Concerns have been raised over Darlington Borough Council's finances as it emerged how much it would need to dip into its savings.

Councillors were told the authority was projected to spend most of its revenue reserves in the next few years.

It has been suggested it could go into the red with more money needed to pay council workers.

The council is attributing much of the financial difficulty to a £1,925 pay offer for council employees, an average increase of 6.5%.

Financial plans made previously had factored in a pay award of just 3%, leaving an extra £2.079m to find.

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And children's services are facing a £1.5m overspend with more children needing complex residential placements.

A council report says it has committed to use almost £22.7m of reserves in the next few years, leaving just £172,000 of unallocated reserves.

Councillor Scott Durham, cabinet member for resources, told a cabinet meeting: "At this time balances have reduced by £1.4m. While there have been some small positive and negative changes, the decline is mainly due to the pay award negotiated between the national employers and the unions.

"This award being over double that budgeted at over £2m. It is the equivalent of a 4% council tax increase."

The Northern Echo: Cllr Scott Durham. Picture: Darlington Borough Council.Cllr Scott Durham. Picture: Darlington Borough Council.

Presenting a report on the revenue budget, he added "This report is obviously looking at the short term and there still remains uncertainty over Government funding.

"In due course we will be producing a draft budget and medium term financial plan which looks at the longer term impact of current pressures."

Cllr Cyndi Hughes said: "The salary increase is clearly welcome news for staff, who have seen a real-terms decline in their salaries since 2010.

"It obviously creates a dire problem for our budget. £2m unfunded additional expenditure is a big pressure."

The Northern Echo: Cllr Cyndi HughesCllr Cyndi Hughes

She asked: "Has the recurring cost of the £2m salary pressure been factored into the subsequent year or for just this year? If it needs factoring in for the remaining years, is that another £6m from reserves, and doesn't that mean negative reserves?

"And if it does, isn't that a big problem?"

Cllr Durham replied: "Obviously this report is in the here and now, and the current year financial impact of the pay award has been factored in."

He said it did not take future years into account: "But at the same time, we don't know what our income is going to be in future years so we don't know what movement in reserves is going to be.

"Obviously there's the Autumn Statement where we will get greater clarity."

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The council's economy and resources scrutiny committee also discussed the matter.

At that meeting, assistant resources director Brett Nielsen said: "The biggest area that contributes to the movement in the overall position is within our council-wide budget, and this has arisen as a result of the pay award.

"There's a £2m increase in pay this year. That could roll on into next year."

He also outlined the plans to use £22.4m of the £22.66m reserves in the next few years: "That'll leave £172,000 in unallocated reserves."

Cllr Heather Scott said: "The impact on the budget is the pay award setting, but we knew it was probably going to be more than what was in the budget.

The Northern Echo: Cllr Heather Scott. Picture: Sarah Caldecott.Cllr Heather Scott. Picture: Sarah Caldecott.

"We will obviously be lobbying Government. Things at the moment are OK but going forward we're going to have problems, as all other local authorities will.

"I certainly will do my best as far as I can to highlight the problems that we've got."

Cllr Linda Hughes said: "It's extremely worrying that our income is dropping.

"We're all getting a bit worried. I think we're doing really well, punching above our weight but it is concerning in the future.

The Northern Echo: Cllr Linda HughesCllr Linda Hughes

"It is something that we do need to be on Government at every opportunity."

Cllr Stephen Harker also asked about factoring the pay award into future years' budgets, suggesting it could put the balance into negative.

Mr Neilsen said: "At this point in time it may not be £2m overall because there will be some budget moves in other areas. We are pulling those figures together to calculated what the overall position is.

"We'll have to fund the pay award next year.

"In theory it's negative but what we need to do is work through the rest of the budgets to see what the position is overall."

"It's a bit difficult to look at it in isolation and say we've just got that £2m because there will be ups and downs."

But he said everything else being equal, "that £2m will obviously wipe out" the rest of the reserves.

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