SHETLAND Islands Council must find an unexpected extra £7 million in savings this year in a bid to balance its books.
New finance chief James Gray meets councillors at a seminar on Friday to explain how a fresh trawl through the authority’s accounts has turned up the figures, which have come as an unwelcome surprise.
Most of the unbudgeted expenditure is made up of £3.5 million loaned to Hjaltland Housing Association this year to provide bridging finance for 63 homes in Tingwall, Brae and Lerwick.
To the shock of councillors, the loan was agreed on 28 March but not entered into the books.
Oil company BP’s decision to shut down the Schiehallion oil field in the north Atlantic one year ahead of schedule has also lost the SIC more than £1 million in income this year.
The news means that councillors and staff will have to work even harder to find savings in order to protect the SIC’s dwindling reserve fund, which now stands just over £190 million, well below the previous floor of £250 million.
Without further savings, the council will be forced to draw around £42 million from its reserves this year.
Having already achieved £5 million in cuts so far this year, councillors have pledged to cut a further £10 million from the annual spending programme. Many of those savings are currently going through a review process, including the inter island ferries service and the winter road maintenance programme.
SIC leader Gary Robinson said the council should investigate why the £3.5 million for Hjaltland had not been budgeted for.
“I think this is indicative of where the last council has been in recent years and hopefully we are moving away from that,” he said.
Robinson joined other councillors in their praise of Gray, who they say has brought a fresh sense of realism to the authority’s finances.
Councillors have been warned that unless they get a grip on money matters they ultimately face bankruptcy and being taken over by central government.
By that time the council would have run down its oil reserves completely, which have underwritten the high standard of living enjoyed in these isles for the past 30 years.
“I think there is a realisation now that we can’t go on the way previous councils have done and we have to take our heads out of the sand and start dealing with some of the issues in front of us,” Robinson said.
“Last year we shed 230 jobs and saved £12 million and to be honest no one has really noticed much difference.
“However the experience of other councils is that the further you go down the process of cutting the more difficult it becomes and the more people start to notice things.
“At the end of the day though we have no option but to get the council back to a situation where we can balance the budget however hard that might be.
“Five years down the line I think it will be a very different council in terms of services and what it does. I think it will be leaner, but much more focused.”
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