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Scottish council debt is on the rise - but it's not all bad Scottish council debt is on the rise - but it's not all bad
(about 3 hours later)
Scotland's 32 councils owe a combined £19.2bn to lendersScotland's 32 councils owe a combined £19.2bn to lenders
The amount of debt that Scotland's local authorities are racking up is on the rise.The amount of debt that Scotland's local authorities are racking up is on the rise.
BBC analysis shows the country's 32 councils owe a combined £19.2bn to lenders, up 11% on last year.BBC analysis shows the country's 32 councils owe a combined £19.2bn to lenders, up 11% on last year.
But what does this mean for your council tax bills and the funding of services that we all rely on from our local authorities?But what does this mean for your council tax bills and the funding of services that we all rely on from our local authorities?
The good news is there is something to show for the mountain of borrowing, such as new schools, roads and sports centres.The good news is there is something to show for the mountain of borrowing, such as new schools, roads and sports centres.
But the cost of servicing the debts over the coming years will weigh on ever-stretched public finances.But the cost of servicing the debts over the coming years will weigh on ever-stretched public finances.
Which council has the most debt?Which council has the most debt?
Analysis of data from the Ministry of Housing, Communities and Local Government (MHCLG) by the BBC's Shared Data Unit shows every single council in Scotland had some level of debt during the first quarter of the year, with six authorities owing more than £1bn each.Analysis of data from the Ministry of Housing, Communities and Local Government (MHCLG) by the BBC's Shared Data Unit shows every single council in Scotland had some level of debt during the first quarter of the year, with six authorities owing more than £1bn each.
Across the country, debt per person increased by £352 over the past year, rising from £3,138 to £3,490.Across the country, debt per person increased by £352 over the past year, rising from £3,138 to £3,490.
The City of Edinburgh Council was found to have the highest debt levels of all Scottish councils, owing almost £2bn, the equivalent of £3,800 per person.The City of Edinburgh Council was found to have the highest debt levels of all Scottish councils, owing almost £2bn, the equivalent of £3,800 per person.
Mandy Watt, finance convener at the council, said borrowing was "essential" and major infrastructure projects like the delayed £86m restoration of North Bridge would not happen without it.Mandy Watt, finance convener at the council, said borrowing was "essential" and major infrastructure projects like the delayed £86m restoration of North Bridge would not happen without it.
She said: "It would be like a person with an ordinary income saving up to buy a house in cash instead of taking out a mortgage and all the time they're paying rent and trying to save up at the same time."She said: "It would be like a person with an ordinary income saving up to buy a house in cash instead of taking out a mortgage and all the time they're paying rent and trying to save up at the same time."
Edinburgh's debt increased by 14% in the last year, adding on nearly £250m to borrowing.Edinburgh's debt increased by 14% in the last year, adding on nearly £250m to borrowing.
The figures are a snapshot of borrowing levels as of April this year.The figures are a snapshot of borrowing levels as of April this year.
Ms Watt said: "A huge project that we're doing out at West Granton will provide over 700 homes for families to live in and the kind of commercial buildings you need for it to be a community and a place - but you do have to borrow to do that."Ms Watt said: "A huge project that we're doing out at West Granton will provide over 700 homes for families to live in and the kind of commercial buildings you need for it to be a community and a place - but you do have to borrow to do that."
She said the council did not borrow for day-to-day spending; "We're not allowed to have the equivalent of an overdraft or a credit card to pay for things," she said.She said the council did not borrow for day-to-day spending; "We're not allowed to have the equivalent of an overdraft or a credit card to pay for things," she said.
Where does council debt come from?Where does council debt come from?
It is not just councils in Scotland that owe billions either.It is not just councils in Scotland that owe billions either.
BBC analysis showing debt at UK-wide local authorities increased by 7% from £114.5bn at the end of Q4 2024 to £122.2bn at the end of Q4 2025.BBC analysis showing debt at UK-wide local authorities increased by 7% from £114.5bn at the end of Q4 2024 to £122.2bn at the end of Q4 2025.
The money is largely borrowed from the Public Works Loan Board (PWLB), a lender run on behalf of the Treasury, which allows authorities to take out long-term loans at better rates.The money is largely borrowed from the Public Works Loan Board (PWLB), a lender run on behalf of the Treasury, which allows authorities to take out long-term loans at better rates.
