Consultation on our budget proposals for 2024/5 and Medium Term Financial Plan 2025-2028

We are in the process of preparing our budget estimates and proposals for 1 April 2024 to 31 March 2025 and have updated our medium-term financial forecasts for the three years after that too. Outlined below are the challenges we face in setting a balanced budget next year and beyond and the difficult decisions needed as a result.

The economic and local context

We continue to operate in a period of significant uncertainty and volatility, the likes of which we have not seen for over 30 years.  For next year, and across the next four years, setting the budget will be more difficult than before, due to a range of external factors that are outside our control, including significant increases in inflation and increases in demand for our services especially in children's and adult's social care.

These factors are being further compounded by interest rate rises, expected pay settlements, and continued uncertainty about future government funding. It is very difficult to plan ahead with any certainty at this time and the unprecedented challenge in balancing the budget in the coming years could worsen if any further cost pressures arise, or if the government's funding for councils is reduced.  

As an area, County Durham has lower average earning levels and higher levels of poverty and deprivation compared to other more affluent areas. This puts increased demand on our services and reduces the ability for the public to pay for services such as adult social care. It also means that we have more properties in the lower and lowest council tax bands, making us a low tax base authority. As such, we cannot raise sufficient income from council tax charges to fund the spending pressures we face i.e. every 1% increase in council tax in Durham generates significantly less funding than an authority in a more affluent area. Yet we face significantly more demand for our services.

How these factors are affecting our costs

Across our services, some of the biggest impacts are as follows:

• Over 60% of our expenditure goes into adult and children's services with 47% being spent on caring for the most vulnerable. Alongside an increasing demand for these services, wage increases in the care industry, and other inflationary costs, have led to an increase in the cost of this care.
• There continues to be an increase in demand for children in care services with more children needing support or being taken into care e.g. fostering, as well as some children having more complex needs. These are some of the largest budgets we have, which are spent on a small part of the population.
• Forecast increases in the National Living Wage are expected to add significant costs, particularly in Adult Social Care commissioned services, as well as driving higher pay awards for our staff, which are subject to national pay bargaining and again outside our control.
• High and rising inflation levels and increases in interest rates are adding to projected costs of our regeneration programmes and projects and making it more expensive for us to borrow to invest in these programmes.

The diagram below shows the expenditure on our services during the current financial year:

Impact on our budget forecasts

These rising costs are continuing to have a substantial impact on our budget.

For many years, Government grant funding has not increased in line with the inflation that we and the wider sector has been facing, which amounts to a real terms cut in funding.

Although we are forecast to receive a £26 million increase in Government funding this coming year, some of this is specific grant funding that is targeted for specific purposes and in overall terms the funding we will receive will not cover the scope of the budget pressures we are faced with. We forecast we will still face a funding shortfall of £12.1million in 2024/25 and a shortfall of £56 million over the next four years.

Since 2010, we have had to achieve savings of £262 million from our budget because of a combination of reductions in central government funding during the Government's austerity programme (2010 to 2018) and unavoidable and unfunded cost pressures.

To meet these savings requirements, we have had to transform the way we do things, becoming much more efficient in what we do and how we do it, and protecting frontline services as much as possible as a priority. We have largely been able to do this by increasing or introducing new charges, reducing staff levels, changing the way we do things and making significant savings to management and back-office functions wherever we can. We employ around 3,000 fewer people today than we did in 2010 - a 30% reduction in our overall workforce over that period and significantly higher in our back office areas.

It is becoming increasingly hard to make savings in this way and going forward it will be extremely difficult to avoid impacts on front line service delivery.

We will need to make some difficult decisions for next year's budget and beyond, and we're seeking your views on our proposed approach as we continue to look at ways we can meet the savings required.

We have previously agreed  £2.2 million of savings for 2024/25. There are 27 savings plans already agreed, covering all service areas, which include more effective procurement of services in Adult and Health Services, reduction in car mileage costs in Children and Young People's Services, a review of car park charges and a range of employee restructures.

In addition, as part of the current Medium Term Financial Plan, we are seeking your views on some further proposed savings and efficiencies to achieve a further £3.7 million for 2024/25 and your views on increasing council tax next year.

