Scots council borrowing ‘should be more transparent’

20 Mar 15

Local authorities in Scotland need to do more to set out the long-term implications of borrowing for capital projects to ensure that councillors are able to better scrutinise investment decisions, auditors have said.

In a report published yesterday, the Accounts Commission highlighted that borrowing was a major source of funding for councils to invest in capital projects such as schools or roads.

Although councils were meeting professional requirements for loans, the report stated that more should be done to clarify the longer-term impact of borrowing, which can come from the Public Works Loan Board and other sources.

Total councils debt from traditional borrowing now stands at £12.1bn and has changed little over the last three years, and just over half of Scotland’s 32 councils have increased their borrowing levels over the last decade, the report concluded.
Although authorities have developed plans to suit their own local priorities and needs, they are not always highlighting the strategic importance of borrowing and treasury management or providing evidence of long-term affordability and sustainability, commission chair Douglas Sinclair said.

‘This is a highly complex technical area,’ he added.

‘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.’

Responding to the report, CIPFA Scotland head Don Peebles said there was a need to look at both sides of the balance sheet when assessing local authority debt.

‘Local authorities borrow for a purpose and it is important to recognise that borrowing has helped to finance an asset base of £39bn which helps to provide essential services,’ he added.

‘CIPFA acknowledges that there is scope to develop the scrutiny of borrowing and treasury management. That is why we are working in Scotland to help to provide a support package for elected members which not only helps them to navigate the complexities of borrowing, but also to develop their scrutiny skills.’

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