The Sunday Post has exposed a UK Treasury plan to raise the interest payments levied on local authorities by 1% in order to address the UK’s debts. The plan, if it goes ahead, will cost Scottish local authorities £120 million.
Yesterday the newspaper revealed that Para 2.38 of the Spending Review Document states that all new lending from the UK government’s Public Work Loan Book is now to be charged at 1% above government gilts. The Loan Book is largely used by local authorities to fund building projects.
The increased interest rate is expected to raise £1.3bn across the period of the spending review with a cost Scotland’s public bodies of an additional £120 million in interest payments. Such a loss will impact on councils’ ability to protect front line services.
The revelation has prompted the SNP’s Treasury Spokesperson, Stewart Hosie to write to the Chief Secretary of the Treasury, Danny Alexander, seeking immediate confirmation of the plan. Mr Hosie described the move as ‘sleekit’ and claimed that it would hit the Scottish construction sector.
Commenting, Mr Hosie said:
“This sleekit cut hidden in the Spending Review will pile yet more pain on the public sector bodies across Scotland already having to cope with the UK Government’s hard and fast cuts.
“By hiking up the rate of the Public Works Loan Book, the UK Government are hitting the capital investment budgets of local authorities hard – depriving the construction sector of vital income in these tough times. Councils will have to choose between scaling back building projects or cutting other budgets.”
The Scottish economy out-performed the UK for the last quarter with growth of 1.3%. This was heavily influenced by a construction industry that saw double figure growth. Mr Hosie argued that fiscal autonomy is a necessity if Scotland is to grow her economy and protect jobs and claimed that further cuts to the Scottish budget threatens the Scottish recovery.
Mr Hosie added:
“The Scottish economy continued to grow in Q2 and this was largely down to the strong performance of the building industry. It seems the UK Government is determined to pull the rug out from under the Scottish recovery.
“All of this underlines exactly why Scotland must be given financial responsibility over its own affairs – so we can make sensible decisions which protect jobs instead pressing ahead with these flawed measures which will cost them.”