CAB - 7 Oct 2020 - 10 Oct 2020 - Advice

Council / Council tax and rents rise to offset measly Holyrood settlement

A THREE per cent rise in council tax is being proposed for next financial year to try and offset a 1.3 per cent drop in non ring fenced funding from the Scottish Government for 2019.

Council house rents will also be up two per cent with a £1 week addition for bedsits and one-bedroom properties.

The proposals are contained in a report by Shetland Islands Council executive manager of finance Jamie Manson outlining the tough financial situation facing the council.

The report spells out potentially drastic changes for the inter-island ferry service and hints at even more financially challenging times ahead.

It says: “In the absence of a fair funding settlement from the Scottish Government for the second consecutive year, the council will need to consider significant reductions to internal ferry services in the near future in order to avoid significant reductions across other council services.

“The council will therefore seek advice with regard to the feasibility of transferring responsibility for operating internal ferry services from Shetland Islands Council to the Scottish Government.”

SIC finance manager Jamie Manson.SIC finance manager Jamie Manson.

It also pinpoints an “ever-increasing cost base” as the “greatest challenge facing the council.

This can arise from local or “externally-imposed changes, for example, centrally-negotiated pay awards or national changes in legislation”, Manson writes in his report.

“Growth included in the budget from pay awards, price inflation and increased service demand amounts to £4.3m (3.9 per cent) more than expected in the MTFP (medium term financial plan) 2019/20 target budget.”

The report also recommends the council “supplement its general fund budget with an additional £24.673 million from its reserves, including a one-off, unsustainable draw of £3.542m to meet an expected shortfall in funding for the year ahead. This means the council is able to set a balanced general fund budget totalling £113.725m.”

Overall, Shetland is in for a 0.3 per cent rise in revenue support from the Scottish Government to £86.422m compared with a 2.9 per cent rise in Scottish revenue funding overall. When an increased £7.107 ring fenced element is taken from this, revenue funding for the isles drops 1.3 per cent to £79.315 million.

The ring fenced grant from the government includes £5m for ferries – itself £3 million less than the council wanted to fully fund the service; £1.6m for the early learning and childcare programme; £283,000 for criminal justice social work and £214,000 for pupil equity funding.

The capital situation is also poor with Shetland receiving £54,000 less than last year at £7.689m compared with a 23.7m increase in capital grant overall in Scotland to £1.084 billion.

Overall Shetland non-ring fenced funding falls 1.3 per cent to £87.004 million.

Council tax will raise about £9.7m while still keeping the tax among the lowest in Scotland. Other local authorities are planning to increase council tax by 4.79 per cent.

Despite the acknowledged difficulties, the report is upbeat insofar as it says: “Shetland Islands Council’s 2019/20 budget will ensure that council-provided services across Shetland continue to deliver the best outcomes for Shetland in line with Council’s Corporate Plan and the Shetland Partnership Plan.”

The council is recommended to apply a near three per cent increase in harbour fees and charges for the coming year, which will allow the harbour account to operate with a surplus.

A rent increase on dwellings of two per cent has been applied in line with a five year business plan with an additional £1 per week added to the rental of bedsits and one-bedroom properties, making the average rent rise 2.22 per cent.

The proposed budget includes the revised financial settlement indicated in late January, which gave the council an additional £719,000 on top of the provisional allocation set out in December 2018.

The report will be tabled at the council’s policy and resources committee on Tuesday morning with the intention it will be recommended to the full council which convenes later the same day.