A council has criticised the government's “late” decision to award cash-strapped local authorities extra funding to help balance its budgets and condemned a “broken” financial system. 

Durham County Council is set to benefit from £30.3m additional funding following the announcement of the government’s financial settlement in January. That is more than what was initially proposed in December, but councillors said they cannot guarantee similar sums would be received in the future. 

The investment has improved the council’s financial forecasts for the next year, but multi-million pound savings are still needed and leaders warned that “some very difficult decisions” will have to be made. 

Council Leader, Amanda Hopgood, said: “Whilst I welcome the receipt of the additional funding announced on January 24, it is frustrating that the government left this so late.

"Why couldn’t this additional funding be announced earlier? It simply isn’t conducive to good financial planning to have such late announcements and to only have a one year settlement. 

“Our overall position has improved since the previous forecast was considered in January - but we are still faced with using £3.72m of our reserves to balance our budget next year, even after we increase council tax.”

While the additional funding has reduced the council’s reliance on using its reserves, it warned that simply raising council tax is not enough, “meaning we are constantly having to find savings just to stand still,” Cllr Hopgood added. 

Not raising council tax, by 4.99 per cent, would have meant cuts to vital services and would be “reckless and simply irresponsible”, said Richard Bell, Conservative councillor and cabinet member for finance.

Local authorities have repeatedly warned that more than a decade of funding pressures exacerbated by rising demand and inflation are putting vital services under severe strain. They say the crisis in local government is driven by long-term funding constraints and a “broken” financial system, putting services including social care and support for children with special educational needs on the brink. 

Councils’ core spending power, which is a combination of Government grants and the maximum that can be raised through council tax and business rates, has not kept pace with growing pressures. And reductions in the funding provided directly by the Government has led to councils relying increasingly on revenue generated locally.

Politicians believe the level of new funding will only prevent a financial crisis in the short term and have called for a long-term settlement alongside reform of the finance system. 

Speaking at council cabinet meeting, Cllr Hopgood continued: “To balance the budget in 2025/26 we are faced with having to save £16.8m of savings, which will require some very difficult decisions to be made. Many councils are already on the brink, and many of these are not down to bad decision-making or governance, as the government will have you believe. 

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“The system is broken and in need of urgent reform if council’s, like ourselves, are to thrive going forward. The problem is that no one appears to be committed to increasing the funding available to council’s at this stage; our only hope is that the government changes the distribution mechanism.”

The local government finance settlement for next year included a £64 billion funding package. The Department of Levelling Up, Housing and Communities said this was a real terms increase of 6.5 per cent for councils on average. The funding would “ensure (councils) can continue making a difference alongside our combined efforts to level up,” the department said.

However, the total spending power available to councils includes council tax increases, meaning residents pay more for everyday services.