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Letters / Opinion: Preparing for financial hardship

SIC political leader Gary Robinson.

SHETLAND Islands Council’s political leader Gary Robinson responds to highlands and islands MSP Mike MacKenzie, who has been challenging the SIC on its plans to shut rural schools (Opinion: There is always an alternative; SN, 30/05/14). Robinson argues the council is doing the prudent thing by planning its expenditure according to future income estimates.

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I was surprised to read in the local media recently that Mike Mackenzie MSP is openly suggesting that Shetland is about to receive an increased cash settlement from the Scottish Government. While this would be most welcome if true, sadly, the opposite is the case as I’ll explain.

I have to say I’m disappointed that the MSP from Argyll didn’t speak to me about any of the issues he raises. Had he done so, then he would have known that Shetland Islands Council’s income has fallen since 2010 when we received £95.566m and, in spite of a growing population, it continues to fall.

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According to figures I received recently from the cabinet secretary for finance, John Swinney, our grant next year (2015/16) will be £85.382m. When inflation and the changes to the police service’s funding are taken into account, this represents a 19.8 per cent real terms reduction in the council’s spending power.

Mr Mackenzie goes on to speak of “more jam tomorrow”, but again his optimism for Shetland’s economy doesn’t translate into hard cash for council services.

Sullom Voe is destined to get busier again and we anticipate that the harbour will generate surpluses from 2016 onwards. However, this won’t see a return to 1980s levels of income. Industry analysts predict throughput that might result in a £4m surplus or, in other words, enough to meet a one-year two per cent pay award for our staff and deal with the upcoming changes to national insurance contributions that the council will suffer from.

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Similarly, the £2m or so of income that we expect when the Total gas plant comes on stream would only pay for last year’s and this year’s one per cent pay award.

The MSP from Argyll goes on to suggest that we will benefit from increased council tax should our population increase as predicted, in respect of 2,900 renewable energy jobs that may come to the islands.

While it’s true that our income would increase, this needs to be put into context. Our council tax rate is one of the lowest in the country and consequently it only makes up seven per cent of the council’s income, so even if every one of those 2,900 additional jobs resulted in someone building a house in Shetland we’d only receive an extra £2.3m of income, equivalent to less than one year’s worth of inflation. We’ve respected the Scottish Government’s freeze on council tax for seven consecutive years now.

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Mr Mackenzie is right in saying that our grant aided expenditure is impacted upon by population; however this isn’t the only indicator used when calculating our grant.

That’s why, in spite of our growing population, we’ve been told by John Swinney that our grant, along with 11 other local authorities in Scotland, will go down next year – in Shetland’s case, by around £1.4m. It’s less clear what will happen beyond that, but the best estimates suggest we could be in line for two consecutive years of reductions with around five per cent predicted for each year in real terms.

Another indicator used to determine our annual funding is pupil numbers. The number of schools doesn’t come into the equation so we spend more and get less, on the basis of this indicator, than the Western Isles, which has more pupils and fewer schools than we do.

The 8.35 per cent population increase in Shetland predicted by the General Register Office for Scotland (GROS) 2012-2037 isn’t likely to help us either when it’s compared to the 8.78 per cent prediction for Scotland as a whole.

This comparative reduction in population would result in yet further reductions to our grant under the current formula.

The GROS predicts a 2.79 per cent decline in those aged 0-15 in Shetland and an 18.3 per cent reduction in Mr Mackenzie’s area of comparison – Argyll & Bute – over the same period.

Meanwhile, the prediction is that the number of people over 75 in Shetland will more than double, increasing by 130.77 per cent. In Argyll & Bute, that statistic is 72.7 per cent.

So I would argue that by failing to shift resources from an area of decreasing demand (education) to an area of increasing demand (care for the elderly) we would only be storing up trouble for ourselves in the future.

I for one wouldn’t like to be a pensioner in need of care in Arrochar in 20 years’ time.

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