Saturday, 20 December 2014

An issue of great interest!

As predicted in these columns many moons ago, the Borders will be playing permanent host to the Great Tapestry of Scotland whether we like it or not, and even though a local referendum would have returned a resounding 'No' vote for this reckless, unwanted venture.

Now, thanks to a score of misguided councillors, we are saddled with a £3.5 million millstone to meet the cost of building a home for a potential white elephant plus a further £6 million in interest payments over the next 30 years. Apparently there was a miscalculation which means the annual loan charge "only" works out at £208,000 rather than the original figure of £275,000. Whew, that's a relief!

But back here in the real world it's worth taking a closer look at the amount of money Scottish Borders Council has to find just to service its massive debts and an ever increasing portfolio of borrowings.

There's also the small matter of paying for three Public Private Partnership (PPP) secondary schools, another irresponsible decision which has left us with £225.6 million outstanding plus interest of just over £41 million. In 2013/14 alone the bill for PPP came to £8.763 million. The demands on the local authority's purse will grow as time marches on, and the debt will be on the balance sheet for a generation.

According to Scottish Government figures SBC's total debt at the end of the last financial year (2013/14) stood at £193.114 million, equivalent to £1,698 per head of the Borders population. But the actual figure depends on which formula you care to adopt.

The council's own set of accounts tell us that more than a third (37%) of the £27.6 million capital expenditure programme last year was funded by borrowing. Meanwhile interest payable and similar charges for the 'carrying amount' on the range of outstanding debts totalled £11.908 million in 2013/14. So the decision by councillors to add another £208,000 to that annual bill doesn't matter much, does it?

How many teachers would that kind of money pay for? Or how many service cuts could have been avoided had the spiral of borrowing and the collection of debts not existed? Pressures on budgets meant SBC had to find £6.3 million in efficiency savings during the last financial year, yet that was only a fraction of the money required to service loan charges.

If all this sounds distinctly downbeat, then its only fair to point out there's an even scarier set of figures included in the accounts under the heading of Fair Value of Loans. The eye watering total stands at £239.899 million.

An accompanying explanatory note tells us: "The fair value is higher than the carrying amount because the council's portfolio of loans includes a number of fixed rate loans where the interest rate payable is higher than rates available for similar loans in the market". The average rate of interest on the various loans was 5.2% last year.

Taken together, the £12 million of interest payments together with the £8.763 million to keep the PPP payments on schedule works out at more than twice the entire Cultural & Related Service budget (£10.552 million) and is also well in excess of the £15.9 million spent on Roads & Transport.

As long as the open-ended permission to borrow even more from the Public Works Loan Board (PWLB) continues to be available, and while we have irresponsible elected members who don't particularly care how high SBC's debt mountain rises then there will be no chance of cutting this scandalous level of indebtedness. Many more millions of pounds of public money are certain to be flushed down the pan as the black hole of near insolvency becomes a veritable galaxy.

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