Unite calls for Scottish councils to be relieved of pre-devolution debt

Scottish councils are in the grip of a “toxic cocktail” of austerity and debt that could damage services in way not seen since the 1980s, according to Scotland’s largest union.

Unite today gained the backing of the Scottish Trade Union Congress (STUC) for its campaign for a debt amnesty for Scottish councils as part of a package of measures aimed at easing the financial crisis facing Scotland’s local authorities.

Speaking at the STUC conference in Dundee, Unite local government representative Charlie McDonald called for the wipe out of £2.5bn of pre-devolution debt owed to the UK Treasury Public Works Loans Board, which in 2015-16 resulted in payments of £195m to the Treasury by Scottish local authorities.

He said cancellation of the debt should be part of a package of measures to address the current financial crisis facing Scotland’s councils, including consideration of how public sector debts such as PFI could be eliminated or refinanced and greater flexibility for councils to use their capital budgets. 

Unite’s campaign is being backed by Scottish Labour. The shadow Scottish secretary, Ian Murray, has written to the Chancellor of the Exchequer, George Osborne, asking him to consider reducing the rates of interest currently being paid by local authorities on pre-1999 debts.

In his letter, Ian Murray said: "I would urge you to give serious consideration to the request from Scottish local authorities and the Unite union to grant an amnesty on outstanding pre-devolution debt liability. This request has my full support, and that of the Scottish Labour leader, Kezia Dugdale.”    

Murray added: “Given the current financial parameters within which Scotland’s local authorities are being forced to operate, payments on this scale are both unfair and unsustainable.”  

"The new powers transferred to Scotland by the Scotland Act will greatly enhance the Scottish Parliament's control over our public finances.

“However, if this is truly to represent a clean break from the past and a fresh start for Scotland, relief should be granted on pre-devolution debt liabilities that continue to impose an unwarranted burden of debt on Scottish local authorities.”

Unite estimates that Scottish local authorities have paid back over £3bn in interest on pre-devolution debt since 1999.

Research conducted by Unite has shown that Scottish local authorities owe a total of £2.4bn in pre-devolution debt, on which they are paying an average rate of return of eight per cent, with some paying up to 10 per cent.

Since devolution in 1999, the typical rate of return on loans from the Public Works Loans Board has been around four per cent, according to Unite.

Unite Scottish secretary Pat Rafferty said: “It is scandalous that some councils are paying interest rates of over 10 per cent resulting in 10 pence in every one pound of council taxpayer’s money being funnelled from vital services to pay outstanding pre-devolution liabilities.  

Scottish councils are in the grip of a “toxic cocktail of austerity and debt” that could damage services in way not seen since the 1980s, he said.

“With 40,000 Scottish local government jobs gone since 2010 and a further 15,000 under threat because of the Scottish Government’s £600 million cut to local authority funding, now is the time for politicians of all parties to follow Scottish Labour’s lead and back our call for a debt amnesty,” he added.