Who’ll blink as we get to brink?
LOCALISM is the buzz word in Westminster circles these days, now that the Big Soci ety idea seems to have been kicked into the long grass.
Mind you, I’m not sure that David Cameron thinks along the same lines as some west of Scotland local authorities which, earlier this week, used localism as a cudgel to bash Edinburgh.
John Swinney hadn’t even opened his mouth to announce the results of his spending review before councillors in Glasgow and North Lanarkshire were claiming that their authorities were being pushed into the red because of the Government’s plans to finance Edinburgh’s trams and “a bridge on the other side of the country”.
Pretty easy point-scoring, but government finance is all just one big merry-go-round of blame: if it’s not the SNP’s fault at Holyrood, it’s the Tories at Westminster, or it’s the profligate, mostly Labour-run councils in Scotland and all those public sector staff with their gold-plated pensions (average £4000 a year, the lucky beggars).
However, the west coast councillors have a point in terms of debt. It certainly seems to be the case that in order to balance the Scottish Government’s books, keeping the council tax frozen and not asking Scottish students to pay tuition fees, the buck of paying for any capital projects which might well help stimulate economic recovery is being passed directly to local councils.
The result will possibly be many councils having to increase their borrowings to ensure that they can deliver on those and also on front-line services at a time when demand is on the rise.
None of that is Edinburgh City Council’s fault, thankfully, but let’s not breathe too large a sigh of relief. Jenny Dawe’s administration, and Edinburgh as a whole, are facing black days of their own.
The problem with council finance is that few people understand it. Councillors especially seem to have a rather tenuous grasp, which is why the figures for the city’s deficit have altered so dramatically over the last few years.
When the Lib Dem/SNP coalition came to power in 2007, it made much of the fact that it had inherited a “massive financial black hole” from the previous administration, totalling £10 million.
And there were warnings of a £25m overspend, with the Children and Families department – which carries out most of the council’s statutory obligations – the main problem.
However, by the time of the budget the following year, the administration said it had “balanced the books” – despite the fact that the main element it had hoped to use to achieve this – the immediate closure of schools, was halted. Yet more recently, in a letter to this newspaper, Councillor Marilyne Maclaren claimed that the deficit had been £18m.
Perhaps only the accountants know the real truth. There was even talk in Labour circles that its administration had actually upped the general balances of the council to £20m before the last elections.
It seems there are lies, damned lies and council finance. One thing is clear though, if things were bad financially in 2007, by the time there’s another election next year, the council’s borrowings will be through the roof.
The tram project is the main culprit, of course. The projected £700m that it’s now likely to cost means a £231m shortfall between final bill and government funding, which the council is already borrowing to cover. This figure will undoubtedly rise, as have all tram costs, with interest payments and further unanticipated costs.
Without doubt, the council will have to go even deeper into debt.
Then there’s the lack of provision for equal pay claims, which can be the only reason the council continues to fight an unwinnable fight in the courts. Already the Scottish Government has agreed that it can borrow £25.68m to pay that bill, and while so far it’s not been spent, eventually it will have to be.
Now there’s the potential that it will have to meet compensation claims – possibly in the tens of millions – from homeowners who have allegedly been defrauded by the statutory repairs notice system which is under police investigation. Where will that cash come from?
Already, the council borrows £9 for every £100 it spends, the kind of figure which it believes to be prudential.
However, with the further squeeze on finances from Holyrood, borrowing will have to rise, and there is nothing prudent about robbing Peter to pay Paul.
Where will all this leave Edinburgh and its council taxpayers? Will there be a mass exodus of people to the counties of Mid, West and East Lothian where it can be less expensive to live?
Unlikely. More likely is that with borrowings rising, the Scottish Government will cap them so that councils don’t end up bankrupt.
Then the concordat between councils and the Scottish Government, signed to keep council tax frozen and to ensure that local authorities would receive a bigger grant than they otherwise would, will be broken.
My money is on Edinburgh being the first.