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Council / SIC struggles to tighten belt while reserves grow

Lerwick Town Hall.

FINANCES were a pivotal part of discussions in the council chamber on Monday as one member called for the local authority to spend more of its reserves on areas like roads.

South mainland councillor Robbie McGregor’s message came after members of the policy and resources committee heard that the council’s investments were valued at £355 million at the end of September after increasing by £14 million in six months.

But his call coincided with a report on Shetland Islands Council’s (SIC) ongoing service redesign programme confirming that it had only achieved £1.3 million in savings against a goal of £15.6 million over five years. This target has now been increased to £22 million.

While the council’s investments went up by £22 million in the first six months of the 2019/20, councillors were warned that they could fall as well as a rise as markets remain volatile.

In this same period £8 million was withdrawn from the SIC’s investments to cover expenditure, creating the £14 million rise in value.

“Is it possible that we can investigate greater draw down to support council services in the future?” McGregor asked in light of the increase in the investments’ value.

Council leader Steven Coutts reiterated that the SIC will shortly be looking to refresh its medium term financial plan, which was set in 2018.

South mainlander councillor George Smith also called for future plans to include a “clear, unambiguous statement” on the capacity to draw from the reserves.

McGregor raised the issue of spending from the reserves again during discussions over possible upgrade work on some of Shetland’s core roads.

While building a new road to the Cullivoe Pier in Yell at a cost of around £4.3 million is likely to move ahead to a business case, McGregor said that other roads in Shetland also needed attention.

“If we can’t invest in our own infrastructure, it’s a sad day,” he said.

“I would be advocating that we spend more to advance our own infrastructure.”

Shetland Central member Ian Scott, a long-time supporter of using more money from the SIC reserves to fund services, said he felt the local authority was “strangled” by the £15.6 million savings target imposed last year.

The service redesign programme has identified where the council could make these savings, with reviews carried out in areas like transport and education.

But with £1.3 million savings from the programme, a report before councillors said the SIC must “escalate the rate of change” if long-term financial targets are to be achieved.

A report on the SIC’s projected financial position at the end of the financial year, meanwhile, showed that there is an anticipated boost of £2.5 million from increased tanker movements at Sullom Voe thanks to production starting on the Clair Ridge project west of Shetland.

The council will meanwhile lose out on projected income of £700,000 from Shetland Gas Plant throughput due to a “very low gas price”.

There could, however, be a short-lived boost to the SIC’s coffers after councillors gave the go-ahead for Quendale House to be put on the market.

The historic building on the south end of Commercial Street, which is owned by the council, has been vacant since January. It had previously been leased by facilities management company Shetland FM, which is now liquidation.