Durham County Council faces a period of “significant financial uncertainty” alongside £400 million debt

By

Durham County Council has acquired £423 million in debt as of September 2023, according to data from the Department for Levelling Up, Housing and Communities.

UK councils owe £97.8 billion in total, which, as reported by the BBC, amounts to £1,455 per person. Only 38 councils had no debt at all.

However, debt acquired by Durham County Council amounts to £812 per person in County Durham, which is just over half of the national average for local authorities.

In January 2024, a report reviewing Durham County Council’s Medium Term Financial Plan (MTFP) said that “the council is continuing to operate in a period of significant financial uncertainty and volatility.”

The report, which was undertaken by the Corporate Management Team, explained that the Council would need to save £58.4m across the next four years. Out of the £58.4m required to be saved, £14.4m of the total savings requirement will fall in 2024/25.

This comes at a point where local authorities across the UK are facing financial uncertainty: five UK local councils have issued Section 114 orders since 2022. A Section 114 notice is, in essence, a declaration of bankruptcy for a local authority, and is issued when a council expects that their expenditure would be unlawful in light of the Local Government Finance Act 1988. Whilst Section 114 orders were implemented in 1988, nine of its sixteen uses occurred after 2020. 

Councillor Richard Bell, deputy leader for Durham County Council and Cabinet member for finance, said in a statement by the County Council that: “Unfortunately the provisional local government settlement for 2024/25 does not provide the additional resources we need to meet the unavoidable cost pressures we are facing and we are expecting 2025/26 to be even more challenging.

“One major concern was that the government’s Policy Statement in December encouraged local authorities to utilise reserves to balance their budgets next year. Given the financial pressures facing councils, using reserves to continually balance annual budgets is not a sustainable and prudent approach.

“However, in County Durham we remain committed to strong financial governance and getting value for public money, while ensuring we have a sustainable balanced budget to support our services to residents. We are in the process of finalising savings proposals following consultation with residents to help us meet budget shortfalls for 2024/25 and the next four years.”

“We remain committed to strong financial governance and getting value for public money”

CLLR Richard Bell

The January report featured a survey by Durham County Council asking residents to select “service areas to target for additional savings”, wherein 50.6% of responses chose “Culture” as a source for savings. 29% suggested “Environment and climate change” and “Council tax, benefits and other processing”, whilst 28% chose “Local council tax support”.

58% also disagreed with the proposed council tax increase of 4.99% due to “the cost-of-living pressures and the perceived unaffordability of the council tax increase”, as summarised in the report.

If council tax increases in line with the government expectations of 4.99% in 2024/25 and 2.99% each year after, this initial rise will result in an increase of £1.15 to £1.54 per week for eligible residents in County Durham.

This survey, part of two phases of consultation, will be taken on board when the finalised saving proposals will be presented to the Cabinet and full council in February 2024. These phases of consultation will then be carried out in 2024/25 and for the following three years.

In a statement from Durham County Council, it is reported that, if all the proposed savings in the MTFP are approved, and assuming that council taxes increases as expected, then “the council is facing a £42.183m shortfall over the four-year period, with £6.447m of this falling into 2024/25 and the council having to use its reserves again to meet that budget shortfall.”

Image:

Leave a Reply

Your email address will not be published. Required fields are marked *

 

This site uses Akismet to reduce spam. Learn how your comment data is processed.