News / SIC plans extra draw on reserves plus council tax rise to balance the books

SHETLAND Islands Council will have to draw an additional £2.8 million from its reserves in the next financial year to offset the cut in its core funding from the Scottish Government.

As expected, councillors also plan to use new powers to raise council tax by the maximum three per cent as part of their efforts to balance its budget.

Council house rent will also go up by two per cent plus an additional pound per week for every one and two bedroom property in the isles.

SIC leader Gary Robinson said the council is currently “drawing more than is sustainable”, but he also believes it is heading in a “direction to getting back to a sustainable budget”.

Councillors will be asked at Monday’s policy and resources committee to recommend that the full council, which meets the following week, approve these the measures as part of the local authority’s budget for the next 12 months.


Members of the committee will be told that £2.753m of reserve money should be used as a one-off after the council was told it would receive around £2.8 million less from the government than it got this financial year.

However, a report by finance manager Jonathan Belford says using the reserves was nevertheless “affordable” due to an expected announcement from the government on fairer funding of the SIC’s inter-island ferry service.

It means that the council is in line to use a total of just over £21 million from its reserves, which currently stand at £326 million, to provide public services in the isles in 2017/18.

This will be offset in part by the surplus gained through harbour income and Sullom Voe port charges, which will contribute over £9 million, as well as underspends in 2015/16 and an increase in investment returns.

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The council is expected to gain £258,000 a year from the council tax rise, while it will also receive an extra £155,000 through the additional government implemented council tax increase on properties in band E and above.

The SIC currently charges the fourth-lowest level of council tax out of Scotland’s 32 local authorities.

Robinson said that while the tax increase will allow more funds to be added to the pot, councils have been pushed into the move as a result of the reduction in core funding.

The cuts come at the time when austerity measures at the hands of the Westminster government continue to be felt across the country.

“The likes of Shetland has had their council tax frozen at the lowest in Scotland for seven years now,” Robinson said.

“It has, I suppose, starved local services of funding that they might not have otherwise have had. On unfreezing the council tax, the Scottish Government looked at how much each council could raise by increasing council tax by three per cent.


“And they factored that into the grant that they gave local government. In many ways, local government’s hand has been forced in this.”

The budget is also expected to realise savings of £3.187 million, but this falls short of the £3.409 million target.

The report confirms that current measures will not be sustainable in future years, with the council facing a possible funding gap of another £20 million by 2021 if nothing is done to counter rising costs and falling grant income.

Robinson said the council’s problems stem back to a number of years ago when overspending was an issue.

In summer 2010 the Audit Commission held a two-day hearing into the crisis-hit local authority after spending ballooned to more than £30 million a year higher than what was sustainable.


“I think we’ve had a difficult time from the start of this council, dealing with first of all the historic overspending that the council inflicted upon itself over many years,” Robinson said.

“But we’ve also had to deal with the real terms reduction in funding that the council has received.

“I think in real terms we’re somewhere over 30 per cent down in terms of grant funding compared to where we were in 2010. That really is significant.”

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