Rising levels of debt owed by North East councils now total more than £4.3 billion.
New data shows that the amount owed to lenders by the seven local authorities in Northumberland, Tyne and Wear, and County Durham jumped by almost £200 million in the 12 months to April 2025 and is equivalent to more than £2,500 per resident on average.
Analysis carried out by the BBC’s Shared Data Unit found that the combined debts of all councils in the UK is now £122.2 billion, an increase of £7.8 billion in a year.
Councils can borrow to put money into improvements to schools, leisure centres and other critical infrastructure, as well as investing in commercial ventures such as shopping centres or energy companies with the aim of generating income that can help make up the gap left by Government grant cuts over the last 15 years.
Experts say that debt is not inherently bad for councils and borrowing has “largely worked”, at a time when authorities are grappling with escalating demand and rising costs for social care and special educational needs and disabilities services.
‘Unsustainable’ borrowing
However, there have long been serious worries about a financial crisis that pushed 30 councils to need emergency financial support from the Government and some town halls racking up “unsustainable” levels of borrowing.
Councils like Nottingham, Woking and Croydon have had to issue section 114 notices, effectively a declaration of bankruptcy, linked to failed investments and spiralling debts over recent years.
Debt in the North East
Among the councils who make up the North East’s ‘LA7’, South Tyneside has by far the highest debt per person at £4,947.
That is the ninth highest in the country and is six times more than County Durham’s, which is the lowest in our region.
The largest debt level overall in the North East is held by Northumberland County Council, whose total increased by £93.7 million in the 2024/25 financial year to reach £834.5 million.
North Tyneside Council on debt
North Tyneside Council, while having the second lowest overall debt, reported the biggest increase in borrowing in the past year – with its debt level rising by almost 21%.
North Tyneside Council said its debt increase last year was partly due to borrowing £28.5 million to buy its office building at Quadrant East rather than continuing to lease it, which it said would save more than £11 million over the next 19 years.
Jon Ritchie, the authority’s director of resources, added: “Our debt levels for 24/25 are well below what borrowing rules allow and we only borrow when it’s the most cost-effective way of treasury management.
“Borrowed funds are used to invest in our capital programmes for improving North Tyneside and are not used to support the General Fund for day to day council services.
“To put our debt levels in context, we have over £1.5bn of assets on our balance sheet.
“In 2024 we had a bigger capital investment programme than normal, borrowing £28.5m as a one-off investment to buy Quadrant East.
Buying this building, instead of continuing to pay the existing lease, saves more than £11m over the next 19 years and is much better value for money for North Tyneside residents.”
Since winning the general election, Labour has promised major reforms to council funding to redistribute money to more deprived areas.
However, recent analysis from the Institute for Fiscal Studies (IFS) claimed that gains for the North East “may be lower than expected”, owing to slow population growth, and that both Sunderland and South Tyneside are actually “set to be big losers” in the review.
South Tyneside Council comment
Coun Jim Foreman, of South Tyneside Council, said it had “invested in the future of South Tyneside and that investment is paying dividends” but that it was now borrowing less money than previously due to higher interest rates.
He added: “Borrowing is used to fund major capital schemes like improvements to our infrastructure and facilities that many of our residents use day in day out, such as the Word and our fantastic leisure facilities in each town. In the latest accounts our fixed assets were valued at £1,353m. It is also worth noting that our independent external auditors have considered that our debt levels are not considered unusual for the council’s size and operations.”
Northumberland County Council comment
Coun Glen Sanderson, Leader of Northumberland County Council, said: “This is comparing apples and pears – councils in the North East are very different in terms of size – some cover tens of miles, we cover thousands, and I make no apologies for our ambition to build the best county for our residents and visitors.
“While many councils are in dire financial straits – this authority is in a very solid position. Borrowing is entirely under control. In fact our recent independent review by the Local Government Association highlighted our strong financial standing – a view echoed by our external auditor.
“We want the best for Northumberland – the best leisure centres, the best schools where Government will not fund new builds, road improvements where we do not get enough central Government funding and a new rail line which has seen well over 500,000 passenger journeys in its first few months.
“Furthermore our work with investors has paid off, especially with regards to us negotiating to secure one of the largest ever inward investments to Northumberland worth in the region of £10bn.
“Our finances are run on a very tight rein – but where we can invest for a better Northumberland we do, and we will continue to do so. We inherited a significant level of borrowing which is actually reducing despite our very ambitious delivery of major projects across the county.”
North East councils debt per person as of end of 2024/25:
- South Tyneside – £4,947.46 (£401.96 increase from 2023/24)
- Gateshead – £3,343.90 (£23.93 decrease)
- Northumberland – £2,551.63 (£286.49 increase)
- North Tyneside – £2,353.71 (£405.63 increase)
- Newcastle – £2,063.64 (£114.27 decrease)
- Sunderland – £1,907.14 (£84.39 decrease)
- County Durham – £816.96 (£43.48 increase)
North East councils total debt level at the end of 2024/25 financial year – £4.35bn (increase of £198.6m from 2023/24)
- Northumberland – £834.5m (£93.7m increase)
- South Tyneside – £738.5m (£60m increase)
- Gateshead – £665.9m (£4.8m decrease)
- Newcastle – £643.8m (£35.6m decrease)
- Sunderland – £536m (£23.7m decrease)
- North Tyneside – £498.4m (£85.9m increase)
- County Durham – £434.8m (£23.1m increase)
Council debt across the UK is equivalent to £1,791 per resident, as of April 2025, which has increased from £1,677 a year ago.
Almost half, 49%, of councils increased their debt levels in that time, 14% maintained the same level and 37% reduced their debt.
Birmingham has the highest level of debt, more than £3 billion, while major cities including Edinburgh, Glasgow, Leeds and Manchester also feature in the top 10.
A change is needed
Jonathan Carr-West, of the Local Government Information Unit (LGIU), said that councils needing emergency support, via Treasury loans or being allowed to sell assets to cover day-to-day spending, to stay afloat was “not a sustainable system” and amounts to “essentially payday loans for local government”.
He added: “For me, the key question we need to look at is not necessarily the council’s overall level of debt, but its ability to pay back that debt and how that compares to the level of revenue those assets are bringing in.
“Where overall this has largely worked for local government, there are a few councils – and we know the famous examples like Thurrock, Woking – that have ended up with unsustainable amounts of debt.
“In those cases and with councils like Croydon also, they have all issued section 114 notices and have effectively gone bankrupt – and that level of debt has been a key element of that failure.”
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