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Council / SIC may need to make ‘difficult decisions’ to maintain financial balance

Lerwick Town Hall.

SHETLAND Islands Council (SIC) may need to make “difficult decisions” when deploying resources over the coming months in order to maintain financial balance following the coronavirus outbreak.

Finance manager Jamie Manson said in a report due to be presented to councillors next week that there will be a continued need to “identify savings, efficiencies and income generation”.

It comes against a backdrop of rising costs and expected reductions in government funding.

The council’s long-term investments also retracted in value by 6.2 per cent over the 12 months to 31 March 2020, which was “well under” the anticipated positive return of 7.3 per cent.

The coronavirus outbreak, however, was only just starting to take effect at the tail end of the financial year.

“The council set a balanced budget for 2020/21 on 11 March 2020 just as the council began to respond to a global pandemic which has caused the most significant public health emergency and economic crash in recent history,” Manson said.

“The 2020/21 budget required one-off additional support from the reserves without factoring in any unanticipated financial pressures that have been created in response to the pandemic.

“The council will potentially need to make difficult decisions when deploying resources to meet changing priorities throughout 2020/21 in order to maintain financial balance.”

The SIC previously confirmed that it would seek to have the Scottish Government cover the costs of its response to coronavirus.

Manson’s report added that the council’s medium term financial plan assumes a “prudent use of reserves in the years to come”.

“However, underlying cost pressures still exist within service budgets in the general fund and will continue into future years’ budgets unless action is taken to resolve those pressures,” it added.

The SIC also overspent against its general fund budget – which finances the majority of services – by around £2 million in the 2019/20 financial year, according to the report.

This was largely driven by additional and unforeseen vessel maintenance costs across the inter-island ferry fleet and consequences of a delay to the college merger project.

The total net draw on reserves in 2019/20 was £21.722 million – an increase of over £6 million on the previous year.

The value of the externally invested funds stood at £314 million on 31 March 2020 – a decrease of £27 million from the same date in 2019.

Councillors will also be told that the SIC wrote off £206,413 in bad debt during the financial year.

The debts identified for write off are “those where all efforts to recover the debt have been exhausted and the prospects of recovering funds are negligible or nil”.

It covers areas like council tax, water charges, non domestic rates and housing rent.