30 January 2020

S5M-19810 Public Works Loan Board Rate

The Deputy Presiding Officer (Linda Fabiani): The next item of business is a members’ business debate on motion S5M-19810, in the name of Keith Brown, on the Public Works Loan Board rate. The debate will be concluded without any question being put.

Motion debated,

That the Parliament condemns the recent UK Treasury announcement of an increase in the rate of borrowing from the Public Works Loan Board (PWLB) by one percentage point; understands that the PWLB lends money to local authorities for community infrastructure projects; is concerned by the implications of this percentage-point hike in interest rates on Scottish councils’ abilities, including Clackmannanshire Council, to carry out crucial infrastructure developments, such as affordable housing, schools, leisure and regeneration projects; agrees with a number of local authorities that this increase is paramount to the UK Government “profiteering at the expense of council tax payers”; recognises the detrimental impact that this move will have on infrastructure projects in Clackmannanshire and Dunblane and other local authority areas across Scotland, and acknowledges calls on the UK Government to reconsider its decision.

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Stewart Stevenson (Banffshire and Buchan Coast) (SNP):

I thank Keith Brown for giving us the opportunity to debate this important subject.

Before I move to the central thrust of what I want to say, I will respond to a few things that were said by Alexander Stewart. He said that the aim is to put a limit on what councils borrow, so why not change the rules on what they can borrow for rather than put costs up? He also said that councils are struggling to service debt. I am sure that increasing the interest rate by 56 per cent will not help them to do that. Under the prudential borrowing rules that councils work within, they will have to reduce the number of projects that they fund by that mechanism by a third in order to pay the same interest as they are currently paying. Therefore, the effect of this small change in terms of the amount of interest that might be paid each year is fundamental to the way in which councils are able to renew public infrastructure.

Let us remember that it is the Public Works Loan Board: the money is for public works. It is simply unacceptable that, in hard times, the UK Government is making it fundamentally more difficult for councils in Scotland—indeed, across the UK—to do what their local communities require. Many councils, including my own, rely on the PWLB.

Last year, £819 million was borrowed, so the increased rate is going to have an impact—members can work that out for themselves. Fife wanted funding for a new campus for Woodmill high school, St Columba’s high school and Fife College. Clackmannanshire and Dunblane needed funding to increase affordable housing and improve their schools. Aberdeen budgeted for £481 million to be spent on capital projects over the next five years, of which £293 million was to be borrowed. All those plans may now be delayed or halted altogether. That is the real, on-the-ground effect. Alexander Stewart said that councils are suffering—how does the increase help them and the communities that they serve?

The underlying cause of the increase—I recognise that it is a valid issue—is illustrated by Spelthorne Borough Council, in Surrey, which borrowed £1 billion. For what? For a school or a community centre? No, it was used for commercial investments. I do not think that any of us would defend that council’s use of the money for that purpose. However, if councils’ doing things like that is the problem, increasing the interest is hardly the solution. The solution is to change the basis on which councils can borrow.

Woking Borough Council, which is also in Surrey, borrowed £1.2 billion, a large proportion of which was used to buy the town’s main shopping centre. Those are risky commercial investments that are not central to public works, the development of new facilities or the improvement of existing ones. The funds are meant for sustainable community development that will directly improve the lives of residents. If a main road requires to be built, a council has to find the money. Borrowing costs are a significant part of councils’ costs—that is for sure—but increasing the PWLB rate is simply going to increase that significant burden.

The PWLB places all authority to determine the usage of its loans on the councils, and most councils behave responsibly. Let us not allow the majority of our councils to be penalised for irresponsible spending by the likes of Spelthorne Borough Council. Let us make a distinction between that and loans being taken out for proper purposes. It is time for the UK Government to rethink the matter and take a different approach to solving the genuine problem that led to this issue.


Stewart Stevenson
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