Council hopes accounting move will bring in millions to plug £60 million blackhole

Highland Council is looking at an accounting move that would increase its long-term debt but provide a short-term windfall that could help the local authority dig it out of its £60 million budget blackhole.

The local authority is desperately casting around – even asking the public for ideas – for ways to plug that shortfall in funding for 2024/25 and £113 million over the next three years to balance the books.

And time is beginning to run out to offset major service cuts and even redundancies which have not been considered for years as the Scottish Parliament is likely to finalise its budget around mid-February and the council to follow shortly after.

So the council is considering extending its debt on three Public Private Partnerships which funded school building across the region – that would garner £68 million in the short-to medium term and estimated at £6 million a year.

But that so-called “accounting flexibility” would add £146 million in loan charges for the already debt-mired local authority by extending the time period on those PPP contracts from 25-30 years to 45 years.

Even the £146 million estimate is variable as it would depend on what the credits are used for so theoretically that figure could rise.

The leader of the council Raymond Bremner said: “It’s important to realise this accounting flexibility is not a magic solution to the council’s financial challenges.

“The council is still faced with a budget gap over three years of £113 million, and the increase in council reserves won’t solve that challenge. The council is still faced with difficult choices in how it balances its budget in a sustainable way.

“That will require recurring budget savings, cost reductions and income generation, not a one-off use of reserves.

“The accounting flexibility can however assist with how the council addresses that financial challenge by giving scope to use reserves to redesign how we deliver services and transform our operating models.”

Convener Bill Lobban added: “Accounting flexibilities are another tool in our toolbox which we can use to get the best use of all our resources and help to minimise the impacts of our budget gap.

“This particular tool is akin to having an increase of credit limit on a credit card but as we all know, there are interest costs involved in using that credit. I am sure members will give careful consideration to this matter when it comes before them.”

Do you want to respond to this article? If so, click here to submit your thoughts and they may be published in print.