SHETLAND Islands Council (SIC) has warned the community that changes may need to be made to services in the coming year as it grapples with “extreme” funding challenges.
It said the core funding it receives from the Scottish Government for 2023/24 is not expected to cover the cost of services currently provided to the community.
Figures provided by the government shortly before Christmas appears to show the SIC is in line to receive £103 million in revenue funding for the year, and nearly £7 million in capital.
The message from the council is that amid rising costs the settlement essentially represents a cut in funding – and it has released information about the scale of the challenge in a bid to inform the community.
The SIC said with budget decisions coming up for councillors in the weeks ahead it is keen to start a “conversation with the community to highlight the particular challenges for the year ahead, and for years to come”.
At the moment the council’s funding shortfall between 2023 and 2026 is expected to be around £106 million. Particular challenges locally include an ageing population and maintenance needs for ferries and roads.
There is already a yearly shortfall, but this is covered by dipping into reserves, which are invested in global markets.
As of November the value of the reserves was £388 million, which was a drop from £415 million at the end of March.
The SIC said it believes it can afford to spend around £15 million a year and still keep the reserves sustainable – but there has been repeated warnings about using the cash ‘unsustainably’, including from the Accounts Commission last year.
Speaking on Monday, council leader Emma Macdonald said there will be challenging decisions over the next few months – “there’s no doubt about it”.
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“I think it’s really important we communicate that with the community. Nobody wants to be in this position, but I think most councils across Scotland will be facing similar challenges,” she said.
“I think it’s really important we are honest with the community and explain that in a way that they can understand.”
The Shetland North councillor suggested the best way forward is about “reviewing everything we do and consider if we can reduce costs”.
“We have to look at some of the things that people would maybe not want us to look at,” Macdonald said.
But she stressed that change is not always negative – it is about trying to make sure services are sustainable.
She said the community would be kept abreast as to what some of the budget decisions may look like.
When asked if topics like school closures may return to the agenda, Macdonald reiterated that no decisions have been made about any services.
But referring to council services as a whole, she said “we’re at the stage where we know we have to take action”.
“We cannot afford to just stand still and just accept that it’s another challenging year. We have to put some action in, and we have to see some changes.”
The Scottish Government budget is not yet set in stone, as it still needs to be passed by MSPs.
In years gone by the overall funding for local government has increased at the last minute following deals among parties, and Macdonald said naturally she would welcome any increased settlement.
“We are very keen to engage with the government (…) but we do recognise the Scottish Government as well has funding challenges of their own,” Macdonald said.
“We have to take some responsibility and we have to change what we do, and we’ve got to get on with that.”
In the draft budget around £17.5 million appears to be allocated for Shetland Islands Council to plug the shortfall in running internal ferries – more than £5 million less than requested amid increased costs such as fuel.
Macdonald said work is ongoing to clarify the ferry funding settlement.
The council is budgeted to spend £139 million in the current financial year, and it received nearly £99 million from the Scottish Government to do so.
Local residents paid £10.3 million in council tax last year, which accounted for around eight per cent of the SIC’s total funding.
There is a warning that the council may have no option but to increase charges like council tax.
Macdonald said: “We don’t want people at home to be panicking – we just wanted to lay out the picture so everybody knows […] we’re not keeping secrets, we’re being open and honest”.
She said the SIC will do “everything we can” to keep services sustainable.
In a list of risks and uncertainties for the council there is a mention of Brexit affecting the ability to source raw materials, whilst leading to higher prices and problems recruiting staff to some services.
The SIC also acknowledges the impact the Covid pandemic has had on services and income generation.
It has also pledged to accept difficulties in recruiting staff, highlighting a need to redesign services appropriately rather than continuing to fail to fill vacant posts.
In a document released to explain the financial challenges, the SIC concluded: “We need to change and innovate, and work closely with other organisations in Shetland to go forward in these extraordinary times.
“We want to make sure we are focusing our reducing resources on what matters most to our community. Our management team is working through the different possibilities with elected members, who will come together to make final decisions on next year’s budget and spending in March.
“Before that point, we’ll be sharing our thoughts with you on the potential way forward, and asking you for your input.”
When the budget was announced, deputy first minister John Swinney said the Scottish Government, “like governments all over the world, is faced with a difficult set of choices”.
“Through this budget we are facing up to our responsibilities while being honest with the people of Scotland about the challenges which lie ahead,” he said.
“To govern is to choose and the Scottish Government has made its choice. Within the powers available to us, we will choose a different path.
“A path which sees the Scottish Government commit substantial resources to protect the most vulnerable people of Scotland from the impact of decisions and policies made by the UK Government.
“We choose to stand firmly behind the Scottish people, investing in our public services and doing everything possible to ensure that no one is left behind.”
More information on the council’s budget position can be found here.
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