Council Debt Rises by £800 Million in 2016/17

A report released today has show that 19 councils were forced to use reserve revenue in 2016/17 compared to eight in the previous two years. 

The Accounts Commission financial overview of local government showed that councils have had a real terms funding cut of 7.6% from the central Scottish government compared to 2010/11. 

Excluding Shetland and Orkney, borrowing increased from £13.7 billion to £14.5 billion for local authorities in 2016/17. Levels of debt among councils are “not currently problematic”, the Accounts Commission said, but it added that some authorities were “becoming concerned about affordability of costs associated with debt within future budgets”. If this pattern of funding, spending and borrowing were to continue, it is estimated that the council may run out of money in two to three years. 

It has also been suggested that councils are currently taking advantage of low interest rates to fund projects.

Councillor Gavin Corbett, finance spokesman for the Greens in Edinburgh, said: “With the lowest level of funding per head in Scotland, Edinburgh can see the truth of the report more than most. Over the next five years the city is looking at another £150m worth of cuts to services, which can’t be done without an impact on schools, transport, social care and other vital council services.

“So the Scottish Government needs to give the council a fair funding deal when it announces its draft budget in just over two weeks. But more than that – ministers need to take off the shackles of central control and allow councils greater flexibility with funds, from council tax levels to a tourist tax.”

Scottish Conservative local government spokesman Alexander Stewart hit out, saying: “Under the SNP government, the financial health of Scotland’s 32 councils has deteriorated rapidly. Debt levels are eye-watering, and millions upon millions of pounds in taxpayers’ cash is now being used just to service it.

“We’ve even got to the stage where local authorities are dipping into the rainy day fund routinely just to stay afloat. “And as auditors say, if that continues, there won’t be any reserves left to call on.”

A Scottish Government spokesman said: “We have treated local government very fairly despite the cuts to the Scottish budget from the UK government. “Including the extra £250m to support the integration of health and social care the overall reduction in local government funding in 2016-17 equated to less than 1 per cent of local government’s total estimated expenditure. “The 2017-18 local government finance settlement, including the increase in council tax and health and social care integration funding, means that local government have an extra £383m, or 3.7 per cent, in support for services compared to 2016-17.”

2016/17 was also the last year of the council tax freeze, with council tax providing 14 per cent of councils' income.

The report noted that if all councils chose to raise council tax by three per cent, it would yield an estimated £68m - broadly comparable to a one per cent pay rise for staff.

 Source: Holyrood, Scotsman. 

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