Council / Islands deal funding not being inflation-proofed may cause difficulties, meeting hears

A WARNING had been made that some of the projects planned to go ahead over the coming decade as part of the £100 million Islands Deal may have to be reconfigured as the funding is not inflation-proofed.

Shetland Islands Council (SIC) leader Emma Macdonald said the local authority needs to be “agile to change”.

But she told a meeting of the SIC’s development committee on Wednesday that reconfiguring plans is not always a negative.

The UK and Scottish Governments have pledged a total of £100 million between them over ten years to support development and growth projects in Shetland, Orkney and the Western Isles, with the money equally split between the three groups.

But development director Neil Grant told Wednesday’s meeting that the cash pledged will not increase with inflation, which causes concern around rising costs.

He said it is “flatlined” at £3.3 million a year for Shetland.


“It’s a ten year programme, so when you get towards the end of that it’s going to be worth less money than it is currently today,” Grant said.

From left to right: councillor Paul Steele, Leader of Comhairle nan Eilean Siar; Malcolm Offord, UK Government Minister for Scotland; Ivan McKee MSP, Scottish Government business minister; councillor Emma Macdonald, Leader of Shetland Islands Council; and councillor James Stockan, leader of Orkney Islands Council. Photo: OIC

He suggested ways to mitigate this could be to seek additional funding, or by changing the scope of work.

Some of the Shetland-related initiatives include work on the UHI college campus, the Knab redevelopment, an ultra-deep water quay at Dales Voe and a clean energy project.

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The islands deal is also expected to attract further investment of up to £293 million in match funding.

Macdonald said there was a “real significant risk”, however, that the projects may have to be rescaled given the absence of inflation-proofing.

“I think we have to recognise that we might not be able to do all we thought we do, because that money just simply won’t go as far,” the Shetland North councillor said.

Earlier this year the UK and Scottish governments also confirmed there would be no extra funding available for the programme management aspects of the scheme.

It came after worries from the three island councils about the resources needed for project management.

Scottish Government business minister Ivan McKee said earlier this year that the deal will be a “game-changing initiative for our islands – enabling sustainable economic growth and delivering new and internationally significant port infrastructure that will play an important role in achieving net zero targets”.


Meanwhile UK Government minister for Scotland Malcolm Offord also said at the time that the deal will “not just boost local economies and create jobs, but also empower communities to get the most out of the many assets and attributes that make the islands such unique and special places to live”.

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