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Council / Council tax could rise by nearly five per cent as SIC struggles to close funding gap

Lerwick Town Hall.

SHETLAND Islands Council (SIC) is proposing to increase its council tax rates by nearly five per cent as it grapples with an anticipated funding deficit of over £12 million.

Members will be asked to approve the 4.84 per cent increase when the full council meets on Wednesday (26 February).

They will also be asked to approve an average increase in housing rent of 2.39 per cent.

A report due to be presented to councillors states that the Scottish Government’s draft core funding settlement to the SIC for the forthcoming financial year is £112.9 million.

At the time of writing, the council’s total estimated expenditure amounts to £125.2 million – meaning that there is a projected funding gap of £12.3 million before considering the council tax rise.

The council is considering a number of options to reduce that gap, “namely by reducing expenditure through efficiencies, or increasing anticipated income through a further use of reserves, albeit in excess of the amount considered sustainable”.

The option to increase council tax by the maximum 4.8 per cent is estimated to generate an additional £569,000.

It would mean the annual band D rate would be £1,206.33 – an increase of £1.07 a week or £55.69 a year compared to the current 2019/20 rate.

The council’s latest budget estimates, meanwhile, assume that £14.1 million will be withdrawn from the SIC’s long-term investments to supplement its general fund budget on a sustainable basis.

“A further withdrawal to meet the current funding gap is unsustainable and will have long-term implications on the extent to which the reserves can be relied upon to contribute to future budgets, and ultimately support the delivery of services across Shetland,” the report warns.

Councillors, meanwhile, have criticised the Scottish Government for including £5 million in its recently published draft budget for the SIC to run its inter-island ferries when its full ask was £9.49 million.

Scottish Parliament election, 6 May 2021