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SECTION 2: OUTSTANDING DEBT
Local authorities often need to provide long term financing for capital projects (such as the building of schools, roads and leisure facilities). Borrowing allows local authorities a flexible, yet largely predictable, method of finance. The Scottish Government monitors local authority borrowing.
Table 10 shows local authority debt totals for the general fund, trading services and the housing revenue account.
General Fund
Debt on general fund services was formerly divided into 'relevant' and 'non-relevant' debt to allow the proper functioning of mechanisms designed to support debt costs associated with non-revenue generating, non-grant supported undertakings. Since the advent of the Prudential Regime in 2004-05, under which local authorities have greater freedom to undertake self-financed borrowing, it is no longer possible to split general fund borrowing into that which is relevant and that which is not. The cost of servicing the majority of the debt, however, is still supported directly through loan charges support within Aggregate External Finance ( AEF). Revenue-generating and Prudential debts are self supporting and the small element of non-revenue generating debt on general fund services that is not relevant for loan charges support within AEF is generally on programmes ( e.g. the Social Inclusion Partnership Fund/Community Regeneration Fund) supported through specific grants.
Trading services & Housing Revenue Account
The costs of servicing debt on local authority trading services ( e.g. piers and harbours) are mainly met through the charges made for these services while the costs of servicing Housing Revenue Account ( HRA) debt are met principally from income from rents and from Housing Support Grant.
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