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 £946m 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.

“Local government is being forced into the unenviable position of having to put everything on the credit card and to pay for it some time in the future,” Baillie said. Annual borrowing costs would mount sharply if interest rates rise, worsening day to day budgeting.

The Scottish government was guilty of double standards, she said. “They’re forcing councils to borrow more and are therefore amassing a level of debt per household which is eye-watering, and the Scottish government is equally responsible for that ultimately,” she said.

“As the Accounts Commission report recognises, local government in Scotland has been treated very favourably compared to councils in England, despite the significant UK government’s cuts to the Scottish budget.”

Local government experts and officials said routine spending which used to be funded from day-to-day revenue budgets was now increasingly being “capitalised” – converted into more ambitious capital programmes to relieve pressure on day-to-day spending. This allows councils to borrow the money rather than use revenue spending.



Other sources said shifting spending on to capital projects allowed councils to move related staffing costsoff revenue budgets.

Detailed figures from Audit Scotland, which serves the Accounts Commission, show that annual Scottish council borrowing increased suddenly in 2008-09, the year Alex Salmond’s government introduced a council tax freeze, from £665m the year before to £1.18bn in 2008.

While year-to-year borrowing has remained relatively steady since 2008 at between £1.1bn and £1.3bn a year, overall debt has increased because it is being borrowed faster than it is being paid off.

Audit Scotland says that councils’ net indebtedness, which measures overall debt minus investments, grew by more than 40% from £9.1bn in 2004, the year when councils were given full control of their borrowing by the Scottish government, to £13bn in 2012.

Brenda Campbell, Cosla’s corporate director, said: “Councils undertake borrowing for many reasons and the fact that they borrow to invest in infrastructure should not automatically be seen as a bad thing. The debt profiles for each council are constantly changing as borrowing is repaid and fresh borrowing is undertaken. This reflects local flexibility and attention to local investment priorities that matter to local communities.

“Cosla firmly believes that councils are managing their borrowing prudently in order to ensure investment in the vital services provided by them to local communities.”

The money has been used to build new and cheaper-to-run schools rather than repairing older schools, resurfacing roads entirely rather than repairing potholes and installing more efficient street lights, but often by using borrowing instead of using day-to-day revenue budgets.

In many cases, the borrowing has gone on major, far-reaching capital projects which predate the council tax freeze and the 2008 recession.

The debt carried by one of Scotland’s largest councils, South Lanarkshire, has gone up by 130% from £490m in 2003-04 to £1.12bn in 2013-14. It has spent £856m to replace or totally refurbish 103 primary schools. But South Lanarkshire has also borrowed money for a £126m programme to resurface 80% of its roads rather than fill in potholes using revenue budgets.

Per capita, Scotland’s 32 local authorities owe £2,792 per person based on the total debt of the £14.8bn reportedby the Accounts Commission, compared with about £1,280 per head owed by English local authorities and £1.203 per head owed by Welsh councils.

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. In England, council debt has risen significantly over the past 10 years, by roughly 80% from £37.7bn in 2004 to £69bn in 2013.

There are some significant differences in the services paid for by councils in different parts of the UK, but no agency has yet carried out a detailed audit of why the figures vary so greatly. In England, new schools are often paid for by the Department for Education and in Wales by a new Welsh government school-building programme.