Council is gearing up to fund its battle for survival

Durham City Council has granted its leader and chief executive powers to launch the challenge - if the Government decrees that it, along with County Durham's other six district councils, should be replaced by one unitary authority.

However, Peter Mitchell, a Labour councillor on the Liberal Democrat-controlled authority, warned: "The cabinet has just signed a blank cheque with taxpayers' money."

The Government is consulting on unitary bids filed by the county councils of Durham and North Yorkshire.

The Northern Echo understands decisions on both bids could come as soon as Tuesday.

Durham City Council chief executive Brian Spears told his cabinet he expects the Durham unitary bid to be accepted.

Council leader Fraser Reynolds said a referendum held by Durham's district councils, in which 76 per cent of respondents voted against a unitary council, provides a "clear mandate" to fight the decision.

Harrogate, Congleton and Shrewsbury and Atcham councils are already challenging the shake-up, insisting the Government does not have the power to make the changes.

They have been granted a judicial review.

If its bid fails, Durham City Council may claim the Government made its mind up on the changes before its consultation, making the process invalid.

The council wants other Durham districts to help fund the challenge but none has yet agreed to do so and the city says it will go it alone if it needs to.

Councillor Mitchell said the city council's cabinet had exposed the authority to substantial financial risk.

"We feel the full council should have been allowed to debate this, not the cabinet in a paper circulated at the last minute. Most councillors will not even know this decision has been taken."

However, deputy leader Coun Carol Woods said: "This was a cabinet decision to take. We have got to fight this all the way.

"It's important that we respond to the needs and wants of people in this city and take action if we need to."