Council / Public spending watchdog’s concern over SIC’s projected cumulative £134m budget gap
The Accounts Commission has called on the council to urgently increase the pace of its change programme
SHETLAND Islands Council (SIC) needs to take a “more strategic, long-term approach to achieving financial balance” – and “urgently” increase the pace of its change programme.
That is the view of the public watchdog Accounts Commission, which has published its latest best value report on the SIC.
It highlights the SIC’s projected cumulative budget gap of £134.3 million by 2029/30.
The council relies on its reserves to balance the books, with an “unsustainable” draw of £26.1 million planned for 2026/27.
At the end of December the value of the SIC’s reserves was nearly £400 million.
A best value report was considered by Accounts Commission members last month, and they have now added their findings.
These include that the SIC should “urgently prioritise” delivery of ten actions included in its medium-term financial plan, as well as taking a more “strategic and coherent approach” to the adoption of digital technology.
The Accounts Commission has praised the SIC for its level of services and a “clear vision”.
It also said the council has improved its performance management arrangements over the last three years, as well as its engagement with the community on budget priorities.
Deputy chair of the Accounts Commission Andrew Burns said: “People living on Shetland are getting a good service right now and we’ve seen some improvements in how the council is run since we last reported.
“But the council continues to draw on its reserves to balance its budget. That’s unsustainable and will impact future generations if not addressed.
“We’re calling on the council to urgently increase the pace of its change programme and prioritise the actions that will help it achieve financial sustainability in the medium to long term.”
In response SIC leader Emma Macdonald said the report recognises that councils services generally perform “very well” – but said “difficult decisions” will need to be made about the budget challenges.
Back in 2022 an Audit Scotland report, prepared for the Accounts Commission, took a first look at how the SIC was meeting its ‘best value’ duty.
Audit Scotland describes best value as “ensuring there is good governance and effective management of resources, with a focus on improvement, to deliver the best possible outcomes for the public”.
While there were many positives highlighted, the 2022 report ruled that the SIC had been slow to improve its plans for financial sustainability and has not yet demonstrated that it is meeting its ‘best value’ duty in a number of areas.
The SIC said at the time that it had already begun addressing the issues raised, with follow-up reports ensuing.
Echoing a message that has emanated from the council chamber in recent years, the commission said in its latest report that there are “undoubtedly” difficult decisions ahead for elected members in light of the budget gap.
It highlights that communities have benefitted from “strong and improving” performance across a range of services, with satisfaction levels among the highest in Scotland.
But the report said: “This focus on maintaining service levels and keeping council tax increases relatively low will be welcomed by Shetland’s current residents but has been achieved by drawing on the council’s reserves unsustainably over recent years, which will impact future generations if not addressed.”
When it comes to projects to bring in change, the commission said it recognised that workforce capacity can affect progressed.
But it said without “detailed project plans” the council cannot effectively prioritise its limited resources.
The commission also recognised the impact of Shetland’s “population challenges” on both day‑to-day service delivery and the council’s capacity to transform and innovate.
“While attracting people to the islands remains a priority, the council must deploy the staff it does have now as effectively as possible so updating its overall workforce plan and service-level plans should remain a priority,” the report added.
“We also expect the council to ensure it has sufficient staff capacity to meet statutory requirements.”
Responding to the report SIC leader Emma Macdonald said the council is operating in an “extremely challenging financial environment”.
In recent budget-setting meetings the message to elected members was that the core grant from the Scottish Government has not kept pace with rising costs, such pay awards and inflation.
“We welcome this report, which recognises that our services generally perform very well, compare favourably to national averages, and have some of the highest levels of public satisfaction in Scotland,” Macdonald said.
“The report also highlights that we have a clear vision and priorities, strong partnerships and good engagement with the public about our Corporate Plan and our budget.
“The gap between the funding we receive and what services we are expected to deliver is significant – and it is an unsustainable situation.
“Despite the extremely challenging financial environment in which we operate, difficult decisions need to be made.
“We are determined to ensure the council addresses its unsustainable use of reserves, whilst innovating and collaborating to address our population challenges, reduce inequalities, and sustaining and growing our economy.”
Macdonald added that the SIC knows that digital transformation is essential to becoming more efficient as the working age population reduces, with the council ensuring there is a “clear focus” on this.
“Finally, I would like to take this opportunity to thank all council employees for their hard work which these findings are testament to,” she said.
“We know that it is their commitment that means that we maintain high-quality services for the community we serve when facing staffing and financial pressures.
“The full Accounts Commission report will be considered by elected members at an upcoming meeting of Shetland Islands Council.”
The report has gained some reaction from the political sphere too, with Conservative Highlands and Islands MSP Jamie Halcro Johnston saying it reflected the financial pressures being felt by local government.
“While the work that the council will need to undertake to address this £134 million black hole is worrying, Shetland is far from alone – with council finances cut to the bone by SNP ministers in Edinburgh, while the Scottish Government’s budget increases,” he said.
“COSLA, the representative organisation for councils, has already warned that this year’s SNP budget settlement – backed by the Lib Dems and abstained-upon by Labour, will mean difficult decisions locally and ‘falls far short of what is needed to sustain local services’.
“Unsurprisingly, John Swinney had little to say about this on his recent flying visit to the islands.
“Because this is an entirely cynical move, leaving councils to ramp up council tax to cover the shortfalls in their funding – shifting the blame for cuts from Holyrood to town halls.”
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