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Financial challenges laid out by council

Lerwick Town Hall. Photo: Shetland News

THE FINANCIAL challenges due to be faced by Shetland Islands Council (SIC) have been reiterated in a new report detailing the outlook for the next five years.

A report on a medium term financial plan, which will be discussed by councillors on Wednesday, states that the “net cost of services will rise over time faster than the income that the council can expect to receive.”

This is partly because core funding from the Scottish Government is expected to reduce.

The report adds that the council should look to deliver £15.6 million in cost reductions over the next five years.

Council officers are already working on a service redesign programme to make its operations more sustainable.

Finance manager Jonathan Belford said in his report that the council has aimed to avoid a “salami slicing” approach to savings, and is instead looking to “target savings on deliverable options”.

This led to £1.9 million worth of savings being found for the 2018/19 budget – only £600,000 of which related to directly to services.

Also included in the report, meanwhile, is confirmation that the council will ask for around £8 million from the Scottish Government for fair-funding of inter-island ferries for 2019/20.

The SIC received £5 million for the current financial year for running its ferries, although this was around £2.5 million less than it spent on plugging its funding gap.

Members of the full council meeting on Wednesday will also consider a report which says the SIC needs to improve on the return from its investments so that £13 million can be taken out of its reserves sustainably.

Councillors will be asked to approve a new investment strategy, which “proposes a mix of growth seeking assets such as equities and income returning assets such as direct lending investments”.

It is hoped that the addition of a long-term lending fund to medium sized UK and European companies over a five to ten year period will produce a “steady return” for the council.

A third item due to be discussed at the full council meeting on the future of the public and school bus networks, meanwhile, says that there is a target to reduce the cost of bus contracts by £500,000 per annum.