Page last updated at 13:22 GMT, Tuesday, 11 November 2008

Downturn squeezes council budget

Bank notes
Glasgow City Council said it was not immune from the global downturn

Scotland's largest council will have to break into its 144m cash reserves over the next three years to meet spending commitments, it has emerged.

Glasgow City Council blamed the move on "a perfect storm" of rising costs and falling revenue amid the global economic downturn.

Cash reserves will help the authority pay for new schools, nursing homes and projects for the Commonwealth Games.

A report on the council's finances will go before members on Friday.

City treasurer Councillor Stephen Curran said Glasgow was "not immune" from the current global economic difficulties.

"The perfect storm of inflation added to the credit crunch means there are significant pressures on our budgets which we will have to deal with," he said.

"If we do not, we will see our reserves cut to an unacceptably low level.

"Over recent years we have taken difficult decisions which have allowed us to put money in the bank for a rainy day and it's certainly raining now.

"While things will still be bad, they will be significantly better than they might have been."

Surplus property

In a report, due before the executive committee on Friday, councillors will be told that "gross expenditure on the current investment programme" will rise from 650m to 900m over the next three years.

The report states that this is down to infrastructure developments for the Commonwealth Games in 2014, new schools and residential homes for the elderly.

The council had hoped to meet these costs by creating a company to sell surplus property and land.

But it has now had to suspend these plans in the face of falling land values triggered by the slowing property market.

This has meant the council will now have to agree "bridging funding from the capital fund until market conditions improve".

A council spokesman said the authority was hoping, like everyone else, for a quick recovery.

But he conceded that if the world economy had not bounced back in "three to four years' time", there was a possibility its capital reserves would be exhausted.

This, in turn, would make it difficult for the council to meet its current level of commitments.

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