South Ayrshire in debt to the tune of £190m

Figures released this week have shown local authority, South Ayrshire Council, has a net debt of an astonishing £190m.

However, finance bosses at County Buildings in Ayr insist that the level of debt is affordable when measured against their level of assets.

The Accounts Commission’s findings show that for the year 2013/14 the council’s debt had risen to £190m.

This represents a 3.6% increase in the level of debt over the last decade since data was published in 2003/2004.

Overall the 32 councils across Scotland have a total debt of a staggering £14.8bn which is the equivalent of £6,166 per household in the country, more than double the English equivalent of £3,100 of debt per household with Welsh households calculated at £2,825.

South Ayrshire’s net debt level is in fact the third lowest in Scotland but still presents a worrying trend that council chiefs are borrowing money to fund projects like new schools, road improvements and plans for new social housing.

Council bosses say that they have been far more prudent in their investment decisions over the last decade.

Tim Baulk, Head of Finance and ICT for South Ayrshire Council said: “In 2004 regulations on capital expenditure in local authorities changed with the introduction of the Prudential Code. This has allowed local authorities the freedom to take decisions on investing in local communities and take borrowing decisions for capital financing within the framework of sound financial plans. “We have been far more prudent in our investment decisions, making sure any decision is affordable and sustainable thereby keeping the debt charge costs under tight control.

“In the ten year period since April 2004 we have invested nearly £236 million in our buildings, infrastructure, housing stock and other assets, funded through capital grants from the Scottish Government, revenue contribution from services and borrowing.

“Borrowing decisions to support capital investment are made within the context of our financial strategy and capital investment programme, where it is deemed affordable in revenue terms and is sustainable in future years.

“The level of net debt held by us, around £190 million, is considered prudent and affordable when compared to the value of assets held.”

The Accounts Commission say that borrowing is a necessary tool, but that the debts whatever they have been used to fund will need to be payed back.

Annual repayments to the Scottish Government’s non-profit distribution (NPD) public-private partnership debt and its private finance initiative (PFI) predecessor is predicted to rise from £488 million to £600 million by 2024/25, the Accounts Commission said.

The Accounts Commission said: “Annual interest and debt repayments have increased from £946 million in 2009/10 to £1.5 billion in 2013/14, with repayments for PFI and NPD contracts totalling £488 million in 2013/14 and thereafter predicted to peak at around £600 million per year between 2024/25 and 2027/28.

“Population projections indicate that there will be increasing demand for council services at the same time as financing charges are anticipated to peak.”

The percentage of over 65s in Scotland’s population is expected to rise from 17% to 25% by 2037 putting an increased strain on social care and housing.