Glasgow City Council will pay a staggering £1.5billion to rent its own buildings over 30 years to settle £770million of equal pay claims.
And a tax haven-based finance company is being used for a part of the deal which sees the sale and lease-back of its historic City Chambers headquarters and landmark Kelvingrove Art Gallery.
A Sunday Mail investigation has lifted the lid on the crippling finance package for the first time including how:
- Rent payments of around £32million a year will rocker to over £70million a year by 2050.
- Council services will be axed and residents charged and taxed to pay the bill.
- Bermuda headquartered Assured Guaranty has brokered £220million of borrowing.
- The council will eventually pay over £1.5billion in rent to service loans of £770million.
- Rent for Kelvingrove Art Gallery alone – for now a free to use facility – will be over £4million a year.
- Desperate council leaders have even had to sell off newly built primary schools and state-of-the art sports facilities.
Lib Dem economy spokesman Willie Rennie said: “It’s simply adding insult to injury that not only are Glasgow residents seeing the architectural crown jewels of their city sold off but that fees for doing so will be flowing to financial firms headquartered in tax havens abroad.
“It will be decades before the council owns its own buildings once again. That’s a depressing state of affairs that speaks to the parlous state of local government finances.”
Glasgow finalised the second phase of a £770million settlement with 19,000 workers who had been unfairly paid last year.
At the heart of the dispute was the fact female dominated jobs like working in school canteens had historically attracted a lower wage than male dominated sectors like refuse collection.
In 2019 the local authority finally agreed to pay an astonishing £550million and then last year a further £220million was added.
In order to meet the cost, the council set up a network of “arms-length” companies and sold off its most valuable property assets.
The companies – which the council ultimately owns – have then struck loan agreements totalling £759million with private finance firms.
Total rent repayments for the buildings in initial years will be around £32.1million.
But when we asked Glasgow City Council to give the total amount to fund the deal over its 32 years term they failed to give a figure.
It was only after the Sunday Mail analysed details of the lease agreements and rent increase stipulations that the true colossal cost became clear.
By year 30 of the deals total annual rents will be in excess of £70million.
The total repaid for the £550million loan is likely to be around £938million while the second deal to borrow £220million will cost taxpayers £608million.
This second loan struck in 2022 appear to have attracted less favourable rates due to the worsening economic situation.
A council source said: “Nobody is suggesting that the workers, mainly women, who are receiving payouts are not entitled to them, however the financial impact of this will be felt for decades.
“The council is effectively mortgaging off all of the valuable buildings it owns, putting them up as collateral for £759million of commercial loans.
“A tax haven headquartered firm will be cashing in on part of this deal, and a total £1.5billion in rental payments for the luxury of the council using its own buildings will flow into the coffers of a number of private finance firms rather than funding municipal services.
“The alternative would have been the council effectively declaring itself bankrupt like Birmingham.
“The cuts are already being made and they are going to accelerate and deepen to the detriment of thousands of people who live in the city.
“The other side of this is that the council is going to need to squeeze every last penny of revenue out of the public.
“That is likely to come through increased council tax bills, the introduction of congestion charges, parking charges, fees for renting football pitches or charging for entry to galleries, parks and museums which has been free until now.
“There is no guarantee that this is over either, but when the next crisis hits there will be nothing left to sell off.”
The latest round of deals was struck through Assured Guaranty (UK) Ltd, a firm which is ultimately headquartered in the notorious tax haven of Bermuda.
The £220million raised involved mortgaging off a slew of the city’s most treasured and valuable buildings including Kelvingrove Art Gallery, the Kelvin Hall and Gallery of Modern Art.
Two newly built schools – Sighthill Community Campus and Gowanbank Primary School – were also sold to finance the deal. They were recently completed for around £20million each.
Assured Guaranty accounts filed with companies house state that Brexit, Covid-19 and the war in Ukraine had left the UK economy ravaged by inflation and high interest rates.
However it added: “a rising interest rate is regarded as favourable to the company” because “cost inflation can be passed to customers”.
Assured Guaranty’s CEO Dominic Frederico is understood to have earned around £12million last year.
Glasgow City Council said the firm was “guaranteeing” the loan while two further companies – Phoenix Group and Abrdn – were supplying the finance.
The first tranche of £550million in 2019 was supplied by Assured Guaranty along with LGIM Commercial Lending Limited and Canada Life Asset Management.
For those loans properties sold off included recently built state of the art sports facilities Tollcross International Swimming Centre and the Emirates Arena and Scotstoun and Bellahouston Leisure Centres.
Cultural venues included the SEC Armadillo, Riverside Museum Cultural and Glasgow Royal Concert Hall.
It recently emerged Glasgow was considering introducing a £15 congestion charge for driving into the city centre and there have been reports of fees are being considered to enter the west end’s Botanic Gardens.
Council tax is to rise by five per cent and services are being cut while costs are increasing for many of those that remain.
The Lib Dem’s Willie Rennie added: “For years the SNP and their green allies have passed budgets that take an axe to the budget for local government.
“Perhaps its time that the nationalists in power in Glasgow pushed back against the nationalists in power in the Scottish Government and urged them to pick a different path.”
Several other Scottish Councils including Dundee, Fife and South Lanarkshire also have ongoing equal pay disputes with staff.
Leader of Glasgow City Council, Susan Aitken admitted the prime of the deal would be high but insisted it was necessary to right an “egregious wrong”.
She said: “I made it a priority to put right years of pay inequality in Glasgow. I’m very proud of the progress we have made and to be nearing the end of what has been an enormous challenge.
“The price of discrimination is a high one and Glasgow will be paying it for a long time.
“However, if years of fighting women workers that were seeking justice was perhaps the worst thing this council has done; then I believe the effort over the past five years to bring us to this point has been among the best.
“It has been a hard road. It has been fraught and it has been painful at times – but it has been essential to right an egregious wrong.”
A Scottish Government spokesperson said: “Councils are responsible for meeting their legal obligations to their employees, including on equal pay.
“In addition to the real-terms increase to local government revenue funding this financial year, we are working with COSLA on a new fiscal framework for local authorities alongside considering how best to continue to support them and make sure there is adequate scrutiny where necessary.”
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