by OUR LOCAL GOVERNMENT CORRESPONDENT
Scottish Borders Council borrowed another £30 million last month from the UK Treasury to help fund its long-term spending spree on capital projects which is set to generate a massive rise in interest charges and total external debt over the next ten years.
And figures published today by the Scottish Government show the level of Borders local government capital expenditure per head of population last year was one of the highest in the country at £772 compared to the national average of £451.
Since taking control of SBC following the last municipal elections, the Conservative-led administration has embarked on a ten-year programme of infrastructure investment, including the replacement of outdated school buildings. Over the decade from 2023/24 the council plans to commit £454 million of public money to its programme, much of the cash to be borrowed from the Public Works Loans Board [PWLB].
The latest £30 million loan from the PWLB, arranged on January 30th carries a 5.09% interest rate with a maturity date of January 30th 2026. Interest payments on the loan will amount to about £1.5 million.
In the calendar year 2024, SBC borrowed a record £136 million from the Board, including £60 million in November alone. And the arrangement of further loans is expected to continue in the immediate future.
By March 2022, just prior to the elections of that year, SBC's external debt totalled £215 million, having increased from £172 million in 2015 (ten years ago).
Those figures seem modest when compared to the £399.7 million sum for 2024/25, according to the council's current Treasury Management Plan report.
And here are the external debt projections for the following years of the capital programme: 2025/26 £449.5 million; 2026/27 £478 million; 2027/28 £498.2 million; 2028/29 £490.4 million; 2029/30 £479.1 million; 2030/31 £462.2 million; 2031/32 £447.7 million; and 2032/33 £435.6 million.
Between 2027 and 2031, it is predicted the council will be close to its Operational Limit for External Debt.
The amounts in annual interest payments, known as loan charges, will be met from SBC's revenue budget, partly bankrolled by council taxpayers.
During the current financial year (2024/25) the authority will be liable for £18.185 million in loan charges. However, that figure is projected to spiral by no less than 63 per cent to £29.753 million by 2029/30.
Over a ten-year period, those combined loan charges are set to total £250.5 million, representing a significant drain on SBC's financial resources.
The Borders local authority's debt-ridden status is no different from the precarious financial plight of all 32 Scottish councils.
A report on local government finance, produced last week by public spending watchdog Audit Scotland declared: "Borrowing means debt has again increased, and further borrowing will be needed to invest in new schools.
"Due to the increased reliance on borrowing to fund investment, councils’ net debt has now risen to £19.8 billion. This is an increase of 15.8 per cent from 2022/23 and a 29.7 per cent increase since 2018/19. All but one council increased their debt in 2023/24. The cost of servicing debt has risen, with a 16 per cent rise in interest payable and similar charges since 2022/23. Interest payable as a proportion of net cost of services, was six per cent compared to five per cent in 2022/23."
Today's collection of local authority publications from the Scottish Government includes an analysis of capital expenditure by each council, setting out the per capita spend during 2023/24.
Scottish Borders Council was the third highest spender per person (£772), only exceeded by Perth & Kinross (£982) and Comhairle Nan Eilean Siar (£1,083).
The neighbouring Dumfries & Galloway per capita figure of £341 was less than half that of the Borders council. The lowest total of £179 applied to South Lanarkshire while the all-Scotland (average) stood at £451.
A separate table shows that Scottish Borders Council's debt per person on loan fund advances already works out at £2,545 a head of the local population, some £784 higher than the Dumfries & Galloway Council equivalent figure of £1,761. The Borders per capita debt level is set to increase significantly in future years.
In a detailed request for comment, Not Just Sheep & Rugby suggested to Councillor Leagh Douglas (Conservative), Executive Member for Finance at SBC, that the debt burden would fall on council taxpayers, already facing the prospect of a possible ten per cent increase in charges in 2025/26. It appeared SBC was piling up debts for future generations of its residents.
In response, Councillor Douglas told us: "The Council has an approved 10-year capital plan which is ambitious in nature and reflects significant investment to enhance the Scottish Borders through the delivery of several projects including improved roads infrastructure, new schools and care villages and the completion of the £90 million Hawick Flood Protection Scheme. An example of this investment was demonstrated through the opening of the new primary school in Earlston yesterday."
She explained that as outlined in the Council’s budget each year, a significant element of these planned construction projects are approved to be funded through Council borrowing. Without the commitment to funding these projects through borrowing they would simply not progress.
"The Council’s Treasury Strategy considers the affordability and impact of capital expenditure decisions with all borrowing costs being reflected in the Council’s revenue budget.
"The Council's treasury strategy shows how under borrowed we currently are against our actual borrowing requirement to fund capital projects. This borrowing requirement is the future cash we need to fund approved capital expenditure on schools, care facilities, road infrastructure and flood schemes."
Councillor Douglas said the Council sets out clearly each year the ongoing need to borrow to fund its capital plan to deliver the projects approved by (elected) members.
"I can confirm all borrowing has been undertaken within budgeted levels in 2024/25. The recent £30 million borrowing you reference was the refinancing of an existing loan which has saved the Council £84,000 annually through the loan being refinanced on a new, more favourable, interest rate."
