Times are hard for local government, north and south of the Border.

Whether you accept or deny that budget cuts are necessary, there is no longer room to doubt that strains are beginning to show. All the "easy" economies have been made. Local politicians argue, with reason, that the knife is striking bone.

One justification offered by the Conservative Government is that we have no right to saddle future generations with our debts. The sentiment makes sense. But what if the debts are not, in any normal sense, of our making? And what if historically low interest rates present a golden opportunity to remedy past mistakes? "Debt restructuring" is common enough in the world of business. What hinders its application in local government finance?

The Private Finance Initiative (PFI) and suchlike infrastructure schemes always gave off the faint odour of something slightly rotten. Their resemblance to poor higher purchase deals was remarked upon often enough when new Labour was more interested in the prize of new schools and hospitals than in the price. The price was, and remains, monumental.

Where Scottish councils busy laying off thousands are concerned, the figures are indeed staggering. Half a billion pounds a year and rising in repayments; £4 billion in capital projects since 1999 for which the final cost will be £17bn; debts which will indeed fall on the next generation. So what can be done?

Typically, there is a thriving market in the sale and resale of PFI and other such contracts. One result is that taxpayers can never be entirely certain who is making vast returns from their new local hospital or new school. Another consequence, entirely unaffected by government austerity, is that the contracts once promoted by Gordon Brown are these days being bought with cash borrowed on the markets at fantastically low rates.

The Bank of England base rate is currently 0.5 per cent; varieties of "internal rate of return" (in Treasury jargon) on PFI schemes can give investors actual returns exceeding 40 per cent. Already, fully two per cent of the NHS budget in England and Wales is devoted, reportedly, to making annual payments to PFI consortia. Scotland's councils are staring into the same abyss. With an impending annual bill of £600 million this is, in any normal sense of the word, unsustainable.

A few examples from England involving health boards and councils offer an alternative. The idea is simple enough: take advantage of low interest rates and buy out onerous PFI contracts before it is too late. The savings, like the profits, could be enormous. Some consortia might not be keen to sell. Certain ideologues might dislike public sector intrusions on the dream of a privatised world. But if money talks and also happens to make sense, attention should be paid.

In England, there have already been examples of health trusts going bust, in part because of unaffordable PFI costs. Should Scottish local government be risking the same fate, or play the market at its own game?