THE UK government is to hand over £10 million towards paying off Shetland Islands Council’s historic housing debt, which currently stands at £40 million.
Chancellor George Osborne made the announcement as part of his autumn statement after intensive behind the scenes efforts within government by local MP and Scottish secretary Alistair Carmichael.
The SIC described the commitment as “extremely welcome”, and hopes it will help them control council house rent rises and build new properties to reduce the chronic waiting list for social housing in the isles.
The money will be paid over two years in two payments of £5 million, but depends on the Scottish government matching the funding with its own £10 million.
The SIC has also committed itself to drawing £10 million from its oil reserves and externalising the remaining £10 million of debt.
Thursday’s statement follows a week of political tension during which councillors cast doubt on the UK’s commitment towards helping the council, swiftly followed by a riposte from Carmichael himself.
The original debt stood at around £60 million and was built up during the construction boom of the 1970s when the council paid for new houses for workers building the Sullom Voe oil terminal.
Successive Westminster governments held back on their initial promise to clear the debt, which has been responsible for Shetland having some of the highest council house rents in Scotland.
The issue reached a head last year when the Scottish government cancelled the housing support grant through which the UK government paid the interest on the council’s debt.
Carmichael stepped in and organised a meeting between a large SIC delegation and chief secretary to the treasury Danny Alexander 12 months ago in London.
The MP said the political will was always there from the coalition government to help the islands in recognition of their role in supporting the oil and gas industry that has been so important to the UK economy over the past three and a half decades.
However major administrative challenges had to be overcome before any money could be handed over, as the devolution settlement does not allow Westminster to pay councils money for housing.
Therefore the cash is targeted at council infrastructure projects, but will allow the authority to divert other funds towards clearing the debt.
Carmichael explained that the two £5 million payments would be paid through the Scottish government, but be ring-fenced for Shetland.
The payments will also depend on Holyrood matching the government funding, though the treasury would be “looking at ways to ensure that this money reaches the SIC even if the Scottish government refuse to contribute”, he said.
“The council asked for £10 million to address the ongoing issue of their historic housing debt and the Treasury has delivered.
“I am delighted that we have been able to secure what the SIC asked for.
“This has been far from straightforward. If it were easy I am sure it would have been sorted years ago.
“It has ultimately been resolved because there has been a political commitment within the coalition government to recognise Shetland’s contribution to the national economy and see us treated fairly.
“We have reached that point now and the SIC are being given the money they requested.
“Now that we have delivered this £10 million I would expect the Scottish government to do the same.
“They have never been slow to deliver an opinion on this matter. They now need to put their money where their mouth is.”
SIC social services committee chairman Cecil Smith welcomed the announcement, but said it was too early to say what the implications would be and they would need to examine the details of the announcement.
Smith paid tribute to the efforts of SIC officers and fellow councillors, as well as Carmichael “who has worked so hard on our behalf”.
Once the government had voiced its willingness to support the council’s bid to clear the debt, the council presented the political argument that Shetland deserved recognition for its support of the UK oil and gas industry.
It also worked out how the administrative challenges could be overcome by directing any government contributions towards infrastructure projects.
Smith added: “We would hope that the Scottish government will contribute a similar amount of money and this will assist us to help build new houses.”
Shetland MSP Tavish Scott said on Thursday that he would be pressing the Scottish government to match the investment “without delay”.