SCOTLAND’S wealthiest council is being forced to face years of belt tightening to maintain its reserves and absorb cuts in government funding.
Council tax however is likely to stay frozen at 2007 levels as part of the concordat with the SNP government at Holyrood.
Shetland Islands Council tomorrow (Wednesday) is being asked to slash next year’s revenue budget by £16.3 million, through losing staff, reducing grant funding, lowering operating costs and raising more income.
Last month senior councillors and officials identified savings of £11.6 million, but head of finance Graham Johnston has told councillors that a further £6.7 million must be found if the SIC’s funds are to remain healthy.
He has proposed a range of measures including raising the price of school meals, charging pupils for music lessons, hiking ferry fares and cutting staffing levels and overtime.
However he warns that more savings will be needed over the next few years after grim forecasts from Scottish finance secretary John Swinney that support for local government will shrink by three per cent a year for the next six years, a cut of £18 million by 2016 for Shetland.
Government capital funding is looking even worse, with a 40 per cent reduction on the cards for next year.
Mr Johnston said that these government cuts, along with spending pressures, the world-wide financial crisis and “distractions within the council” make this year’s budget setting exercise “more challenging than ever before”.
Adding to the pressure, the eyes of local government watchdog Audit Scotland are trained on the SIC following the difficulties surrounding chief executive Dave Clark, whose departure is currently being negotiated after just eight months in the post. This will put councillors under “exceptional external scrutiny”, according to the finance chief.
The major problems facing the council’s overstretched budget include the cost of introducing single status, which has risen from a projected £4 million to £5.3 million.
Community care is £4.1 million over budget; the school service is over by £1.2 million; children’s services by £1.1 million and transport by £500,000.
Proposed savings include a 15 pence increase in school meals (yielding £20,000); charging £160 a year for music lessons (£130,000); charging £2.70 for meals on wheels (£6,000); and increasing fares by five per cent (£74,000).
Savings of £1.5 million could be made by scrapping 10 per cent of the council’s vacant posts, £240,000 by cutting overtime by 10 per cent and £370,000 by reducing the travel and subsistence budget by 10 per cent.
Other proposals include a three per cent cut in discretionary grants and in maintenance budgets, replacing the essential car users allowance with a standard mileage rate, and introducing efficiency measures.
In his report to today’s full council meeting, Mr Johnston said: “As much as possible has been done to minimise the effects of these proposals, but there can be no doubt that there will be some adverse effect on services, service users, employees and the wider Shetland economy.
“The scale of the problem makes it impossible to maintain the council’s sustainable financial policy framework without having these adverse effects to some degree.”
He added that implementing these measures would be “very challenging” and would require “resolve and close collaboration between councillors and corporate managers”.
He added: “Members should be in no doubt that the implementation of many of the measures referred to above will have a significant impact on staffing levels (there is no possibility of achieving the savings required without such impacts).
“For the moment it is envisaged that the results will be achieved by not recruiting into vacant posts, but that is something which will have to be carefully monitored and controlled during 2010/11, requiring the vigilant engagement of corporate management and councillors, either through the proposed finance committee and/or full council.”
By freezing council tax the SIC will benefit from an extra £256,000 as it has for the past three years, which is the equivalent of an increase of 3.2 per cent.
Next year Mr Johnston says the council is likely to be looking for savings of £7.815 million, going up to £8.906 million in 2012/13. By that time the council should have reduced its draw on the reserve fund from £2 million to zero.
“If the current service growth trends are not addressed then the ability to fund future capital programmes from our reserves will be jeopardised,” he said.
Forward planning will be a priority to meet the “known and agreed future expenditure growth”, especially in community care.
“Given the council’s aspirations to meet those demands as fully as possible, there will have to be real progress on substantially cutting expenditure elsewhere, which strongly implies the need to secure savings from the Education Blueprint exercise (to mention only one highly salient and significant area),” Mr Johnston said.