The mountain of debt owed to the UK Treasury by Scottish councils has topped £11billion for the first time after huge increases in borrowing last year.
Local authorities in Aberdeenshire, Highland and Perth and Kinross have seen some of Scotland’s biggest increases in 2021/22, helping to add £722m to the overall bill.
This marks a return to rising debt levels after the trend temporarily reversed in the first year of the pandemic as spending on major construction projects came to a halt.
As well as restarting work on large-scale schemes, local authorities said the increase in borrowing was the result of efforts to “protect them in the future” from potential interest rate hikes, passing from short term loans to longer term fixed rate loans.
Councils regularly borrow money to invest in capital construction projects such as new schools, recreation and cultural facilities, flood defences, offices and roads.
One of the main sources of funding is the Public Works Loan Board (PWLB), which is managed by the UK Debt Management Office on behalf of the Treasury.
Newly released PWLB data shows a £120million increase recorded by Aberdeenshire council, with its outstanding debts rising by 22% from £533million in 2020/21 to £652million at the end of the year. end of last month.
The cash figure was topped only by a £154million raise to Edinburgh City Council, which owed the most, at £1.2billion.
Highland Council, which has the fourth highest level of overall debt to the PWLB among Scotland’s 32 local authorities, has increased its total by more than £92m to £791m.
In Perth and Kinross, the value of outstanding loans climbed from £77.5m to £568m, while that of Fife rose by £38m to £578m and that of Dundee City rose by just over £20m to almost £481m.
Figures show Aberdeen City Council’s PWLB debts rose by £30m to £510m last year, while Angus Council’s rose by £1.5m at £112m.
Moray, Argyll and Bute, Western Isles and Glasgow City were among a dozen councils that bucked the trend by reducing the total amount they owed last year, when there was no change to the islands Orkney and Shetland.
Concerns have been raised in recent years about the increasing level of council debt, including the risks of investing in commercial property, as well as the need to make loan payments from day-to-day budgets for services.
Prior to the pandemic, the amount owed by Scottish local authorities had increased in each of the previous four years, from £8.8bn at the end of 2015/16 to £10.6bn in 2019/20.
This included a sharp rise of almost £1bn between 2018/19 and 2019/20, linked to a 1% rise in Treasury interest rates.
The upward trajectory was interrupted in 2020/21 as the pandemic caused work to halt on key construction projects.
The 32 authorities were able to reduce the combined amount they owed from around £10.63bn to £10.35bn.
However, new figures show the total has risen in 2021/22 to £11.07billion.
Mary Beattie, Aberdeenshire Council’s Chief Financial Officer, said: “In 2021/22 Aberdeenshire Council advanced some major infrastructure projects, including the new Energy for Waste plant, our housing improvements and our new housing project which account for part of the increased borrowing.
“We have also worked to ‘future-proof’ some of our borrowings against any potential rise in interest rates.
“This means that we have essentially ‘consolidated’ existing short-term variable borrowings at a fixed rate with the Public Works Loan Board”
A Highland Council spokesperson said: ‘The increase in PWLB is the result of the council taking advantage of low long-term interest rates and replacing previous short-term loans with long-term loans of the PWLB.
“Borrowing activity is reported regularly to the Resources and Finance Committee.”
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[Scottish council debt to the Treasury soars over £11billion for the first time]