Borders Council's record capital spend after borrowing £40 million

by OUR LOCAL GOVERNMENT EDITOR

Scottish Borders Council recorded its highest ever annual investment in major publicly funded projects during 2023/24 with a £90 million programme achieved after borrowing £40 million in the final quarter of the financial year.

The figures on borrowing and spending are revealed in SBC's draft annual report and accounts which also show a revenue underspend of £600,000 on its approved budget for 2023/24 with a total outlay on service provision of £346.5 million.

In her management commentary on the accounts, Director of Finance Suzanne Douglas writes: "The Capital Financial Plan aims to ensure that capital borrowing is within prudential borrowing limits and remains sustainable in the longer term. In this regard it is important to recognise that capital investment decisions taken now have longer term borrowing and revenue implications which have the potential to place an undue burden on future taxpayers."

She points out that the £90 million Capital spend in 2023/24 represents the highest amount the Council has delivered demonstrating significant investment in key projects across the Borders.

Individual schemes included Flood Protection Works £22.3 million; Roads & Bridges £8.5 million; Land & Property Infrastructure £3.8 million; Plant & Vehicles £4.7 million; Earlston Primary School £6.7 million; Galashiels Academy £15.5 million; Peebles High School £8.1 million; ICT Transformation £6.4 million; Economic Regeneration £4.1 million.

According to Ms Douglas: "Debt Management: The Council continued to maintain its’ under-borrowed position only borrowing £40 million in the final quarter of the year to support capital spend compared to £70 million originally anticipated. This means that the capital financing need was not fully funded by external loan debt and instead internal cash supporting the Council’s reserves, balances and cash flow has continued to be used as a temporary tactical measure. This strategy remains both prudent and cost effective."

The authority's outstanding external debt as at 31 March 2024 was £251 million. The average rate of interest paid on a portfolio of loans was 4.53% while the amount owed to the UK Treasury's Public Works Loans Board [PWLB] increased by more than 15% from £184 million in March 2023 to £212.4 million a year later.

So far as revenue was concerned, the finance director explains savings of £11.5 million were delivered during 2023/24 in order to balance the costs of delivering services and the available resources. 

"Of the savings delivered during 2023/24 £6.6 million (58%) were delivered permanently (down from 74% last year) leaving a balance of £4.9 million (42%) to be carried forward from 2023/24 for permanent delivery in 2024/25. The 2024/25 plan includes savings of £4.4 million giving a total target of £9.3 million in 2024/25. 

"This increasing level of brought forward savings increases the challenge of delivering savings. To date the Council’s approach to longer term financial planning has delivered permanent savings of £85 million in the last 11 years. Ongoing effort will be required going forward to successfully deliver the Financial Plan due to the scale of further savings required in 2024/25 and beyond and the challenges now posed through the current economic position."

Ms Douglas concludes that the operating environment for the Council continues to be very challenging. The Council is faced with a number of financial and economic influences such as increasing demands on services, restricted funding, the ongoing impact of high inflation in key areas and wider labour market factors affecting the Council’s ability to recruit to fill key vacancies. 

These pressures have resulted in significant use of one-off funding during 2023/34 and further use of reserves is planned as part of the agreed budget for 2024/25. To ensure the continued financial sustainability of the Council it must reduce spend across services. 

"The Council, despite ongoing challenges, has met the aims of its Financial Strategy and has delivered record capital spend during 2023/24 whilst also delivering its planned services within budget. Scottish Borders Council remains financially sound and well placed to serve the people of the Scottish Borders in the future."

Costs associated with councillors' salaries and expenses included the following data: total remuneration to 'senior' councillors increased by 9.1% from £388,945 to £424,351 while the overall expenditure on councillors was up by 3.7% from £808,000 to £838,000.

The highest paid staff members [total remuneration including pension contributions and expenses] included chief executive David Robertson £143,873, and directors Jenni Craig (Resilient Communities) £101,229; Clair Hepburn (People, Performance and Change) £101,253; Lesley Munro (Education and Children's Services) £103,964); John Curry (Infrastructure and Environment) £100,146); and Nuala McKinlay (Corporate Governance) £101,032.

There was a 14.9% increase in the number of employees paid more than £50,000 per annum [361 in 2022/23 and 415 in 2023/24].

The financial bills associated with SBC's three Public Finance Initiative (PFI) secondary schools in Earlston, Duns and Eyemouth will total £16.694 million in 2024/25. The figure is made up of Payment for Services £8.6 million, reimbursement of capital expenditure £4.625 million, and interest £3.468 million.

Other longer term liabilities linked to the PFI agreement signed off in 2006/07 amount to £293.469 million including interest payments of £49.331 million.

However, the report points out that flexibility arrangements introduced by the Scottish Government allows councils to undertake 'internal accounting changes' to reprofile the repayments charged to their General Funds over an extended period of time. SBC has taken advantage of this facility.

The draft accounts include a number of provisions which are recognised when the council has a present obligation (legal or constructive) as a result of a past event. The provisions list with estimates as detailed is:

 *Provision for contractual claims is the anticipated cost for remedial works relating to SBc Contracts, the authority's trading entity which carries out roadworks - £50,000.

*Equal Pay Provision - Employment Tribunal proceedings have been raised against the Council by a number of staff relating to Equal Pay - £8,000.

*Historical Legal Claims: Provision relates to civil claims raised against the Council in relation to historical child abuse - £29,000.

*Municipal Mutual Insurance – estimate of outstanding claims relating to the Council following Municipal Mutual Insurance Ltd ceasing operations in 1992 - £310,000.

*Provision for asset decommissioning reflect the Council`s liability for restoration and ongoing maintenance in respect of the Langlee landfill site on the outskirts of Galashiels. This has been provided for based on the net present value of estimated future costs - £3.653 million.