leave a shortfall of £23.2m to be met through budget savings, dependent on what the final settlement from Welsh Government is.

Members of PCC’s cabinet agreed that, if the projected overspend of £3.9m is not recovered during the financial year, it will be funded from reserves, and that relevant members and officers work to identify potential savings to assist in addressing the indicative budget gap of £33.6 million for 2025-26.