Home BusinessFinancial Scots council paying back £1.5bn private finance deal on historic buildings to fund equal pay scandal

Scots council paying back £1.5bn private finance deal on historic buildings to fund equal pay scandal

by Paul Morgan

Glasgow City Council is facing a staggering finance package of £1.5 billion to settle equal pay claims. As part of the deal, the council will pay £770 million to rent its own buildings over 30 years. To facilitate the deal, the council has entered into a sale and lease-back agreement with a tax haven-based finance company. The agreement includes the sale of the historic City Chambers headquarters and the Kelvingrove Art Gallery. The cost of rent payments is expected to rise from £32 million per year to over £70 million per year by 2050. The council will have to cut services and charge residents to meet the increased costs. Assured Guaranty, a Bermuda-based finance company, has facilitated £220 million of borrowing for the deal.

The equal pay claims stem from a settlement reached last year between the council and 19,000 workers who had been unfairly paid. The settlement was reached after it was revealed that female-dominated jobs, such as working in school canteens, had historically attracted lower wages compared to male-dominated sectors, such as refuse collection. Glasgow City Council agreed to pay £550 million in 2019, and an additional £220 million last year to settle the claims.

To fund the settlement, the council established “arms-length” companies and sold off valuable property assets. These companies, which are ultimately owned by the council, obtained loans totaling £759 million from private finance firms. Initially, total rent repayments for the buildings were estimated to be around £32.1 million per year. However, it has now become apparent that the total cost will be much higher. By year 30 of the deal, annual rents are expected to exceed £70 million. The total repayment for the first loan of £550 million is estimated to be around £938 million, while the second loan of £220 million will cost taxpayers £608 million.

Critics argue that the council’s decision to mortgage off valuable buildings and incur such exorbitant costs is an unfortunate consequence of the equal pay settlement. They point out that the deal will have a lasting impact on local government finances and may result in service cuts and increased charges for residents. Furthermore, the fact that a significant portion of the fees for the deal will go to financial firms headquartered in tax havens has drawn criticism.

Glasgow City Council defended the deal, stating that it was necessary to address the pay inequality that had persisted for years. Council leader Susan Aitken acknowledged the high price of discrimination but said that it was essential to right an “egregious wrong.” The Scottish Government highlighted that councils are responsible for meeting their legal obligations to employees and stated that they are working to support local authorities and ensure adequate scrutiny.

The financial implications of the deal are expected to be significant for Glasgow City Council. It will take decades before the council can own its buildings again, and the cost of rent is expected to have a substantial impact on the council’s budget. The deal has also raised concerns about the role of tax havens in financial transactions and the impact on local government finances.

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