MSs approved a £4.5bn settlement for Wales’ 22 local authorities amid concerns that rural and north Wales councils are losing out due to an unfair funding formula.

Rebecca Evans told the Senedd the final 2024-25 local government settlement is 3.3 per cent higher than in the current financial year, with a £184m increase in cash terms.

She said no council will receive less than a 2.3 per cent increase, emphasising that protecting core frontline public services has been a priority.

However, Ms Evans recognised it does not match the impact of spiralling inflation nor the increasing demands on councils.

She said the Welsh Government’s budget is worth up to £1.2bn less in real terms than when it was set in 2021.

James Evans, for the Conservatives, said the Welsh Government’s funding formula for councils is not fit for purpose as he called for an independent review.

He warned: “We have a scenario in place where rural councils lose out, and so do those in north Wales. This creates a system of winners and losers by design.”

Mr Evans said huge increases to council tax are being proposed across Wales at a time when services are being slashed.

He raised the example of a proposed 16.31 per cent council tax rise in Pembrokeshire – the largest increase across the whole of England and Wales since 2012-13.

Mr Evans reiterated the Conservatives’ call for a local referendum on any proposed council tax increase of more than 5 per cent during the debate on March 5.

Peredur Owen Griffiths warned councils are facing an existential crisis, with the prospect of bankruptcy.

Plaid Cymru’s shadow minister said: “Fourteen years of Tory-driven austerity has left local government finances in Wales in an utterly ruinous state.”

Chairperson of finance committee, Mr Owen Griffiths, said UK Government policies have led to a 12 per cent real-terms erosion in councils’ spending power since 2010.

Mike Hedges, a Labour backbencher and former council leader, pointed out councils such as Northamptonshire and Birmingham have effectively become bankrupt, raising examples of English councils borrowing huge sums – in some cases, the equivalent of ten times their annual budget – to buy real estate.

He said: “In Wales, no council has gone bankrupt or gambled on property, at least in part because councils have been better resourced – not well resourced but better resourced.”

Peter Fox, the Conservatives’ shadow finance minister, described the real-terms cuts levelled at councils as nothing but a stealth tax on the people of Wales.

Janet Finch-Saunders, who represents Aberconwy, told members council tax in Conwy has increased by 256 per cent since 2000.

Carolyn Thomas, a Labour backbencher who represents North Wales, warned the pie is too small even if the funding formula is reviewed.

The motion was agreed 28-15, with Plaid Cymru abstaining and Tory amendments falling.