THE recession has hit a new super-council before it has started life because its investments are not earning as much interest as rates plummet because of the credit crunch.

Durham County Council will become a unitary council in April, providing services currently delivered by the existing county council and seven districts The Labour-run council’s cabinet meets on Thursday (January 29) to draw-up recommendations on spending levels for the new unitary authority.

The recommendations will be considered by the existing county council next month when both the annual budget and Council Tax precept will be agreed.

The cabinet will get a report from Corporate Director of Resources Stuart Crowe that outlines proposals for a "priority-driven’’ budget which will bring together the spending of the county council and the seven district councils.

At service provision level, it includes efficiency savings of more than £10.5m and proposes additional investment of almost £8m.

And it also includes significant levels of extra investment and efficiency savings made possible by the move to unitary status.

Council Leader Simon Henig said the "hugely complex" task of building the budget had not been made any easier by the global credit crunch.

" The county council has not escaped the impact of the current economic downturn," he added.

" Every year, our spending power is bolstered by interest earned from the short term investment of funds which would otherwise lie dormant in bank accounts until they were needed.

" While, through careful money management, we have escaped the levels of loss experienced by some councils through short term investments, we are not forecasting to make as much return as we have in previous years.

" In fact, we are having to find an extra £10.5m to compensate for the forecast loss of interest from short term investments simply to balance our budget, minimise the impact on front line services and to continue to do what we promised to do."

Cabinet members will consider additional investment in services of £7.9m including an extra £400,000 for a demand-responsive bus strategy, an extra £100,000 for subsidised bus services and an extra £1m on services for the growing number of older people in the county.