South and East Ayrshire councils are carrying almost £1 billion of debt between them, with both among the UK’s most indebted local authorities on a per-resident basis, according to a new analysis of council borrowing and liabilities.
Research by the TaxPayers’ Alliance, a campaign group which advocates for lower taxes, found South Ayrshire Council has total debt of £472.3 million, while East Ayrshire Council’s debt stands at £498.4 million.
The figures equate to around £4,208 per resident in South Ayrshire and £4,103 per resident in East Ayrshire, placing both authorities towards the higher end among Scotland’s 32 councils.
Neighbouring North Ayrshire Council’s debt was listed at £425.9 million, equivalent to around £3,178 per resident. Measured on a per-resident basis, South and East Ayrshire also rank among the 22 most indebted local authorities across the UK.
Councils defend borrowing practices
Both councils stressed, however, that their borrowing complies with national prudential rules and is used to fund long-term investment rather than day-to-day spending.
A South Ayrshire Council spokesperson said: “The figures relating to our council are accurate. We echo the comments made by CIPFA and add that we comply with the requirements of CIPFA’s Prudential Code to ensure any debt is affordable. The council’s financial sustainability is assessed and reported on annually by our external auditors.”
An East Ayrshire Council spokesperson said the authority had delivered a £1 billion capital programme over the past 15 years focused on education, economic growth, housing and roads infrastructure.
The spokesperson said the council had recently reviewed its capital programme alongside its Treasury Management Strategy and Annual Investment Strategy to ensure borrowing remained within agreed prudential indicators. They added the reports provide assurance that the council’s borrowing is “affordable and sustainable” and that monitoring of debt forms “an integral part of the council’s overall approach to financial management.”
Expert caution on headline debt figures
Finance specialists caution against judging councils solely on headline debt figures. The Chartered Institute of Public Finance and Accountancy (CIPFA), whose Prudential Code governs local authority borrowing, says councils should borrow only where it is affordable, prudent and sustainable.
Most council borrowing funds long-term investment in assets such as schools, housing, roads, bridges, leisure facilities and regeneration projects, with repayments spread over many years rather than being used to finance day-to-day services.
Sources of borrowing
Another important factor is where the borrowing comes from. Across the UK, around three-quarters of the borrowing included in the analysis comes from the Public Works Loan Board (PWLB), the long-established government lending system used to finance public infrastructure. Among Scottish councils, that rises to almost 80 per cent.
East Ayrshire’s borrowing is particularly concentrated in PWLB loans, which account for 86.6 percent of its debt, while South Ayrshire’s figure is 71.6 percent.
Headline debt figures can also include more than traditional borrowing. Depending on accounting rules, they may incorporate long-term lease liabilities, historic finance arrangements and other balance sheet obligations. For example, East Ayrshire Council’s latest audited accounts report long-term borrowing of around £441 million, while the TaxPayers’ Alliance analysis records overall debt of almost £498 million, indicating the total includes wider long-term liabilities.
Comparisons between Scotland and England
Comparisons between Scottish and English councils should also be treated with caution because they operate under different systems of local government. Scotland’s councils are responsible for delivering almost the full range of local government services, including education, roads, planning, waste collection and many health and social care functions. In much of England, many of the most expensive services are delivered by county councils rather than district councils, meaning direct comparisons can be misleading.
Even allowing for those differences, however, South and East Ayrshire remain among the more indebted authorities when debt is measured on a per-resident basis.
Audit Scotland highlights growing reliance on borrowing
Audit Scotland has also highlighted councils’ increasing reliance on borrowing to fund capital investment while facing growing demand for services and continued pressure on day-to-day budgets. Its latest financial bulletin says debt servicing costs are becoming an increasingly important element of financial planning as repayments compete with spending on priorities such as education, social care and maintaining ageing infrastructure.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “The mountain of local authority debt is a ticking time bomb for taxpayers who will ultimately be left holding the bag. Decades of speculative investments, reckless borrowing and statutory obligations from Westminster have left councils stuffed to the brim with debt, while basic services like fixing potholes have been neglected. Local authorities need to urgently get a grip on their debts before even more end up going completely bust.”
