Funds released by increased ferry grant absorbed by rising costs elsewhere across council
SHETLAND Islands Council’s (SIC) care costs rose by nearly 50 per cent during the last four financial years, with children’s services expenditure rising by nearly one third.
The figures were included in a briefing note to councillors highlighting how increased Scottish Government funding for running inter-island ferries has not provided a “direct financial windfall”, given rising costs elsewhere in the local authority.
The briefing says from 2021/22 to 2025/26, care costs have risen from £22.773 million to £33.128 million.
For children’s services, which includes education as well as social work, this has increased from £49.352 million to £63.742 million.
Ferry costs, meanwhile, rose from £16.767 million to £24.679 million.
The briefing was created following a question over why the council’s financial position has not improved significantly despite the sizeable increase in ferry grant funding.
In recent years, following political campaigning, the council has received extra funding to cover a deficit in running its inter-island ferries – with the first grant, nearly £10.8 million, announced in 2021.
These days the ferry funding is well over £20 million, given the increased cost of running the service.
The briefing note to councillors from finance manager Paul Fraser said the council did not go from zero to more than £20 million overnight.
The note said the SIC’s historic budget “always contained an element of contribution to ferry costs”.
It highlights that in 2021/22 the council received £10.784 million from the government for ferries, topped up with nearly £6 million of the SIC’s own funds. Overall the local authority drew nearly £30 million from reserves.
The note said that in 2023/24 ferry costs grew to around £23 million, which was matched by the grant.
Overall council costs increased by a further £9 million in that year, and its grant increased by £4.3 million, so the use of reserves grew by a further £4.76 million.
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The note highlights the significantly increased costs of running services elsewhere in the council, including care and children’s services.
“The key point is that increased ferry grant has not accumulated within reserves or provided a direct financial windfall,” Fraser’s note said.
“The funding released from ferry operations has been absorbed by increasing demand and cost pressures across council services.”
The note said that between 2021/22 and 2025/26 overall general fund expenditure increased by £33.217m (27 per cent), equivalent to average annual growth of £8.304 million per year.
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