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Council finances

I am interested in the comments of councillors on the method to finance public projects, known as the public finance initiative.
When the scheme was introduced by the Tories, it was condemned by Gordon Brown in no uncertain terms. As soon as he became Chancellor he made it almost the only way public authorities could finance capital development. The result has been heavier burdens on the public purse and to vastly increase profit to the private sector. For many years councils were able to borrow at a favourable rate of interest from a government-promoted agency. The council owned the asset. While there are differences in the detail of private finance schemes, the basic factor is that the ownership of the building is with the private company who charges a rent for its use. The rent is a great deal higher that the loan charge that applied under the earlier arrangements. The health service is affected. When the Scottish Government decided to abolish car parking charges for visitors to patients it found that it could not for the Royal Infirmary since the building belonged to the builder who received the parking fees. I do not know the position in Scotland but in England a number of wards have been closed in order to meet the budget. The system has been condemned by the British Medical Association. A council may in rent pay equal to six times the cost to erect a building. Had the older means of financing been applied some of the cuts in public services would have been avoided. Like all other councils Midlothian had either to build its new schools by this method or nothing at all. All councils should have made the sharpest possible protest and made the public aware of their problems. Within the political parties there should have been opposition. An authority at Edinburgh University has conducted long-term research and the information is devastating.The finance system was changed to comply with a directive from the European Union. Member states are prevented from borrowing above a fixed level of resources. Capital borrowing by local councils is included in the restriction.
Paying rental charges out of revenue is a means of escaping the restriction. It is an absurd and artificial way of harmonising the different countries.

David Smith

Hunt Close, Dalkeith

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