Durham County Council has warned that it faces a budget deficit of more than £67m over the next four years due to “significant financial uncertainty”.
According to a report, which is to be presented to Durham’s Cabinet on 11 October, the authority faces a budget gap of £16.3m next year and £67.6m over the next four years. This is around £11m more than Durham had previously forecast.
The report outlined that this overspend is due to the “ongoing and consequential impact” of high levels of inflation and service demand alongside other concerns.
“These concerns continue to impact significantly upon financial planning with increases in bank base rates, expected pay settlements for our employees and the impact of future national living wage increases all forecast to increase pressure upon future years budgets,” the report said.
The report also stated that these challenges are “largely exacerbated” by the “significant uncertainty” regarding future financial settlements for local government and how available funding will be shared between councils.
“Local authorities continue to be provided with one-year financial settlements, which provide little financial certainty and security,” it explained. The local government finance settlement is expected in early December.
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Section 114 danger?
Unlike some other councils, Durham has “sufficient financial resilience, a strong track record of prudent financial management and sufficiently robust budget and medium-term financial planning processes”, hence, at this stage, the council is not in danger of issuing a section 114 notice, according to the report.
“That said, the financial challenges in 2025/26 and beyond are immense based on our current forecasts and if the council does not address these challenges in a planned way, then the position could change rapidly,” the report added.
Local authorities desperately need early notification of how much, if any, additional government support will be provided in 2024/25 to offset the significant financial pressures faced by the sector, it continued.
Commenting on Durham’s financial situation, Richard Bell, deputy leader and cabinet member for finance, said: “We have called on the government to provide more much-needed financial support to our council and to the wider sector to help with these demands. We’ve also called for a fundamental review of the way councils are funded going forward, as the current system is just not sustainable.
“We also need longer-term settlements from government as the current pattern of annual announcements makes forward planning even more difficult.”
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