50p in every pound of council tax spent paying off old debt

50p of every pound is being spent on paying off debt
50p of every pound is being spent on paying off debt
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FIFTY pence of every pound in council tax is spent paying interest on historic debt, union leaders have claimed.

Unite said the annual cost of servicing Edinburgh Council’s debt is around £119 million – and that doesn’t include private finance deals.

It is now calling for an amnesty on loans the council took out with the Public Works Loans Board – a body which allows cheap borrowing for the public sector – before devolution in 1999, in an attempt to save the city £47.6m a year.

Unite Scottish secretary Pat Rafferty said the Capital’s public services were being “shredded” due to an “economic crisis caused by casino bankers”.

He added: “It’s an attack on all of us – from children in nurseries to elderly people needing care. We believe a debt amnesty will help.

“There is already a precedent for it – for example, the UK government wrote off Glasgow City Council’s historic housing debt when its homes were transferred to a new housing association.

“Eventually, we need the UK Treasury to act. But if there is going to be any chance of that happening we need the Scottish Government to get on board first.

“We need our government to do everything it can to protect the local services we all rely on from Tory austerity.

“The cuts are taking a massive toll on our members. They are having to work harder and harder, with fewer and fewer resources, just to provide basic services. We can’t go on like this. It’s time to drop the debt.”

Councillor Gavin Corbett, Green finance spokesman, said his party published a report last week which showed half of all council tax income in Edinburgh goes on paying long-term debt.

He said: “While some critics highlight the woefully-managed tram project as a source of debt, in reality most debt is from years ago, sometimes decades ago.

“So, in the face of dramatic cuts and losses of services, the case for looking again at the debt burden is growing. 15 or so years ago, six of Scotland’s councils transferred council homes to housing associations and, in return, saw hundreds of millions of pounds of debt passed to the Treasury. So clearly there is no problem in principle with the idea.”

In the 17 years since devolution, Unite estimates that Scotland’s councils have sent back a minimum of £3.3 billion to the Treasury in interest-only payments, just to cover historic debt to the Public Works Loans Board.

Cllr Alasdair Rankin, the city’s finance leader, said council tax supported around a quarter of the local authority’s net expenditure.

He said: “When compared against total income from government grant, business rates and council tax, loans charge expenditure represents 12 per cent of our net expenditure.

“The council has, in addition, delivered significant savings in this area in recent years, reducing its overall level of external borrowing by over £100m since March 2014.

“Some debt incurred has been agreed for projects where we make significant revenue savings, including the purchase of [the council’s] headquarters building in 2008.

“All borrowing undertaken furthermore requires to be prudent, affordable and sustainable and adheres to relevant professional guidance.”