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CSPP Chair Richard Kerley Analyses Local Authority Finance on BBC Radio Scotland



Last week, CSPP Chair Professor Richard Kerley was interviewed on BBC Radio Scotland’s John Beattie regarding the challenges and options for local government financing in Scotland.

The discussion came in the context of a proposal by the Scottish Greens for the cancellation of over £11bn of outstanding council debts. Research for the party found that councils spend hundreds of millions each year servicing the debts, and suggested that if these were written off, more could be spent on local services. As a precedent, the party’s co-convenor, Patrick Harvie, cited the cancellation of council housing debt.

A discussion on this issue then took place with Angus Campbell (Leader of Comhairle nan Eilean Siar), and CSPP Chair, Professor Richard Kerley.

Cllr Campbell outlined how local government had received a reduction in money from central government in recent years, putting pressure on the delivery of services.  He urged a “big picture” focus on what the revenue settlement this year would mean for local government and the services it could deliver. He also stated that the cancellation of historic debts would allow the redirection of resources into revenue budgets, something that would be “very welcome”, covering around two-thirds of what the council had lost in revenue funding under austerity.

Professor Richard Kerley, an expert in Scottish local government, was then interviewed. He outlined the different ways local authorities raise capital, such as borrowing from banks, the Public Works Loans Board, and sale of assets.

Professor Kerley gave a favourable view of the Scottish Greens’ overall proposals on local government finance, however disagreed that cancelling council debts should be part of the solution to funding pressures. This was because encouraging councils to take their own financial decisions, and debt cancellation, were considered to contradict one another.

Beyond this, the CSPP’s Chair stated that local authorities gain their income from a variety of sources, and that, for example, the Council Tax is only a small part of this. Meanwhile councils incurring debts were not seen as necessarily problematic as long as the capital investments which incurred the debt were worthwhile, and the conditions of the debt favourable.

It was added that even with the ending of the council tax freeze, local authorities will continue to run on limited budgets for at least the next two financial years. This is one reason why councils are investing at the moment – in order to “spend to save”, such as installing LED bulbs in street-lighting to reduce costs.

Regarding how councils could get access to even cheaper finance, Professor Kerley stated that local authorities are able to access very low interest rates already, and that this information is publicly available on the Public Works Loans Board – UK Debt Management office.

The full feature can be listened to on BBC Radio Scotland here, from just after 13:30.

       
Centre for Scottish Public Policy
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