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Turnaround helps SIC to top up reserves

SIC finance chief Jonathan Belford.

SHETLAND Islands Council topped up its oil reserves rather than taking money out of them for the first time since the 1990s in the last financial year.

The milestone resembles a remarkable turnaround in the financial position of the local authority, which in the early part of this decade was drawing down tens of millions of pounds a year to balance its books.

A report to Wednesday’s meeting of the full council from finance chief Jonathan Belford set out how a total of £5.75 million was contributed to the reserves “due mainly to one-off capital receipts and one-off fortuitous additional income and underspends”.

The achievement, however, remains an impressive one given the continued pressure on public sector spending.

The council has also had to contend with less income than expected due to the much-delayed switch-on of Total’s Shetland Gas Plant, while its own harbour account income was well below expectation due to reduced tanker traffic amid low global oil prices.

Selling the council’s two unwanted Sullom Voe harbour tugs and a payment from the Scottish Government towards writing off the SIC’s housing debt bolstered the balance sheet by around £10 million.

The continued cross-department crackdown on spending has also made a considerable contribution.

Difficulties in recruiting social workers saw community care record a £1.6 million underspend on staff, while the ferry service underspent on fuel by some £725,000.

The SIC’s stock market investments fell by 0.8 per cent during 2015/16, but the one-off income boosts meant the reserves’ value rose from £278.9 million to £286.7 million between March 2016 and March 2017.

Belford stressed that, with government funding falling substantially this year and uncertainty lying beyond, more work will still be required to put the SIC on a sustainable footing in the long term.

“We are in a positive position to contribute to reserves rather than draw away from reserves,” he told councillors. “This has been a successful year financially for the council.”

Lerwick councillor Jonathan Wills said he was initially confused by what he was reading, but was delighted when he realised that the reserves had received a top-up.

He questioned whether there were “perhaps one or two little things we could do a little more of”, such as offering bursaries for students and apprentices, or “are we going to keep all this money because of the horrid things the government are supposed to be doing to us in the next financial year?”

Belford responded that, having been hit with a five per cent cut in 2016/17, it might be prudent to wait until setting the 2017/18 budget before considering such changes.