New research suggests Scottish councils are almost £16 billion in debt. Why are these figures so much higher than the rest of the country, and how can local authorities deal with the problem?
Scottish councils' borrowing increased by half a billion in 2015 in their continued effort to offset major funding cuts. This has resulted in an overall debt increase of £14.2 billion to £15.9 billion over four years.
As previously reported, some Scottish councils considered raising council tax rates in order to deal with cutbacks. However, these proposals were abandoned after Scotland’s Finance Secretary John Swinney threatened financial penalties if such plans went ahead.
The 2016/17 council tax freeze deal provides £70m to councils in an attempt to mitigate the costs involved and Mr Swinney has suggested councils use their cash reserves to manage financial pressure.
The cost of the council tax freeze
Scottish councils currently owe more than double per head than English and Welsh local authorities. However, the Convention of Scottish Local Authorities maintains it's misleading to compare debt levels between them. Scottish councils have more responsibility for costs like building schools, running care homes, collecting waste, and providing social housing. While, in England, new schools are often funded by the Department for Education rather than local government.
Leader of the Scottish Liberal Democrats Willie Rennie stated: “Half of what councils do is education and John Swinney bullied local authorities into accepting a financial settlement that will mean big cuts in our schools.” The continuation of the council tax freeze therefore represents a significant challenge to local authorities, who are already concerned about funding education.
Chairman of the Accounts Commission Douglas Sinclair believes that Scottish councils must reduce spending further, or make big savings, in order to avoid problems in the years ahead. If you work for a local council and are worried about the financial shortfall, speak to our Contact Centre Manager today. Ethical Enforcement Agents such as Dukes Bailiffs can help councils build up cash reserves through the fair and transparent collection of outstanding arrears.