Deputy Leader of Scottish Labour, Alex Rowley MSP has written to the Chancellor of the Exchequer, Philip Hammond MP, asking him to grant a debt amnesty on historic debts owed by councils across Scotland.
Scottish councils face over a staggering £2 billion of pre-devolution debt liabilities, which have a significantly higher rate of return over post-devolution interest rates. However, in the 17 years since devolution, Scotland has sent back a minimum of £3.3 billion in interest to HM Treasury in interest payments only on pre-devolution debt liabilities.
In his letter to the Chancellor, Mr Rowley highlighted work carried out by the trade union Unite into these historic debts. The report from the trade union has shown that pre-Scottish devolution debt liabilities are being paid with a rate of return averaging 8% whereas the post devolution interest rates are only about half of this.
The Scottish Labour politician also drew attention to the fact that these pre-devolution rates were not independently set by the Bank of England but by the then UK Conservative Government.
Mr Rowley has also raised a motion for debate in the Scottish Parliament on the issue which has achieved cross-party support.
Speaking on the issue Mr Rowley said:
“We are seeing councils across Scotland facing cuts from Westminster and Holyrood. This means cuts to local services that can be vital for communities. I believe there is a need for action to address the level of sustained cuts to local government finances.
“If we take action on tackling this historic and outdated debt owed by councils, and the Chancellor agrees to my call for a debt amnesty, we can stop transferring money from one arm of government to another, and instead use that money to invest in our communities.
“Scottish devolution was intended to be a new beginning for Scotland, and as such this historic financial burden imposed by the Conservative government should be dropped. Not only that, but the initial sum has more than been paid back in interest alone in the years since devolution. Instead, we can use this money to try and mitigate the worst of the cuts imposed by the current UK and Scottish governments.”
Copy of motion (S5M-02900) text:
That the Parliament welcomes the work of Unite the Union Scotland in producing its paper, Local Government Finance and the State of the Debt; understands that the paper estimates that Scotland’s local authorities, which includes Fife Council, have around £2.4 billion of pre-Scottish devolution debt liabilities owed to the Public Works Loan Board (PWLB), with an average rate of return of 8%; further understands that post-devolution interest rates paid to PWLB are only around half this; notes that pre-devolution interest rates were not independently set by the Bank of England but by the then UK Government; believes that there is a growing consensus regarding the need for action to tackle local authority debt owed to PWLB; considers that Scottish devolution was intended to be a new beginning for Scotland, and notes the view that the time has come for this historic financial burden to be dropped by the UK Government.