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A merger of social services departments in Caerphilly and Blaenau Gwent looks unlikely to go ahead after one of the councils voted against the move.

Caerphilly council said pooling budgets posed a "significant risk" as it could be considered to be subsidising its neighbour's services.

The Welsh government has previously encouraged authorities to work collaboratively to improve services.

Blaenau Gwent council's cabinet will consider its position on Wednesday.

A group of council officials have been looking since 2011 at the feasibility of merging the departments to try to improve services and save money.

The report presented to cabinet members showed that in 2011/12, Blaenau Gwent reported an overspend on social services by £1,137,751 which is 3.22% of the total budget.

In contrast, Caerphilly reported an overspend of £164,847 last year - 0.23% of the total - but in 2010/11 had a surplus of £994,287.

Business case

Keith Reynolds, Caerphilly cabinet member for corporate services, described the decision to reject a merger as "the only sensible way forward".

He added: "It was always going to be predicated on the business case for merging.

"In local government there are too many uncertainties ahead of us, including a comprehensive spending review by the UK government and the effect that could have on the Welsh assembly.

"Collaborative management should only take place where there is a robust business case."

Referring to the council report, Caerphilly's head of corporate finance Nicole Scammell said: "One issue with the pooling of budgets is whether one authority could be seen to be subsiding another.

"Blaenau Gwent's social services budget situation is worsening. The two authorities financial situations have moved apart in the last two or three years. A fully integrated merger would be a significant risk."

A Welsh government spokesperson said: "Whilst we believe in good quality and effective local democratic representation, not all services should be replicated 22 times.

"This would not make good financial or organisational sense in the current economic conditions."

The spokesperson said it has supported collaboration with a "generous financial settlement" and has repeatedly urged councils to make the most of this and to use the time and money to invest for the future.

"While there has been some progress, more work needs to be done.

"We have recently announced £4.6m from the regional collaboration fund to help public services work together."