Scottish local authorities owe twice as much per household than those in England and Wales

Scottish councils owe twice as much per head as English and Welsh local authorities, data from the Accounts Commission shows.



The total debt for Scotland’s 32 local councils stands at £14.8bn, equivalent to £6,166 per household. This compares to £3,100 per household in England and £2,825 in Wales, according to the Guardian’s analysis.

In its new report, the Accounts Commission, which polices public spending in Scotland, presents an overview of local government in Scotland 2015. It shows that local authorities have borrowed £12.1bn to finance investments in projects such as schools, social housing, sports facilities, roads, care homes and community facilities. The additional amount designated as borrowing is taken up by private finance initiatives (PFI) and other private finance projects.



The debt has a number of components: direct borrowing by individual councils, making annual payments from historic private finance initiative projects, such as building and managing new schools or hospitals, and on housing debt.

The Convention of Scottish Local Authorities, the umbrella organisation representsing most of Scotland’s councils, says there are important differences in local government responsibilities between the three countries.

“Some of the key differences with England and Wales are that councils in Scotland run schools to a significantly greater extent, they provide social housing directly and they also deliver services such as waste management to a significantly greater degree than elsewhere. In particular there has in recent years been a drive to provide increased affordable housing, as well as a significant investment in schools.

“Councils manage their borrowing using the prudential framework which ensures that decisions made on financing infrastructure locally are made with regard to affordability, sustainability and proper treasury management practice. All Scottish councils are required to operate treasury management policies locally and to be accountable for these.”

The Accounts Commission says borrowing is a necessary tool, but it warns that regardless of what the money is used for and why, these debts will have to be paid off.

For comparison, Scottish councils spent about £18bn last year but only received £10.3bn in direct funding from the Scottish government – an 8.5% fall in real terms since 2010/11. Capital funding fell by 33% in that time, but will rise this year and next. However, further real-terms overall cuts are likely in coming years, the commission added.

A further £1.1bn came from housing rents and £4.3bn from charging for services, housing benefits and other government grants.

It says: “The current value of councils’ assets is £39bn. Borrowing helps councils spread the cost of building and refurbishing their assets over a number of years. However, it means that councils commit a proportion of their future budgets to financing charges, that is repaying debt and interest.

“Annual interest and debt repayments on borrowing have increased from £946m in 2009/10 to £1.5bn in 2013/14. Repayments for current PFI and NPD contracts totalled £488m in 2013/14 and are predicted to peak at around £600m a year between 2024/25 and 2027/28. Higher financing commitments leave councils with less money available to spend on the other day-to-day costs of running services.”

Local government borrowing and debt in England has also increased significantly over the past 10 years, by roughly 80%, from £37.7bn in 2004 to £69bn in 2013. In Wales, which has lower public spending per head than Scotland but similar economic and social problems, local government debt has remained relatively constant, according to data given to the Guardian.