The Department for Education has confirmed in a letter to Darlington MP Jenny Chapman that the Mowden Hall site in the town will close.
The decision is part of a review of buildings used by the department. It is expected that staff will be relocated to new site in Darlington or Newcastle.
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A number of projects across the region have received a grant totalling over £1.5m.
Higher food and petrol prices are expected to send inflation to its highest level in 28 months when official figures are released later.
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