Scotland’s council debt levels soar to £12.9bn

SCOTLAND’S councils have seen their debt levels soar to almost £12.9 billion in recent years – the equivalent of £2,436 for every Scot.

Annual interest and debt repayments alone now account for £1.5 billion a year, it emerged in a report published by public spending watchdog the Accounts Commission today.

Debt run up by local authorities has increased by 39 per cent in the past five years and could rise further in the years to come, the commission warned.

The report into capital projects, such as schools and hospitals, does not paint the full picture due to “significant gaps” in the information provided.

Total council capital spending doubled in the first decade of the millennium from £1.2bn in 2000-01 to nearly £2.4bn in 2008-09, a position it returned to last year following a dip during the recession.

“Councils’ combined debt levels have increased by 39 per cent from £9.3bn in 2007-08 to £12.9bn in 2011-12,” the report stated. “With further borrowing and private finance investment planned over the next few years, overall debt levels may continue to rise.”

Debt repayments for borrowing arrangements have increased from £946 million in 2009-10 to £1.45bn just two years later.

The report warns that “sustainable” investment strategies are needed by councils.

“Councils need to develop long-term investment plans to set out their investment needs and constraints, and provide the information needed for prioritising and planning.”

President of the Convention of Scottish Local Authorities, councillor David O’Neill, said the rise in debt was because schools and other capital projects required “big investment.”

He added: “During the period of this report, the capital grant from government was reduced. Investment was therefore being undertaken through prudential borrowing, which therefore means more debt for councils.

“There was a real drive from the Scottish Government and local government to increase capital investment to stimulate economic recovery at local level on the back of the downturn.”

But a Scottish Government spokesman said: “It is up to councils to ensure they spend capital budgets effectively and in line with local needs.

“The Accounts Commission report sets out some valuable messages for councils in how they manage capital expenditure effectively and get the most from their capital investment, including through working in partnership with other councils and other bodies.”

Tory housing spokesman Alex Johnstone said a lot of the money was going on housing as central government slashes its funding in this area.

He added: “People will look at the soaring debt and wonder if everyone else is having to cut back on their spending, why aren’t the local authorities?”

The report also found that four-fifths of council building projects have been delayed and three-fifths have gone over budget.

One project ran more than four years behind schedule while another was nearly three times the original cost estimate, the first comprehensive review of council capital investment has found.

The average delay was 17 months and the total cost was 26 per cent higher than the initial combined estimate, an overspend of £89 million, according to the Accounts Commission “For one in five projects, the relevant council could not provide a cost estimate at the initial approval stage, either because project costs were not estimated at this time or data was unavailable.

“Similarly, 20 out of 63 could not provide a time estimate at the initial approval stage.”

Scottish Building Federation executive director Michael Levack said local authorities needed to do more to improve their “planning and control” of capital budgets.

He added: “From the perspective of the construction industry, a crucial element of those improvements must be streamlined and more transparent processes for procuring services from building firms..”