Durham County Council has warned it could be forced to file for bankruptcy if financial challenges are not dealt with. 

Amid an escalating crisis for local government after years of inflation and budget cuts, the local authority is cautious about its finances and has stressed the need for stability. 

Although it is not currently in danger of issuing a Section 114 notice - signalling that it does not have the resources to balance its budget - it says the position ‘could change rapidly’ if it does not address the challenges. 

Politicians have called for additional government funding to ease the pressures. 

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A report due to be considered by cabinet members on Tuesday reads: “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. 

“These challenges are largely exacerbated by continuing inflationary and demand pressures and significant uncertainty in terms of future financial settlements for local government and how available funding will be shared between local authorities.”

Despite the concerns, the council is currently managing thanks to its “financial resilience, strong track record of prudent financial management, and sufficiently robust budget”. 

Yet the ongoing uncertainty is continuing to make financial planning extremely challenging and requires the council to adapt, councillors will hear. 

The report adds: “Without significant additional government funding the council will be placed in a very challenging situation and will be required to make very difficult decisions to address these pressures in setting balanced budgets in 2024/25 and in future years.”

An estimated £67.602 million in savings are needed over the next four years – around £11 million more than was previously forecast by the council. Savings of around £16.308 million are currently required for 2024/25 to balance the budget.

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The latest proposed savings include raising the price of bulky waste collections and introducing parking charges. 

Cllr Richard Bell, Durham County Council’s 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”