Local Government Finance and the State of the Debt Debate

Debt Amnesty Campaigners


I met with a group of Unite campaigners who came through to Parliament before my Member’s Debate on local government finance and the state of the debt.

In the debate I called for a debt amnesty on pre-devolution council debts owed to the UK Treasury.

I have to say the SNP Government response to this debate is a real worry. Can you imagine if throughout the history of the Labour and Trade Union movement the leadership had said every time they wanted to fight for something “it is unlikely the Tories will agree so we will not bother” for that is exactly what the SNP government are saying on this question of a debt amnesty.

They are saying the Tories won’t agree so we won’t bother!

The advances of working people have been won through fighting the ruling classes – we never got anything from them without a fight.

Minister for Local Government & Housing Kevin Stewart MSP said in the debate: “We need to be mindful of the likely UK Government reaction to such a request. I do not think that it would be particularly favourable…I think that all members know, sadly, that the reality is that there would be a very negative reaction from the UK Government…We also have to bear in mind that, had the councils chosen to borrow on a repayment method, the value of the outstanding debt and the associated interest costs would now be lower. Local authorities have had borrowing powers for a significant number of years, and borrowing decisions are rightly made by each local authority, as Mr Adam pointed out. Central Government does not require them to borrow; it is a decision that they take for themselves.”

I really despair if this is the approach to the big issues and challenges from the SNP and I really do have to wonder why on earth anyone would think this party is left of anything.

Around £2.5 billion of Scottish council debt owed to the UK Treasury’s Public Works Loans Board dates back to pre-devolution. Interest rates on these pre-devolution debts are around 8% but interest rates on post-devolution debts are around 4% which is the standard rate for a 30 year Public Works Loans Board loan.

I made it clear that I would like to see the Scottish Government make direct representation to the UK Treasury on the issue of all pre-devolution council debt owed.

Scottish residents are paying 50% more interest on pre-devolution debt to the UK Treasury than we are on post-devolution debt.

This means Scottish local governments are spending the equivalent of 44p in every £1 of council tax collected from Scottish residents on servicing debt liabilities – Unite Scotland estimates 10p of this in every pound derives from outstanding pre-devolution liabilities.

It means that in the 17 years since devolution, Scottish councils have sent back a minimum of £3.3 billion to the Treasury in interest payments on pre-devolution debt liabilities alone.

So on the grounds of fairness I suggest we have a strong case for pursuing an amnesty and I hope that this parliament and the government in Scotland will join the campaign and make the case to the UK government for this to happen.

I previously wrote to the UK treasury who responded indicating that they would not be pursuing calls for a debt amnesty, but as I said before, we never got anything without a fight, so we must continue to pursue this.

We know an amnesty is a matter of political will. Councils across the UK have been renegotiating debt, as well as interest rates, and making massive savings with private lenders, so the idea that the UK Treasury cannot do this is fanciful.  Let us firm up our position and our resolve to fight the case for a debt amnesty.




See the full report from Unite the Union: http://www.unitetheunion.org/uploaded/documents/Debt%20Amnesty%20Paper%20Final11-29087.pdf

Post Author: Alex Rowley