Sources within Scottish Borders council say the Scottish Executive is refusing to pay the penalty charges despite having promised to meet any premiums that arise through the repayment of current loans as part of the transfer process.
Councillors claim the council cannot afford to pay the penalties. They have vowed to stop the transfer from going ahead unless the Scottish Executive agrees to provide the additional funds.
As part of the transfer proposals, the Scottish Executive was expected to write off the council's £62m housing debt. It was intended that the £24m stock purchase price paid would cover the resulting penalty charges for early repayment, estimated to be between £14m and £16m, with excess money contributing to the Scottish Executive's repayment of the main housing debt.
However, according to Sandy Brown, Scottish Borders' head of corporate finance, the Scottish Executive views roughly £1.8m of penalty charges as having come from old loans, for which the executive is not responsible.
A spokesperson for the executive said: "We are confident the matter will be resolved."
The executive's position has been made more controversial by the fact that the executive agreed to cover all of Glasgow council's debts during its transfer of 82,000 homes, the biggest such deal in Scotland.
Just last month the Borders transfer appeared to have reached its final stages when the new landlord, Scottish Borders Housing Association, agreed to raise its valuation of the council's stock to £24m after pressure from the Scottish Executive (HT 12 December, page 14). The plans were passed by the council and sent to Scottish first minister Jack McConnell for final approval, which was expected by the end of January.
Norman Pender, deputy leader of Borders' ruling Liberal Democrat group, said councillors would still be prepared to abandon the transfer process, despite the months of negotiation already carried out.
Source
Housing Today
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