Guardian News and Media
Edinburgh

Scotland’s local councils have amassed a record amount of debt of nearly £15bn after borrowing billions of pounds to help survive heavy budget cuts from the Scottish government.
The Guardian has established that Scottish councils owe more than twice as much per head than English and Welsh local authorities, equal to debts of £6,166 per household, compared with £3,100 per home in England and £2,825 per household in Wales.
The overall debts have surged in the past eight years after councils borrowed more heavily than before to help offset continuing cuts in revenue and capital funding from the Scottish government, often with heavy encouragement from civil servants.
The Accounts Commission, Scotland’s local government spending watchdog, reports that Scottish council finances are under severe pressure and face “increasingly difficult challenges” in coming years, after a real-terms cut in government funding of 8.5% in the past three years.
The Convention of Scottish Local Authorities (Cosla), the main councils’ umbrella body, said, however, that it “firmly believed” that the borrowing was prudent and affordable. It is assessed against the councils’ overall income, its asset base and the value of the new investments. It had also all been approved by Audit Scotland. It said that English and Welsh council spending was not directly comparable, since they had fewer direct responsibilities for building and running schools, rubbish collections, care homes and new social housing than Scottish councils.
Although Scottish authorities had assets worth £39bn, debt repayments surged from £946mn in 2009-10 to £1.5bn last year, including repaying privately-financed PFI projects. That cuts the money councils could spend on services, the commission warned.
Douglas Sinclair, chairman of the Accounts Commission, said councils would have to find greater savings or cut spending even further in the near future to avoid storing up greater problems in future. Next year’s funding settlement for councils is expected to be tougher than this year’s.
“They will face pressures beyond next year of a scale not previously experienced, as budgets become even tighter and demands on services continue to increase,” Sinclair said. “The challenge for councillors is to make best use of the money that is available and to take difficult decisions now to avoid storing up problems for the future.” A Scottish government spokesman insisted that councils continued to get a good deal given the cuts in Treasury funding for the devolved government, compared with funding in England. He said revenue and capital funding would be maintained on a cash basis for the next four years.
He insisted that local authority debt was partly due to the “hugely damaging legacy of PFI contracts”, but refused to say whether ministers had made any assessment of the impact of record borrowing on council finances.
“We have not seen the detail behind this analysis, but it would appear not to be comparing like with like, for example how education services are treated and funded is different between Scotland and England,” he said.
But Jackie Baillie, Scottish Labour’s finance spokeswoman, said the level of debt raised challenging questions about the Scottish government’s claims it was “balancing the books” and had avoided the heavy borrowing of the UK government and heavy cuts being experienced in England.

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