A new Accounts Commission report published on 19th March 2015 says councils need to make better use of information to clearly set out the impact of borrowing in the longer term to help councillors make informed decisions and undertake their scrutiny roles.
Borrowing is a major source of funding for councils to invest in key services like schools or roads. Councils are meeting professional requirements but need to do more to set out the longer term implications of borrowing and other debt on their finances.
The report says total councils’ debt from traditional borrowing now stands at £12.1 billion and has changed little over the last three years. Just over half of councils have increased their borrowing levels over the last decade. Councils have other debt of £2.7 billion from Public Private Partnerships, bringing total debt to £14.8 billion. This report focuses on council borrowing but its messages and recommendations could apply to all debt.
Fife Council – Financial facts
- Borrowing – £728.6m, Borrowing is long and short-term borrowing from council audited accounts at 31 March 2014.
- Fixed Assets – £2,151m, Fixed assets is the value of long-term tangible fixed assets, such as buildings and equipment, and long-term intangible assets such as software, from the audited accounts at 31 March 2014.
- Investments – £3.1m, Investments includes long and short-term investments, investment property where relevant, and cash and cash equivalents from the audited accounts at 31 March 2014.
- Cash Reserves – £90.6m, Cash reserves is the total usable reserves of the council, from the audited accounts at 31 March 2014.
- General Capital Programme – £532.2m (2013-23), The length of councils’ capital programmes can vary and spending is phased over the length of the programme. The timeframe of each council’s programme is given in brackets
- Housing Capital Programme – £390.4 (2013-23), The length of councils’ capital programmes can vary and spending is phased over the length of the programme. The timeframe of each council’s programme is given in brackets
Fife Council – Key Facts
Borrowing makes up 90% of the council’s total debt.
The council has borrowed £165m since 2008/2009. The level of borrowing has remained static compared to ten years ago.
Almost two-thirds of borrowing needs to be repaid in 40 years or more.
Douglas Sinclair, chair of the Accounts Commission, said:
This is a highly complex technical area. Councillors don’t need to know every detail but they do need to know enough to ask the right questions. This is a critical part of council business which requires close and effective scrutiny, particularly in times like this when budgets are so tight.
The report highlighted that scrutiny needs to be improved through better training for councillors, cutting out jargon to make reports clearer, and ensuring governance arrangements are solid.
To view the full report, visit: http://www.audit-scotland.gov.uk/docs/local/2015/nr_150319_borrowing_treasury_management.pdf