‘Difficult decisions’ required as financial plan recommends SIC finds £11m-a-year savings
SHETLAND Islands Council’s financial plan for the next five years includes an annual savings target of £11 million from 2027/28 onwards.
This equates to around four per cent of all budgeted expenditure, and stands to be used in the development of the council’s 2027/28 budget.
The savings target is included in the SIC’s next medium-term financial plan, which was approved by councillors on Wednesday.
The forward-looking plan maps out three financial scenarios, and projects a cumulative budget deficit of more than £83 million by 2028/29 under its central scenario.
The central scenario sits in the middle of optimistic and pessimistic models.
A covering report from finance manager Paul Fraser said the SIC will be required to take a number of “difficult decisions” to demonstrate progress towards financial sustainability in advance of setting its 2027/28 budget.
This could include having a renewed focus on “core priorities” and the potential deferral of activity in non-essential areas, while also reviewing how services are delivered – including greater use of automation.
There is also a recommendation of limiting overall use of reserves to around £50 million a year. For 2026/27 the SIC has budgeted taking a sustainable draw of £19.6 million and £26.1 million as an “unsustainable” draw.
The modelling suggests the SIC would have to accommodate capital funding requirements within this reserves limit.
A separate report at Wednesday’s meeting also highlighted that the withdrawals from the SIC’s investments, which make up most of its reserves, reached £47 million in 2025/26 – the largest amount ever withdrawn in a financial year.
This was required to support cash flow needs, covering both revenue and capital expenditure.
The message given to councillors in the budget-setting process for the current financial year was that income from the Scottish Government core grant is not keeping up with rising costs, including factors outside the SIC’s control – like pay awards.
The medium-term plan adds that the “financial challenge is both significant and sustained”.
“While cost pressures continue to be managed across services, the scale of the gap means that incremental efficiencies alone will not be sufficient to restore balance,” it says.
“More fundamental decisions will be required to align the cost of service delivery with the level of available resources.”
However there have been repeated warnings from council officers and elected members for years about the need to make difficult decisions to reduce spend.
The medium-term financial plan continued by saying the SIC will therefore need to focus on “clear prioritisation of its activities, supported by the development of deliverable plans that contribute to a sustainable financial position”.
“This includes ensuring that future decisions are taken with a full understanding of their long-term financial implications,” it added.
The central scenario indicates the cumulative budget rises to a deficit of £131.3 million by 2030/31.
The plan says the figures are “stark and underline the urgency of the position”.
During questioning at Wednesday’s meeting, Fraser said he suspected it would be through a mix of capital and revenue projects that £11 million savings could be found.
Depute leader Gary Robinson said in debate that the time had come for “real change”, adding that the “low-hanging fruit” had likely already been taken by the council in the early 2010s.
He said there may need to be decisions which mean the way services operate change, while he also gave reference to increased use of technology.
Leader Emma Macdonald also said there is a “real challenge” on how the government tells the council how to spend its money.
She said government may provide some funding for some services, but “it doesn’t always go far enough” for an island council.
Shetland North member Andrew Hall added: “I think we need to recognise the fact that the £11 million per annum saving we’re looking at probably won’t be required if we’d actually received the necessary funding from the Scottish Government.”
This view was echoed by Lerwick South councillor John Fraser, who said local authorities have repeatedly been under-funded, and under-valued.
He also said it was “nonsense” to try to separate statutory and non-statutory council services, as they are “inextricably linked”.
Shetland Central councillor Ian Scott meanwhile said government funding has been “completely decimated” over the last two decades, with his blame going on austerity.
When adding in revenue borrowing costs to the construction and maintenance, the overall price tag rises to £51.5 million over a 60-year lifespan.
The recommendation was to effectively put the project on pause until a “sustainable level of borrowing can be determined”.
Earlier this week the SIC also took its first step on the path to tunnels, but how they could be financed remains the key question. Possible funding options being suggested have included capital grants, borrowing and private finance.
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