SHETLAND Islands Council (SIC) will face a projected overall net unsustainable draw on reserves of more than £12 million in the next financial year if its budget is approved by elected members on Wednesday.
Finance manager Jamie Manson told a meeting of the SIC’s policy and resources committee on Monday said this was a decrease on previous projections, and said it was a “move in the right direction”.
But councillor Allison Duncan was not in agreement – stating that unsustainable draws from reserves need to stop.
“We are not getting to grips with balancing our books,” he said.
Other councillors, though, said there is a need to fund vital services for the community and that things are looking up.
“I would contend that we are on the right track here,” Shetland South member George Smith said.
“I would not want to see a knee-jerk reaction…in terms of the unsustainable draw.”
Lerwick member Stephen Leask added: “I think it’s important that we recognise that the people of Shetland will demand quality services.”
Shetland Central councillor Davie Sandison said he felt it was important to remain guided by medium term financial plans.
“One of the things that I’m pleased with is the fact that we are ambitious and we recognise this council has to actually invest in the longer term,” he said.
The budget shows revenue and capital spending will outstrip income from Scottish Government core funding, council tax, fees and charges and sustainable use of reserves by £12.26 million.
A report from Manson described this as affordable in the short-term.
At the end of January the value of the council’s investments was £429 million, with a £32 million increase experienced in the third quarter of the financial year.
“The council is fortunate in holding healthy reserves that can tolerate additional drawdowns to supplement council spending and to help balance budgets as a short-term measure,” Manson wrote.
“The use of reserves to meet an additional £12.26 million is affordable in the short-term given the overall health of the long-term investments and strong underlying asset base, even in the current circumstances.
“The fact remains however, that this the third successive budget that has required the use of reserves over and above any pre-planned and sustainable contributions to general fund budgets that have underpinned the council’s medium–term financial plans in recent years.”
Manson told members that £3.2 million of savings have been identified for the next financial year, which tempers the £4 million of growth associated with increased demand on services.
The budget also includes plans to increase the council’s headcount by 38.5 full-time equivalent posts.
This increase in staffing was met with concern from Duncan, who said he was “totally mystified” why the council was looking to bring in this number of new employees when it had been looking to make savings.
But Manson said there was a requirement to bolster staffing numbers in areas like children’s services and corporate services in response to activity.
“We are increasing our headcount in order to deliver those services,” he said.
Smith, who chairs the council’s education and families committee, also noted that much of the council’s spend goes towards supporting Shetland’s most vulnerable.
The council’s depute leader Emma Macdonald said that “we all want a Shetland where everyone thrives” and suggested that change can be positive.
She also questioned whether Duncan had any alternative suggestions for how to approach the budget.
He responded by saying he could propose something, but the councillor said he was “hitting my head against a brick wall here” and would be unlikely to gain support from his peers.
Duncan added that one area he felt the council could save money on is the school estate.
The committee agreed to recommend that the full council approve the budget when it meets on Wednesday.
A warning was made, meanwhile, that council investments continuing to rise in value needs to be taken in a long-term context.
Sandison issued a reminder that due to the fall out of the pandemic, the “volatility will remain for some time”.
“We should not get starry eyed about the fact that we have had a substantial uplift,” he said.
Council leader Steven Coutts said it remained important for the council to adopt a “long-term approach” to investments – with “ups and downs” expected in the future.
The meeting also heard that the projected net impact of the coronavirus pandemic on the council is now an additional cost of £3.74 million, although extra funding from the Scottish Government should cover this.
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