Warning as County Durham council funding issues worsen

Increasing costs and greater demand for social care means the local authority’s financial position has worsened and now faces a £69.7 million deficit over the next four years, including £25.6 million in 2025. 

Council officials say the £3.8 million increase since its last forecast has been caused by changes to wages and national insurance,  which will have a direct inflationary impact on the rates of fees charged by adult social care providers and suppliers.  

While the government has pledged further funding for social care, the council said it will only cover 25 per cent of the additional costs.

A proposed 4.99 council tax increase across County Durham could soon be announced to help raise additional funds and maintain key council services. The council said doing this would reduce the reliance on using the council’s reserves to balance the budget.

Council Leader Amanda Hopgood told councillors on Wednesday: “We cannot succumb to the temptation to just use reserves to push away the problem and avoid the difficult decisions that are needed. That is the path to financial ruin and would only lead us into Section 114 territory, something we cannot and simply won’t do. 

“But we can and will use reserves where it is prudent to do so and help smooth in more sustainable budget solutions.”

Initial savings proposals suggest 214 jobs could be cut, yet around a third are currently classified as vacant. The council said: “Where staff are classified as being at risk, every possible attempt will be made to minimise the need for compulsory redundancies through the deletion of vacancies and the use of the council’s early retirement and voluntary redundancy scheme.”

In total, the proposals are projected to save £15.8 million over the next four years, including £14.7 million in 2025/26.

Last week, it was revealed the “outdated and inefficient” system of funding councils will be replaced by a fairer process focused on the needs of communities. 

The announcement coincides with the publication of the provisional local government financial settlement for 2026-26, which includes a £600 million recovery grant for councils in deprived areas and an increase in social care funding of £680 million.

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A consultation on funding reform will be launched next month with a focus on what the Government said will be a move away from “an outdated and inefficient approach, which has seen some councils increasing their level of reserves and others struggling to deliver services and balance budgets and shifting to a fairer system which matches funding with need”.

County Durham leaders welcomed the news but said they will continue to lobby the government directly for additional financial support and “hold them to their commitments to undertake a fundamental review of the local government finance system, including how authorities are compensated for low council tax raising capacity as the current system disadvantages places like Durham and is unfair.” 

Cllr Hopgood added: “The sooner this is addressed the better, starting with 2025/26. While this area would benefit from this we should not get carried away as it would result in other areas missing out.”