LEADERS in County Durham will be given an update on the local authority’s financial position ahead of the government’s Autumn Budget Statement.
Next week, Durham County Council’s Cabinet will be presented with a report on the authority’s forecasted financial position and Medium-Term Financial Plan (MTFP) for the period 2026/27 to 2029/30. Cabinet will hear that the council continues to operate in a period of significant financial uncertainty and has done for many years, more recently due to higher levels of inflation and increased interest rates.
It has also been under strain from escalating and sustained increases in demand for statutory services, particularly in children’s social care, home to school transport, and Special Educational Needs and Disability (SEND).
The council is currently awaiting announcements of the government’s Autumn Budget which will take place on 26 November, later than previous years, and of the Local Government Finance Settlement that will follow in December. Councillors will hear that this has made financial planning for the authority difficult as it will not be able to factor in announcements, such as the outcome of the Fair Funding Reforms (FFR), until January. Expected in the FFR is the announcement of a multi-year settlement, rather than the standard one-year settlements awarded to councils.
If the government does confirm it will provide a three-year settlement, this will allow the council to have a much clearer view of its funding position. However, the report also outlines that without a significant increase in national funding, the council will face a huge challenge in balancing its budget as cost pressures would significantly outstrip any funding it would receive.
Cabinet will also be given an update on changes to the council’s financial position since the previous forecasts were considered in September. Having factored in new cost assumptions and £10 million of new additional savings Cabinet has identified, the council currently faces a budget deficit of £72.8 million, with £19 million of this falling into 2026/27.
The previous report highlighted Cabinet’s aspirations that council tax increases be kept to zero per cent across all four years up to 2029/30, which is reiterated in November’s report. The report also outlines how that budget deficit could be reduced if various levels of council tax increases were applied, with Cabinet to decide on this after receipt of the confirmed government grant funding position.
As part of the new assumptions, Cabinet will be asked to agree to recommending changes to the council’s Local Council Tax Reduction Scheme (LCTRS) for working age claimants, when Full Council meets in December. This will see the introduction of an income-band model for assessing and administering the LCTRS. It will also implement a cap of 90 per cent for the maximum amount of support a working age household will be eligible for from next year, alongside other changes designed to simplify the scheme.
This proposal follows a public consultation, where more than half of responses were in favour of introducing these proposals. The changes to the LCTRS are expected to generate an additional £2.1 million in income in 2026/27.
Other updated assumptions which will be highlighted to Cabinet will be forecast increases to the cost of looked after children placements and home to school transport. This will be offset in part by a reduction in costs relating to the triennial review of the pension scheme and in waste management.
The report also sets out £10 million of new savings proposals across the four-year MTFP period, which include:
- Savings from back office and operation efficiencies – £5.6 million.
- Income generation (parking, bus fares, garden waste) and removing grants to town and parish councils – £2.2 million.
- Savings to front line services – £2.1 million.
It also highlights that, following a review of the council’s Capital Programme during June and July, the authority’s need to borrow has been reduced by £21.3 million.
Cllr Darren Grimes, deputy leader of Durham County Council, said: “For many years now it has been a significant challenge to balance the council’s budget. This is a result of year-on-year cuts to government funding and, more recently, increases in costs from inflation and the number and complexity of vulnerable children we need to bring into care.
“The unavoidable cost pressures we face are driven by nationally determined factors and from nationally set legislative requirements, over which we have no control. This has meant, for over a decade now, that we have been locked in a cycle of having to maximise council tax raising powers and make cuts and savings, in order to set a balanced budget.
“This report builds on the work we have already been doing to make efficient savings and preserve vital council services, while trying to avoid putting additional cost onto the taxpayer. However, financial planning for the 2026/27 term and beyond will remain extremely challenging, as long as the system remains as it is.
“Once we have confirmation from the government’s Autumn Statement and the outcome of its Fair Funding Review, we will be able to plan ahead with much more certainty at least. Our concern is that the changes and support we so desperately need will not be forthcoming and the government will once again pass the burden onto the raising of council tax.
“We have made a strong case for additional funding, so we hope that the government does indeed deliver on this promise to fix the foundations because, as things stand, we are facing an uncertain financial outlook for the council, which is necessitating very difficult decisions on service cuts versus council tax increases.”
Cabinet will hear more about the council’s financial position when it meets on Wednesday 19 October.
