Scottish councils 'spend hundreds of millions' on servicing debts

Council tax makes up about 15% of a typical council's budget

Councils are spending hundreds of millions of pounds servicing their debts, according to the Scottish Greens.

An analysis for the party found that Scotland's 32 councils owe £11.5bn between them.

The money is owed to banks and a scheme set up by the UK Treasury.

A typical council spends the equivalent of 42% of its council tax money servicing the debts, the research indicated.

One council - Comhairle nan Eilean Siar (Western Isles Council) - spends more servicing its debts than it raises in council tax locally, although the authority told BBC Scotland its financial arrangements were exceptional.

The analysis also found that Clackmannanshire, Dundee, Edinburgh, Glasgow, Highland, Inverclyde, South Lanarkshire and West Dunbartonshire councils all spent at least half of their council tax revenue servicing debt.

'Unethical' loans

The council tax makes up about 15% of a typical council's budget.

The Greens said the "unethical" nature of the loans meant the Treasury and the banks concerned should cancel them.

In the last financial year, Scottish councils spent almost £1bn on repayments to the Public Works Loan Board of the UK Treasury and still owe the board a total of almost £9bn.

Patrick Harvie, finance spokesman for the Scottish Greens, said: "Given the crisis facing local authority finances, it's unacceptable that councils are using council tax revenue to deal with historic debts that enrich private banks and the UK Treasury.

"The unethical nature of the loans from private banks justifies cancellation of these payments, and the Westminster government should write off council debts to end the unfair squeeze on local services."

Councils say they borrowed the money to invest in the local infrastructure - not to help them balance their books. Some say direct comparisons with the amount raised locally in council tax could be misleading.

The council tax in the Western Isles is the lowest in Scotland and makes up an unusually-low proportion of the council's budget.

Council tax in the Western Isles is the lowest in Scotland

A Western Isles Council (Comhairle nan Eilean Siar) spokesman said: "These figures reflect the fact there has been substantial investment in the islands because of the needs of the islands. The investments have been in the much-needed improvements in the infrastructure of the islands.

"Our low population base and lower than the Scottish average housing values means that revenue from council tax is very low and only accounts for about 8% of our total revenue, which is mainly made up of [Scottish] government grant."

He added: "The servicing of the debt is not based on council tax so, whilst it is a high percentage figure, that simply reflects the investment that the comhairle and government recognised was needed in the islands."

Comhairle nan Eilean Siar said that like other councils it had been through extremely challenging financial circumstances in recent years. Those circumstances showed no sign of improving so the council said it faced choices ahead.

Protect services

Local government umbrella body Cosla said councils borrowed money "extremely responsibly" and worked to a code when they did this.

A spokesman said: "Loans are taken out to fund vital infrastructure which is integral to the services which are provided to support communities. Councils operate within strict guidelines through well-established Treasury management policies and they apply the Prudential Code on affordability to ensure that debt is not a burden on the council or its communities.

"Nonetheless, we are all very aware that councils are facing extremely difficult financial circumstances, with the prospect of another difficult financial settlement, and anything that can be done by the UK government, as part of the Chancellor's Autumn Statement, to help alleviate these pressures and free up resources to protect services to our communities would be welcome."

City of Edinburgh Council said loan costs represented 12% of its net expenditure but the level of borrowing had fallen by more than £100m since March 2014.

Alasdair Rankin, City of Edinburgh Council's finance and resources convener, said: "Some debt incurred has been agreed for projects where we make significant revenue savings, including the purchase of its headquarters building in 2008.

"All borrowing undertaken furthermore requires to be prudent, affordable and sustainable and adheres to relevant professional guidance."

A Treasury spokesman said: "Historic debt is the responsibility of individual local authorities. The government has no plans to change this position.

"Responsibility for borrowing decisions lies with the locally-elected members of the council, who are democratically accountable to their electorates."

Trade union Unite has long been concerned by this issue and is about to launch a nationwide campaign calling on the debt to be cancelled. The union says at least 40,000 jobs have gone at Scottish councils since 2010.

Unite Scottish secretary Pat Rafferty said: "The economic crisis caused by casino bankers is being used as an excuse to attack the public services we all rely on.

"People in Scotland are suffering the results of that every day, with cuts affecting everything from social care and day services, to bins and recycling. Many libraries, parks, and leisure facilities have been closed or are under threat.

"Politicians in Scotland need to do everything they can to protect our council services from this attack, and we believe a debt amnesty will help. We hope MSPs from across the Chamber will support the idea."

Scottish Labour Westminster spokesman Ian Murray said: "Up and down Scotland local authorities are finding it harder and harder to deliver local services because of SNP funding cuts, and the last thing they need is the millstone of historic debt around their necks.

"Since 1999, Scottish local authorities have paid back over £3bn in interest on pre-devolution debt: this is unfair and unsustainable given the huge cuts they are facing from the SNP government in Edinburgh.

"Relief should be granted on pre-devolution debt liabilities that continue to impose an unwarranted burden of debt on Scottish local authorities."

However, Scottish Conservative local government spokesman Graham Simpson said: "It would be utterly irresponsible and unfair to simply write-off council debt.

"A move like that would send a shocking message to everyone else on fiscal responsibility.

"We'd be as well telling councils to just waste as much cash as they like because, one day, a government will come along and pick up the tab.

"It's no surprise to see the Greens and Labour - the two most financially naïve parties in the Scottish Parliament - devising this crackpot plan."