North East councils owe over £4bn – Durham least indebted in region

By Hugh Ludford

Councils in the North East now owe over £4.3 billion in debt, an increase of almost £200m in the past financial year. Durham County Council’s (DCC) own debt has risen by £23.1m in the same period, but is still the lowest in the region.

Of the seven councils in this region, County Durham has the lowest debt in both absolute and per capita terms, totalling £434.8m. However, while some councils (Gateshead, Newcastle and Sunderland) have lowered both measures of debt in the last year, DCC borrowing means County Durham has seen the fourth largest increase in money owed.

Currently, to cancel this debt would cost each resident of County Durham £816.96 in a one-off payment (an increase of £43.48 on last year). This is less than a sixth of the per capita debt for South Tyneside, the most indebted North East council, which owes £4,947.46 per resident (a rise of £401.96).

Durham County Council owes £816.96 per resident…
…South Tyneside Council owes over 6 times this, at £4,947.46 per resident

The DCC was governed by a coalition of Liberal Democrats, Conservatives and Independents in this period. The current Reform UK majority on the council was elected in May this year.

Its worth noting that debt is not necessarily a bad thing for councils. The Local Government Information Unit’s Dr Jonathan Carr-West has said that payback of debt and overall council revenue are more important than the debt itself.

He says that borrowing has “largely worked” for councils in a period of real-term cuts over the past 15 years, allowing for investment that can pay dividends while supporting local communities.

Looking nationally, though, “there are a few councils – and we know the famous examples like Thurrock, Woking [enter Nottingham and Croydon] – that have ended up with unsustainable amounts of debt.” He believes that the public loss of council owned-assets sacrificed to a still-growing deficit represents an unsustainable funding situation.

These assets are sold under “capitalisation directions” – powers granted by the government to councils which also allow them to take out short-term loans, which further add to the debt.

These statements from Dr Carr-West come after the Public Accounts Committee warned last year of “unsustainable” debt levels – which grew nationally by 7% (£7.8bn) in the last year.

“We are now seeing the selling off of assets and once they’re gone, they’re gone. So what was public value is now passing into private hands and that won’t come back” – Dr Jonathan Carr-West

The national picture painted by the BBC’s report warns of public assets and facilities being sold off to finance these national debts. The Labour government has said that funding for councils is “broken” and that it is reforming the system of allocation. In June, Sir Keir Starmer announced an overhaul of centralised council grants in favour of a simpler funding model.

Relative to this national study, per capita debt in the North East is relatively, but not necessarily uncontrollably, high. The £4.3bn owed by North East councils is a small fraction of the £122.2bn owed by councils nationally. However, the per capita debt in the North East (over £2,500) is higher than the national average of £1,791 per resident.

In this context, County Durham’s per capita debt of £816.96 is comfortably the region’s lowest, and less than half the national average.

Reform’s win on the DCC this year followed a campaign in which this debt was central: “DURHAM COUNTY COUNCIL IS £409 MILLION IN DEBT”, declared party campaign materials.

Now in power, Reform have pledged to conduct an audit in the style of Musk’s DOGE for the DCC. Cutting “fraud, corruption and waste” has been a core tenet repeatedly espoused by the new DCC, which in the past month has promised that Pride “won’t be getting a single penny from this council next year”.

More recently, however, council leader Andrew Husband has said that without additional taxpayer funding from the government, the Reform council will be faced with “some pretty stark choices between council tax increases and cuts to vital local services – services our residents rely on.”

Image credit: Josh Eaton