Powys County Council is facing an estimated £10 million hole in its budget next year as rising costs and demand continue to squeeze local services. A £51.8 million funding shortfall is forecast over the next five years as costs and demand continue to rise.

The authority’s latest financial planning update puts the projected gap for 2027/28 at £10m, up from £9.7m when estimates were published in February. Pressures impacting on this budget gap include inflation, interest rates, nationally agreed pay awards, energy and borrowing costs, as well as increasing demand for social care, homelessness support and services for pupils with additional learning needs.

The financial model currently assumes a 5 percent Council Tax rise next year, although the council stressed that no decision has been made and the figure is being used for planning purposes.

Cllr David Thomas, cabinet member for finance and transformation, said the financial challenge facing the authority was “significant”, with rising costs, greater demand and uncertainty over future funding. Cllr Thomas added “these are early estimates, not a final budget.”

The council said work is continuing to reduce costs and reshape services under its Sustainable Powys programme, including greater use of digital technology, simplifying processes, increasing income and making better use of council buildings.

It warned that the review could ultimately involve decisions over which services the authority can afford to continue providing.

The latest forecast comes despite the council reporting an underspend at the end of the previous financial year. Powys said this was helped by unexpected Welsh Government funding, additional income and efficiency savings which cannot be relied upon every year.

The update is due to be considered by the Finance Panel on 15 October and Cabinet on 20 October.