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News / SIC lands £20m ‘landmark’ housing debt deal

The SIC delegation outside Downing Street in December 2012.

SHETLAND politicians have hailed a “landmark” agreement with Westminster and Holyrood which will see more than half of the SIC’s historic housing debt written off.

The agreement will end fears that local authority tenants would see their rents rise by more than a third and should free up the council to build more homes and tackle the isles’ severe shortage of social housing.

The debt was chalked up constructing houses to accommodate an influx of workers brought to Shetland by the 1970s oil boom.

Successive governments had acknowledged a moral obligation to reimburse the local authority over the years, without ever handing over a cheque.

Councillors met in private on Wednesday to finalise arrangements which will see the UK and Scottish governments contribute £10 million apiece.

SIC political leader Gary Robinson described it as a “tremendous outcome” following “a great deal of energy and effort” from members and officials.

“I’m extremely happy that this means we will be able to maintain affordable rents for existing tenants,” Robinson said. “It also opens the way for much needed investment in affordable housing.”

The Scottish government’s contribution will support new housebuilding between now and 2016. It matches the £10 million sum pledged by the UK government in December’s autumn statement.

With the SIC writing off £10 million from its own reserves, that will bring the £36 million debt – which at its peak reached £60 million – down to a “manageable” level of £16 million.

SIC finance chief James Gray said the remainder would be refinanced externally over a period of around 20 years, allowing the council to maintain “affordable” rent levels.

Head of housing Anita Jamieson pointed out that the outstanding debt was now below the Scottish average at £9,000 per house, compared to £14,500 per house in Orkney, which had no housing debt until recently undertaking a major housebuilding programme.

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The latest debt negotiations were sparked by a chance encounter between councillor Allison Duncan and UK chancellor George Osborne at Inverness Airport in November 2011.

Since then there have been extensive talks between the SIC and civil servants and ministers in London and Edinburgh. A council delegation visited Downing Street in December 2012, followed by a tripartite meeting in Glasgow last October.

Robinson and convener Malcolm Bell both paid tribute to those involved in the negotiations, singling out Northern Isles MP Alistair Carmichael – a member of the UK cabinet – for his role in resolving the debt.

The Shetland Tenants Forum and its tenacious participation worker Joann Johnson were praised for their involvement.

Bell also said The Shetland Times’ campaign and petition (signed by over 2,300 people, more than a tenth of the isles’ population) last summer had been valuable in bringing the issue into the spotlight.

The matter had lain unresolved for more than three decades, with a concerted effort in the mid 1990s to address it being gazumped by an untimely change of government.

The outcome far exceeded Bell’s expectations upon taking office: “It’s a great result,” he said. “I think it’s more than any of us really could have expected when we started out.

“I’d like to pay tribute to the UK and Scottish governments in bringing this matter to such a satisfactory resolution – and particularly the role played by our MP, Alistair Carmichael.”

Jamieson said staff would now look at what sites were most suitable for building new homes. The “likelihood” is that funding will be diverted to Hjaltland Housing, as housing associations can attract higher grants for each new home than councils can.

“We’ll be in a position to have a housing revenue account that’s no longer driven by debt,” she said.

“It puts us in a position where we can think about investment to ensure we maintain properties in the standard that they need to be in, at a level that’s affordable for tenants into the future.”

Jamieson said tenants would be consulted ahead of efforts to provide greater certainty by determining rent levels between three and five years in advance.

“In November… we were speaking about, if things didn’t turn out as they have today, looking at 35-37 per cent rent increases.”

Robinson said he did not want to speculate about whether the impending referendum on Scottish independence might have worked in Shetland’s interests.

He added: “It has just been the dogged determination that the council has shown to get this issue resolved once and for all.”

Carmichael welcomed the deal as “the last piece of the jigsaw”.

“This process has been made possible by the work that the Westminster government have done to help Shetland Islands Council,” he said.

MSP Tavish Scott, meanwhile, said it was a “very good outcome” after the two governments “both worked constructively with the council to take housing forward to the benefit of local people”.

Scott described fellow Liberal Democrat Carmichael’s role in London as “greatly helpful for Shetland”. 

A Scottish Government spokesman said it had been able to come up with funding for new housing despite operating within “tight resource constraints”.

He added: “We are pleased that the UK government has finally recognised its responsibilities in relation to the SIC’s long standing housing debt issue and today’s agreement paves the way to unlocking that funding.”

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