We also need your views on prioritising areas where we can make further savings, totalling £6.2 million, to cover the remaining shortfall for next year (to meet the overall £12.1 million total for 2024/25), and longer term, to achieve the remaining £43.5 million in savings needed over the next four years.

You can read the full report at Cabinet agenda and minutes - 12 July 2023.

We've looked at all our services to identify ways in which we can make further savings which will hopefully not affect front line service delivery, including changes to the structure of services and staffing reviews.

This includes a proposal to review the Music Service for schools, looking at how this service is delivered, considering its overheads, outgoings, its pricing policy and accommodation, to see where savings can be made.

We also propose to start a number of service reviews including for Corporate Affairs, Finance and Commercial Services, Digital Services and Customer Services. Within these reviews, we will consider several things such as the structure of these services and how best to use the resources they have available to achieve better value for money. We can and do consider the use of technology and how innovation can also bring about efficiencies to how these services operate.

Additionally, we aim to save money by deleting current vacant staff posts in the areas of development management and spatial policy which sit within our planning services team.

The opportunities available to save money from back-office efficiencies going forward are getting much more difficult to achieve.

We have looked at ways in which we might raise additional income and reduce the amount of contributions we make to others. The proposals in this area can be summarised as follows:

• reduce contributions by bringing charges for the in house extra care community alarm scheme in line with private sector schemes
• increase community protection fees and charges which will be passed onto local businesses and traders, as well as bringing in new charges where possible
• increase fees and charges across children and young people's services particularly reviewing and expanding services charged to schools
• increase traffic management income, for example, from additional enforcement activities.
• increase income from roads, for example, from extra licensing income from companies carrying out roadworks
• increase fees and charges within environmental services, relating to refuse and recycling, Fixed Penalty Notices (fines) and Durham Crematoria

Separately we have consulted with Town and Parish Councils in relation to the option to reduce the grant support provided to some local councils by 50% over a two-year period. We are one of a few councils across the country, and the only one in the northeast, that still pays a grant to Town and Parish Councils.

We are also consulting separately on proposals to implement changes to our long term empty property policy and to introduce a premium on second homes in line with new powers we expect to receive once the Levelling Up and Regeneration Bill passes through parliament in the Autumn. More details on these proposals can be found on our Consultation on increasing the council tax on empty properties and second homes page.

We will continue to explore ways to deliver services in different, and more effective and efficient ways, to help better meet the needs of our residents. Where appropriate, we will involve you in further conversations to get your feedback in more detail. Proposals outlined so far, which would be subject to further conversations, engagement or consultation with service users and/or the public are:

• moving Durham County News to a mainly online format, with four online editions and one printed version per year
• a review of Early Years Services across the children and young people's service with new ways of working and delivering services having the potential so see a reduction in service costs
• a review of Early Help to remove vacant staff posts as a result of more collaborative ways of working with partners and the benefits of linking this service to the new Family Hubs model
• a review of how we provide safeguarding services including the introduction of a new Family Help service, in line with the Government's national reform programme, leading to a reduction in service costs

A review and consultation around home to school transport was carried out earlier this year. A report, considered by our Cabinet meeting on 14 June 2023, agreed with all of the proposals except the fare increase for the concessionary bus scheme - this was reduced to £2 instead of the proposed £2.80.

As in previous years, to try and reduce the impact of cuts to services and the possible impact on many of our most vulnerable residents, an increase in council tax is also proposed.

Our savings figures have been calculated after an assumed increase in council tax to its maximum allowed amount of 4.99% next year. 2% of this figure is for adult social care services. The proposed increase is in line with the Government's expectations and represents the maximum increase permissible without a referendum. For each 1% reduction in this figure, the funding gap we've outlined will increase by a further £2.567 million.

It is estimated that a 4.99% council tax increase will generate £13.3 million of additional income. If we set this figure lower, we would need to find more savings elsewhere than we've currently forecast.

A 4.99% increase in our council tax equates to a £92 increase on a Band D property which is around £1.76 per week. However, in County Durham, 83% of all properties are in Bands A to C, which means that the majority of people will be charged less than this. For example, those living in a Band A property would be charged £61 more next year - or £1.18 per week.

The average council tax charged per household in County Durham is £1,385. This is £193 (12.2%) below the national average. Of the 295 local councils in England, we rank 229th in terms of the highest council tax which puts us in the bottom 25%.

