News / Value of SIC reserves soars above £320m
SHETLAND Islands Council’s oil reserves are enjoying their healthiest position in years, with a buoyant stock market in the first six months of 2016/17 seeing the value of its investments swell to £326 million.
The funds were worth £287 million at the start of this financial year, but a strong market performance – partly caused by the plummeting value of the pound in the wake of the UK’s vote to leave the EU in June – saw an investment return of some £41 million by the end of September.
That translates into a 14.4 per cent increase on the fund’s value at the start of April. The council withdrew £2 million of funds in the first six months and has subsequently withdrawn a further £10 million to bolster its cash reserves and support spending on services.
A report from finance chief Jonathan Belford outlined that by the end of October, the most recent figures to have been calculated, the investments were valued at £322 million.
He told members of the SIC’s policy and resources committee it was a “good scenario” making up for a 1.1 per cent drop in 2015/16. He said the 14.4 per cent increase indicated that investment fund managers were performing “well above benchmarks”.
The figures were accompanied by a customary warning that the investments are volatile, not least because of the uncertainty created by the UK’s impending EU exit, and can fall as quickly as they have risen.
Earlier this year the council was able to top up its oil reserves for the first time since the 1990s.
The turnaround began following an Accounts Commission hearing into the crisis-hit council back in 2010, with a turnaround in spending initially overseen by Belford’s predecessor James Gray.
Until that point it had been withdrawing tens of millions a year more than it could afford from the reserves, which were built up using revenue from the oil industry dating back to the 1970s.
The latest news is unlikely to result in any significant loosening of the purse strings, however, with the latest local government funding settlement from Scotland’s finance minister Derek Mackay next week expected to usher in further spending cuts for councils for the remainder of this decade.
Wednesday’s meeting had earlier heard SIC chief executive Mark Boden praise councillors and officials for scaling a “tall mountain” by setting a balanced budget in the face of a 5.1 per cent cut in government funding last year.
For the first six months of 2016/17, spending has come in under budget by about £3.3 million.
It is expected the total draw on council reserves will be about £12 million, with an underspend in the budget for capital projects of around £7 million.
The vast majority of the latter sum will have to be spent in the future on projects, such as the Anderson High School and halls of residence, which are underway but “started a little later than anticipated”.
“You are delivering that challenging budget that you set,” Boden told councillors. “There are still six months to go [but councillors and officials should] reflect with some satisfaction on their performance this year.”
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