Thursday, 26 February 2015

Debt mountains the size of Everest

In a week when Borders councillors calmly authorised writing off at least £2 million of other people's cash following their own catastrophic decision to award a large contract to a company which could not deliver, it was surely an ironic coincidence that the Scottish Government should regale us with the latest local government finance statistics.

The reams of data, published on Nicola Sturgeon's website a couple of days ago, appear to be sitting there virtually unnoticed even though they have a highly depressing monetary tale to tell.

So rather than baffle readers with a huge basket of figures embracing revenue and capital expenditure let us concentrate on just one topic...the level of debt our councils are now wallowing in with no sign of a day when outstanding bills will have to be settled.

The tables show Scottish Borders Council's deficit at the end of the 2013/14 financial year had reached £193.842 million which is equivalent to £1,702 for every man, woman and child in the territory they administer. The local debt pile increased by £728,000 from the £193.114 million in 2012/13.

But if you think that financial situation is unsustainable take a second to digest the overall debt figure for all 32 Scottish councils. I kid you not, the sum owed is £12.950 BILLION. Had this been the Sky Sports vidiprinter churning out the football scores they'd have repeated those numbers in words and in brackets so that incredulous fans could be assured the result was correct and not a practical joke.

The official statistics reveal that between them our local authorities are spending almost £600 million per annum - £598.150 million to be exact - just to service their various debt mountains or bottomless pits if you prefer.

When staff in the Not Just Sheep and Rugby office first read the debt levels for SBC and Scotland as an entity we wondered what the respective deficits might have been ten years ago.

One of our researchers soon tracked down the information via a previous post still available on the Scottish Government/Jack McConnell internet pages.

In those halcyon weeks and months of 2003/04 SBC, which had just shed its entire housing stock to rid itself of even more debt, owed £154.491 million on its general fund - £1,427 for every man jack in the Borders. At the same time the national total was a mere £6.719 BILLION. Happy days!

This means that in the space of a decade our local administrators have presided over an increase of £39.351 million in Borders local government debt, up by well over 20 per cent, with an average yearly increase of almost £4 million. And in those ten years the debt per capita has spiralled by £275.

So it was perhaps fitting that in April 2011 our debt-ridden local authority hooked up with New Earth Solutions (NES) to develop that state of the art waste treatment facility which never quite came to fruition.

A separate piece of research shows that in the year to January 2011 the outstanding debts at NES had reached £55.572 million (up from £26.992 million in 2010) while the company recorded an annual loss of £8.358 million compared to a deficit of £7.548 million the previous year. For the record the company's 2014 loss was £11.996 million.

The NES accounts for 2011 include the following statement: "The process of securing senior debt funding for both the construction and operational phases of the Avonmouth and Scottish Borders projects is at an advanced stage." There's that four-letter word DEBT again.

Yet almost four years later the council and their chosen developer have parted company after NES encountered "issues" in terms of funding for the Galashiels waste centre. What can have gone wrong, you may ask.

But you have to admit that in the overall scheme of things another £2 million squandered and lost won't make that much difference to the respective debt mountains.

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