Financial support for households

We offer Support to help you pay your Council Tax to our most vulnerable households who may be struggling to pay and are proposing to extend our local Council Tax Reduction in its existing form for another year. This scheme provides council tax discounts of up to 100% to eligible households. We are one of the few authorities in the country to provide this level of support, with our scheme mirroring the entitlement afforded to people in 2013, before the National Council Tax Benefits system was abolished and decisions on the level of support provided to financial vulnerable working age claimants was passed to local authorities.

81.4% of all eligible (financially vulnerable) working age households (around 33,400) in County Durham currently receive 100% support and have no bill to pay.

You can also find out about a range of other financial help available to residents.

Our biggest budgets relate to social care services for adults and children, waste disposal,home to school transport and capital financing costs linked to the council's external borrowing. In total 47 per cent of our budget is spent on social care, providing support to just 2.5 per cent of the population. In the vast majority of circumstances, we are limited to how much we can reduce spend on these budget areas and in recent years, particularly in children's social care there have been significant cost and demand pressures that we have had to face.

We will continue to seek efficiencies within adult and children services, but savings of this nature will not meet the amount needed.

Furthermore, our options for savings in areas, such as social care, are generally limited due to the statutory nature of some services. In other areas we are limited in the savings we can make because we have fixed costs that we need to pay such as in waste disposal. It is therefore becoming more difficult to find other areas where savings can be found.

In previous years we have used reserves to help us reduce our budget shortfalls. For example, in 2023/24 we have used £10 million of reserves to bridge the funding gap. However, this is not a sustainable position, and we cannot continue to do this going forward. Reserves are held for a number of reasons including:

• To help cushion the impact of any uneven cash flows, for example, delays in expected income or funding.
• To avoid unnecessary temporary borrowing, especially important given rising interest rates.
• As a contingency to cushion the impact of any unexpected events or emergencies, for example flooding, and other exceptional weather.
• As a means of building up funds for known or predicted future liabilities. These are known as earmarked reserves.

So, any use of reserves to bridge the budget gap impacts on our financial stability and programmes and projects funded from earmarked reserve.

By the end of this financial year, our reserves will have reduced by £73 million since 1 April 2022 and our General Reserve (to cushion unforeseen events) will be only 5% of our Net Expenditure.

We have compiled a list of front-line services where we could make further savings to help close the current budget deficit, which would only increase if the assumed council tax increases are not implemented. We want to gather your views on these areas to understand where you would prioritise savings. It is important to remember that savings in these areas will still be difficult to achieve and could have a significant impact.

• Community safety and protection - environmental health, trading standards, taxis and events, neighbourhood wardens, emergency planning, road safety and school crossing patrol services
• Council tax, benefits and other processing - processing of Housing Benefit, Council Tax Benefit and other Council Tax and Business Rates account changes 
• Culture - council owned museums and theatres, libraries and support to cultural events
• Customer access and customer services - customer access points, call handling and contact arrangements to report issues / access services
• Economic development - support for businesses, projects and support services to improve the county's economy, creating jobs and wealth
• Environment and climate change - reduction of carbon emissions for the council, residents, and business, to tackle pollution and nature conservation
• Housing services - homelessness, home adaptations for vulnerable people and housing advice​
• Leisure and wellbeing - leisure centres, parks, play areas, playing pitches and allotments and associated activity programmes
• Local community projects - support for community development including Area Action Partnerships (AAPs) and the voluntary sector
• Local council tax support - provided to working age people. We could cap or cut the current level of support in future years
• Planning services - provision of planning and building control services
• Preventative services - community-based early intervention support for vulnerable people with their mental and physical wellbeing to maintain their quality of life and independent living, thus helping to reduce future statutory social care spending
• Roads and transport - road and footpath maintenance, pothole repairs, gully cleaning, street lighting, winter maintenance, parking services, subsidised transport e.g. bus routes and bus passes
• Street cleaning and grounds maintenance - including parks, cemeteries and open spaces, litter picking, fly tipping, dog fouling, grass cutting, flower beds and trees 
• Waste collection, disposal and recycling - household and business bin collections and recycling centres
• Welfare assistance and advice - advice and financial support provided to vulnerable people to help address poverty especially during the cost of living crisis