Scottish councils' borrowing 'needs better scrutiny'

Montage or a road sign, school child, digging and bin
Image caption Borrowing is a major source of funding for councils to invest in key services like schools or roads

Better scrutiny is needed of council borrowing, according to a report from the public spending watchdog.

The Accounts Commission report says Scotland's 32 councils have a total of £12.1bn of debt from borrowing.

It argues councils need to make better use of information to help councillors make informed decisions and scrutinise borrowing.

But, council organisation Cosla argues authorities are managing their debts prudently.

The Scottish government welcomed the report and said councils should work to implement its recommendations.

Although councils have to balance their budgets, borrowing is a major source of funding for investment in key services like schools or roads.

The report says councils are meeting professional requirements but need to do more to set out the longer term implications of borrowing and other debt on their finances.

The councils' total debt has changed little over the last three years although more than half of councils have increased their borrowing levels over the last decade.

Authorities have other debt of £2.7bn from Public Private Partnerships, bringing their total council debt across Scotland to £14.8bn.

'Deliver best value'

This report says the 32 councils have developed strategies to suit their own local priorities and needs, but warns they are not always highlighting the strategic importance of borrowing and treasury management or providing evidence of long-term affordability and sustainability.

It also argues scrutiny needs to be improved through better training for councillors, cutting out jargon to make reports clearer and ensuring governance arrangements are solid.

Douglas Sinclair, chair of the Accounts Commission, said: "This is a highly complex technical area. Councillors don't need to know every detail but they do need to know enough to ask the right questions.

"This is a critical part of council business which requires close and effective scrutiny, particularly in times like this when budgets are so tight.

"We hope this report will help councillors and officers make improvements through clearer information and wider analysis of options so that they can be confident that their borrowing policies deliver best value in the longer term."

Cosla, which represents the bulk of councils, said authorities are managing their borrowing prudently to ensure investment in local services.

'Financial pressures'

Its finance spokesman Councillor Kevin Keenan said borrowing was vital for councils as they were under "increasing financial pressures" from falling funding and high demand for services.

He added: "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.

"Councils have played a significant role in boosting the local economy through these challenging times and investment in capital infrastructure has been a key aspect of this. This was a position supported and indeed encouraged by the Scottish government.

"In short, councils are managing their borrowing prudently in order to ensure investment in the vital services."

However, a spokesman for the Scottish government said it expected councils to act on the report's recommendations.

He added: "It is for each local authority to take decisions on what level of capital investment and associated borrowing is prudent, affordable and sustainable and to assess the long-term financial impact of decisions taken.

"Scottish councils continue to get a good deal from the Scottish government, despite the impact of the UK government's cuts to Scotland's budget."

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