Derek Yule, member of the Accounts Commission, said council borrowing was "certainly not a bad thing" and it was allowing councils to finance projects over a long period of time.Derek Yule, member of the Accounts Commission, said council borrowing was "certainly not a bad thing" and it was allowing councils to finance projects over a long period of time.
He said: "Local government is unique probably in a public sector context in having powers to borrow and in some respects the powers are more flexible that the Scottish government itself where they're very tightly controlled by the Treasury."He said: "Local government is unique probably in a public sector context in having powers to borrow and in some respects the powers are more flexible that the Scottish government itself where they're very tightly controlled by the Treasury."
Is this going to cause council tax to go up?Is this going to cause council tax to go up?
Not directly.Not directly.
It's important to draw a line between the capital budget - which is where the borrowing is happening, for building stuff - and the resource budget, the spending on wages and services which councils have to balance every year.It's important to draw a line between the capital budget - which is where the borrowing is happening, for building stuff - and the resource budget, the spending on wages and services which councils have to balance every year.
For the most part, town halls are not allowed to borrow to balance the books.For the most part, town halls are not allowed to borrow to balance the books.
Where it does come in is paying interest on these loans. That does come out of the resource budget.Where it does come in is paying interest on these loans. That does come out of the resource budget.
So when the council is deciding how to spend your council tax, part of that budget is eaten up by servicing these loans.So when the council is deciding how to spend your council tax, part of that budget is eaten up by servicing these loans.
It's not an enormous chunk of available funds - on average it's about 5% of the budget, but it is rising as borrowing goes up.It's not an enormous chunk of available funds - on average it's about 5% of the budget, but it is rising as borrowing goes up.
And that is ultimately money that can't be spent on other things. It's essentially ring-fenced for the foreseeable future, potentially for 25 years or longer.And that is ultimately money that can't be spent on other things. It's essentially ring-fenced for the foreseeable future, potentially for 25 years or longer.
So councils do have to think very carefully before they commit to borrowing more. They have prudential rules that they have to follow to justify the long-term impact of managing extra debt.So councils do have to think very carefully before they commit to borrowing more. They have prudential rules that they have to follow to justify the long-term impact of managing extra debt.
But ultimately they also need new facilities, from housing stock to schools and roads. That has to be factored in alongside decisions about how to fund bin collections.But ultimately they also need new facilities, from housing stock to schools and roads. That has to be factored in alongside decisions about how to fund bin collections.
Is this increase in debt sustainable?Is this increase in debt sustainable?
Council body Cosla said authorities had been facing increasing financial pressures over the years.
A spokesperson said: "Increased reliance on borrowing places pressure on council revenue budgets that are already under strain, particularly as the cost of construction and borrowing increases.
"Councils need sustainable and flexible multi-year funding, otherwise the scope to continue borrowing to expand on capital programmes will be limited."
As it stands, auditors do not seem hugely concerned about either overall borrowing or the cost of servicing debt.As it stands, auditors do not seem hugely concerned about either overall borrowing or the cost of servicing debt.
On the other hand, they have been very keen for councils to reform services to put them on a more sustainable footing, and investing in better facilities can be part of that.On the other hand, they have been very keen for councils to reform services to put them on a more sustainable footing, and investing in better facilities can be part of that.
The main point is that councils by and large are not as vulnerable to fluctuations in things like interest rates, because the bulk of borrowing comes from the PWLB.The main point is that councils by and large are not as vulnerable to fluctuations in things like interest rates, because the bulk of borrowing comes from the PWLB.
Local authorities also have the flexibility to use the high street if they want, for example if there was a cut in rates which made it cheaper for them to refinance.Local authorities also have the flexibility to use the high street if they want, for example if there was a cut in rates which made it cheaper for them to refinance.
But they are not exposed to huge levels of risk if markets take a turn for the worse.But they are not exposed to huge levels of risk if markets take a turn for the worse.
And the fact they will still be paying these bills years down the line isn't necessarily an issue either.And the fact they will still be paying these bills years down the line isn't necessarily an issue either.
The Accounts Commission offered the example of a new school building - all being well, pupils will still be being taught there in 25 years time, so it's not unreasonable for taxpayers to still be paying for them at that point.The Accounts Commission offered the example of a new school building - all being well, pupils will still be being taught there in 25 years time, so it's not unreasonable for taxpayers to still be paying for them at that point.
Their auditors scrutinise council accounts every year and will be keeping a keen eye out for anything which suggests trouble.Their auditors scrutinise council accounts every year and will be keeping a keen eye out for anything which suggests trouble.