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Council / Mixed views on investing some of SIC’s reserves locally

THERE were some differing views in the council chamber on Wednesday regarding ideas on investing some of the SIC’s reserves locally.

During discussion at a full council meeting on the state of the local authority’s investments, Green member Alex Armitage supported the idea of putting some cash into local projects instead of global markets.

And Lerwick member John Fraser again questioned if the council could act as a high loan to value mortgage lender for young people, or utilise economic development money to act as a guaranteed buyer of last resort for private sector house builds.

But former SIC leader Gary Robinson felt it was “groundhog day” – warning that investing sums locally has backfired in the past.

An update from finance manager Jamie Manson showed that the value of the council’s investments has further dropped due to factors such as the impact of rising inflation and the Ukraine invasion.

In April 2021 the value of investments stood at £423 million, but a year later this year it was £415 million – although that includes a £7 million planned withdrawal to support the council’s cashflow.

Shetland South councillor Alex Armitage.

The latest figure for the end of May the value was £393 million.

Manson said he took comfort in the longer-term picture with regards to how financial markets may recover.

When it comes to the council’s budget for the last financial year there ended up being an underspend, resulting the figures to be deemed sustainable for the first time in years.

But nearly £10 million will need to be carried forward to 2022/23 for activity and work that could not take place – mainly due to Covid delays and issues with materials and labour.

The report on the investments, however, sparked wide-ranging debate as to the best use of the council’s investments, which are overseen by fund managers and spread globally.

Armitage said he had “quite a lot of fear” about how things will pan out across the world, especially in conflict and climate change.

He said he would like to see some of the money currently locked into global stocks and shares being invested locally, such as through a Shetland development company.

Manson said it “would be quite complicated” to do that – but he highlighted the council has £15 million within the value of investments held back and earmarked for economic development loans for local companies.

However, this is under-subscribed at the moment.

He also said local investments would probably not generate the level of returns the council is looking for.

SIC leader Emma Macdonald stressed the need to be careful about where the council’s investments are placed.

And Shetland Central member Davie Sandison said the council already had some local investments – such as in fishing quota, which gives “very good returns”.

But he claimed the UK Government is “significantly failing us” when it comes to future outlooks due to its record on inflation.

“At a political level we’re being let down by our own government, and that’s the most fundamental problem we have in terms of whether or not we can make good choices about where to put our funds,” he said.

John Fraser. Photo: Hans J Marter/Shetland News

Meanwhile Fraser wondered if the SIC could use economic development money to financially support young people getting mortgages, or speculative house builds.

Manson said mortgage lending does not form part of the economic development framework – although it is “not impossible” if the council decided to pursue it – while he said it was a “riskier” area of investment.

He also warned that the council would not currently have the sufficient expertise to carry out such as scheme.

Development committee chairman Dennis Leask felt the council should not be afraid to explore using some parts of the reserves to invest in local projects such as housing and environmental issues.

Meanwhile Robinson said local investment is somewhere the council has been before, and was something it had lost out on.

“I would really caution that we don’t go back there again,” he said.

“The difference with the stock market is that if we lose £20 million we still own those shares, we still get dividends on those shares, and the chances are they go back up again.”

Meanwhile Lerwick North and Bressay member Stephen Leask said councils in Britain have invested in housing schemes and funds and have lost “huge sums of money”.

“I would be very much inclined to stay clear of any of this sort of hamfisted ideas to be honest,” he said.

Fraser responded: “I would certainly never ever condone anything being done hamfisted.”