By David Scott in Edinburgh
30 October 2009
Leading finance officials in Scotland have backed Scottish Government plans to allow councils to borrow to fund equal pay settlements.
However, they want the Scottish Government to lay down a condition that applications to borrow to fund revenue expenditure must be accompanied by a financial plan detailing steps for recovery.
CIPFA Scotland’s comments were in response to a scheme proposed by the Scottish Government.
It would give Scottish councils similar powers to those held by English local authorities.
The proposals were drawn up following a request by the Convention of Scottish Local Authorities.
Many of Scotland’s 32 councils have experienced major funding problems over pressure to settle a huge backlog of equal pay settlements.
In a letter to the Scottish Government, Don Peebles, policy manager for CIPFA Scotland, said that the institute agreed with guidance stating that ‘borrowing to meet revenue costs runs counter to the principles of prudent financial management’ and that it would affect capital investment levels and revenue funding for services.
The letter added: ‘Nevertheless, CIPFA does recognise the circumstances under which the proposed scheme has arisen and that the proposal represents a solution on the collective part of both local and Scottish Government.’
When CIPFA first explored the need for council recovery plans, the Scottish Government advised that this would not be required.
It argued that the financial requirement was the result of a ‘one-off event’ and that an accompanying business case would reflect on past and future financial planning.
In CIPFA’s letter, Peebles stated: ‘We have reviewed the information requirements… and would observe that beyond the request for details of loan repayment periods and available reserves, there is limited information which would provide detail on financial planning or indeed recovery.
‘We would reaffirm our view that a plan or details of recovery should form part of the application.’
The Scottish Government has told CIPFA and council chief executives that a tentative date of November 30 has been set for borrowing applications to be submitted, with a response to be given by December 31.
30 October 2009
Leading finance officials in Scotland have backed Scottish Government plans to allow councils to borrow to fund equal pay settlements.
However, they want the Scottish Government to lay down a condition that applications to borrow to fund revenue expenditure must be accompanied by a financial plan detailing steps for recovery.
CIPFA Scotland’s comments were in response to a scheme proposed by the Scottish Government.
It would give Scottish councils similar powers to those held by English local authorities.
The proposals were drawn up following a request by the Convention of Scottish Local Authorities.
Many of Scotland’s 32 councils have experienced major funding problems over pressure to settle a huge backlog of equal pay settlements.
In a letter to the Scottish Government, Don Peebles, policy manager for CIPFA Scotland, said that the institute agreed with guidance stating that ‘borrowing to meet revenue costs runs counter to the principles of prudent financial management’ and that it would affect capital investment levels and revenue funding for services.
The letter added: ‘Nevertheless, CIPFA does recognise the circumstances under which the proposed scheme has arisen and that the proposal represents a solution on the collective part of both local and Scottish Government.’
When CIPFA first explored the need for council recovery plans, the Scottish Government advised that this would not be required.
It argued that the financial requirement was the result of a ‘one-off event’ and that an accompanying business case would reflect on past and future financial planning.
In CIPFA’s letter, Peebles stated: ‘We have reviewed the information requirements… and would observe that beyond the request for details of loan repayment periods and available reserves, there is limited information which would provide detail on financial planning or indeed recovery.
‘We would reaffirm our view that a plan or details of recovery should form part of the application.’
The Scottish Government has told CIPFA and council chief executives that a tentative date of November 30 has been set for borrowing applications to be submitted, with a response to be given by December 31.
