Projected SIC overspend on service delivery rises to £6m
SHETLAND Islands Council is now forecasting an overspend this financial year of £6 million on core revenue service delivery, according to new figures.
There is a projected underspend in terms of capital expenditure of around £3.4 million, however, meaning the overall projected overspend is £2.6 million.
The figures were included in a report to members of Shetland Islands Council’s policy and resources committee on Monday.
It comes as the council’s reserves dropped in value by more than £30 million between April and September.
The report to councillors said the projected £6 million overspend includes pay awards and £1.1 million of Covid related expenditure.
It is an increase on an overspend of £4.1m on core service delivery which was forecasted when councillors were last updated in September.
Acting manager of finance Hazel Tait said the overall £2.6 million expected overspend should be met by additional government grants and a pull from reserves of £1.2 million.
But the report said the total unsustainable draw on reserves is expected to reach £8.1 million come the end of the financial year.
Shetland South member Robbie McGregor, who represents the SNP, asked whether the projections were realistic given “galloping inflation”, energy and material costs and the “shambles of the mismanagement of the UK economy by the UK Government”.
Tait said the finance team asks services to come with their best estimates, and it accounts for pay awards and cost pressures such as agency staff.
During debate Shetland Central member Davie Sandison said he felt the committee needs to set out its position strongly that the target should be for the books to be balanced at the end of the year.
SIC leader Emma Macdonald said there were a lot of unknowns – such as pay awards – but depute leader Gary Robinson felt balancing the books was not impossible and that in-year savings are worth a try.
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Meanwhile councillors were told that the SIC’s investments decreased in value by more than £30 million over the first six months of the financial year.
At the end of September they were valued at £379 million. However, the value at the start of the financial year was £415 million.
Tait said the negative return was unusual but not surprising due to global market conditions.
Shetland Central member Davie Sandison said that given the decrease in the value – and the projected extra £1.2 million draw from reserves – a “sense check” might be needed.
Expressing concern that it will be some time before the investments are back in a stable position, he added that the situation “puts a shiver down me a little bit”.
Councillor leader Emma Macdonald agreed and said things look “really quite stark” over the coming years.
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