Sharepoint - Lists - Folders - Item Level Permissions

Hi Community,

Hope someone can help with my query. I need to create a SharePoint list that does the following:

• Items can only be read and edited by the user who created it
• Items are placed into folders, where only those in that specific department, can see the folder, and see their own items inside it
• Department folders, have unique permissions, that allow some members, the ability to see all files created for that particular department.

I have been successful in producing the first two steps; but not the last one.

When option one is turned on, the user is unable to see the department folder, and therefore, their items inside the folder. 

I can turn off item level permissions and make the folder stop inheriting permissions from the list, but this means, that all users who are granted access to that particular folder, can see all other items in that folder. 

I could use power automate, to stop inheritance on the individual items upon creation, and then assign relevant parties access to that item, however, if that means I will need to perform bulk updates somehow, so that if a user who created the item leaves, or the manager changes, they can still access and see all previous items.

I could make separate lists for each department, but the maintenance and time required, would be too great. 

Is there a better alternative that I haven't considered?