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Council / Ferries and tertiary education put hole in council finances

Councillors meeting in Lerwick Town Hall in a socially distanced way. Photo: SIC

THE COST of essential internal ferry services has been identified as a perennial problem for Shetland Islands Council as it approved a number of financial reports in its first Town Hall meeting since March.

Councillors, meeting socially distanced in the main hall, heard that council investments dropped in value from near £360 million at the end of January to £314 million by the end of March as the coronavirus pandemic struck.

However, funds had recovered back to where they were by the end of May as global markets surged.

Investments achieved a negative growth of -6.2 per cent in the year till 31 March, where the target is for 7.3 per cent return to enable the council to dip into its reserves, finance boss Jamie Manson told councillors.

He warned of unsustainable spending by the council in part because of what councillors deemed “catastrophic” underfunding by the Scottish Government of local authorities.

SIC chief executive Maggie Sandison said that the cost of running and maintaining an ageing ferry fleet was one of the reasons the council was continuing efforts to get more money from the Scottish Government.

Ferry breakdowns had added £1.5 million to the council bill, but the harbour account had brought a bigger than anticipated surplus of £18.3 million to council funds.

Council leader Steven Coutts said it was clear to see the effect of the government failing to fund some “key” elements like the cost of tertiary mergers and the ferry service.

He said that the council had nonetheless done “particularly well” to to handle wage increases and “additional responsibilities” without receiving subsequent funding from government.

Interim SIC leader Steven Coutts. Photo: Hans J Marter/Shetland NewsSIC leader Steven Coutts. Photo: Hans J Marter/Shetland News

“What’s clearly unsustainable is the government continuing to treat the SIC and its communities unfairly,” he added.

Coutts said that there was a “misunderstanding” at national level that the SIC was sitting on a “rainy day fund” and that government ministers had to realise that it had become an essential part of providing local services.

“Fair funding of lifeline ferries is more essential now than ever,” he added.

In a report, Manson said: “It is crucial for the council to align expenditure with available resources if it is to become financially sustainable in the short to medium-term.”

Manson said that the use of reserves had “increased every year for a number of years and that an element of use of reserves was to support wider council expenditure”.

“We have got those pressures and we will still have to deal with them in the next financial year and beyond. We need to rebalance in order to become financially sustainable,” he added.

The other “key drivers” of the overspend were the council having to pay £1.09 million on Shetland College largely due to the Scottish Funding Council pulling out of meeting operational costs during the merger period.

Extra staffing at Train Shetland added £121,932 and costs associated with the North Atlantic Fisheries College added a further £1.673m.

Shetland Central councillor Ian Scott called on the council to “spend a few more quid” and said it should press on with building tunnels to the isles. “If it means spending the reserves let’s do it,” he added.

Shetland South councillor George Smith said that if ferries and tertiary education were taken out of the equation then council staff would have worked within the budget they were given.