Politics: What is the Shetland Charitable Trust?

As pressure mounts on councillors to make changes to the way Shetland’s oil money is handled, Gavin Morgan takes a look at the organisation at the centre of the controversy, examining the history of the charitable trust, its many successes and its uncertain future.

A wind of change may blow through the board of Shetland Charitable Trust (SCT) in the future so it can prove to its regulator an independence from the local authority and, in the process, lower the volume of dissenting voices that have been steadily growing louder in the local community.

This development provides as good an opportunity as any for a look at the history and function of the fund that holds and invests most of Shetland’s public oil money for the benefit of the isles’ community.

The first North Sea oil was discovered by the drilling rig Sea Quest in summer 1969 about 150 miles east of Aberdeen or the Montrose field and Shetland Islands Council Charitable Trust was established in 1976.

Between these two events there was a huge amount of political wrangling and economic machinations surrounding the UK’s “third industrial revolution”. This reached fever pitch for Shetland from 1972 to 1974, the year construction on Sullom Voe Oil Terminal began.

When the oil industry began to focus on the Shetland Islands in the early seventies as its strategic importance became obvious it may have first looked to oil giants such as BP or Shell as if exploiting the isles for their benefit would be a small factor in grander schemes. If this was the case they could not have been more wrong.

It was the first chief executive of Shetland Islands Council, Ian R Clark, then county clerk of Zetland County Council, who put into motion a plan to acquire special powers from parliament to protect Shetland’s interests and exploit the financial opportunities that were about to arise.

Clark was from Motherwell originally and opinions of him were strongly divided, but his enemies were said to be as respectful towards him as his supporters. In 1972 he put forward a provisional order to parliament with a very wide remit. One of its proposals was that the council get permission to set up special funds separate from those that paid for amenities such as schools and roads.

Overall the order asked for unprecedented powers of ownership and revenue for the then Zetland County Council, and was promoted rigorously by Jo Grimond, Shetland and Orkney’s Liberal MP and leader of the party from 1956 to 1967.

The order became known as the Zetland County Council Bill, and after two long years, during which it became a private bill because it raised issues of such importance, and then was very controversially voted against by Labour MP Tam Dalyell, the bill was finally passed as a lawful act in April 1974.

Most of the demands requested by the original order went through, including permission to set up separate funds, so as the old ZCC gave way to the new SIC in 1974, the isles local authority was in the unique position in Britain of having the initiative in oil matters ahead of the big companies and the government.

In July 1974 the Disturbance Agreement (DA) was signed by the oil industry. It was designed to help compensate Shetland for the pressure of such intense industry, permanent social changes and threat to traditional industries that would occur. Cash paid out by the DA or disturbance receipts is what the charitable trust was based on, and its charitable status meant that the money in it was exempt from certain taxes.

The first incarnation of the Shetland Island Council Charitable Trust (SICCT) was established by a deed of trust on 27 September 1976, with the Shetland Islands Council as a “Body Corporate” and its sole trustee. In 1990, by a “Deed of Assumption and Conveyance”, all the councillors as individuals were assumed as trustees, and two non-councillor trustees were added: the Lord Lieutenant of Shetland and the headteacher of Anderson High School.

In 1997 it was necessary to recreate SICCT due to a clause in the original trust deed which prevented it accumulating income 21 years after its inception. The new trust was almost identical to the old one except the prohibition on accumulating income was excised from the new trust deed. Since 1999 the trust has had 24 trustees on its board: all 22 councillors and the two independents.

The funds placed in trust when it began were around £2 million, about two years before the first oil left Sullom Voe, and in the early days this was topped up by quarterly oil payments. The disturbance monies were paid up until 2000, and amounted to more than £81 million when they stopped.

The money was invested on the stock exchange by fund managers and into local subsidiary companies such as property developers SLAP (Trading) Ltd and Shetland Heat Energy and Power Ltd, who run Lerwick’s district heating scheme.

These investments have seen the trust’s “pot” stand at highs of around £250 million, but in the new millennium fluctuating markets have seen its value slump to £148.7 million as of 30 January 2009 – a drop of more than £35 million since April 2008. As the trust projects its finances on a tri-yearly basis trustees were told in November by financial controller Jeff Goddard that no immediate action was needed.

Despite this, the figures speak for themselves, and the trust is obviously not as buoyant as it once was, reflecting the global financial situation. Trustees were also told they were going to have to rapidly find ways to cut costs in the trust’s annual budget of £12.8 million to keep it at £11 million a year from now on.

Final decisions about where trust monies are doled out locally have been in the hands of the trustees since it was originally established. Over the years it has focused on financing various projects, including supporting traditional industries such as agriculture and fishing. This was a promise made to islanders in its original constitution alongside its main stated aim of improving the quality of life for Shetlanders, particularly in areas of social need, leisure, environment and education.

Through third party charitable bodies such as Shetland Recreational Trust (SRT), Shetland Amenity Trust (SAT), Shetland Arts (SA) and the now defunct Shetland Welfare Trust, an admirable level of success has been achieved over the years. Shetland has an excellent standard of living compared to a lot of areas across the UK, and while there is always room for improvement, what Shetland has is worth being proud of.

To focus on some of the success stories:
The isles have eight top-class leisure centres and sporting facilities in the most populated areas, including the outer isles of Yell, Unst and Whalsay. These have all been provided through the Shetland Recreational Trust, set up on 1st June 1982, with the isles’ flagship leisure centre The Clickimin opening in Lerwick on 30 March 1985. This has contributed to the growing number of Shetlanders who are reaching top levels in various sports including athletics, swimming and shooting. The recent culmination of these achievements was Lerwick hosting the island games in 2005, to widespread success and praise. Last month, Whalsay teenager Victoria Duffy, a whizz at various sports including hockey, football and netball, made it through to the second stage of the Girls4Gold programme, designed to reveal potential British athletes that could grab gold at the 2012 Olympics in London in the pentathlon section.

The achievements of Shetland Amenity Trust are also wide-reaching. Among its most high profile successes is Da Voar Redd Up, the isles annual clean up of beaches and roadsides, which has been given royal approval by Prince Charles. Recently, the spanking new museum and archives at Hay’s Dock in Lerwick has exceeded all expectations, breaking attendance forecasts and generally being praised across the board.

Shetland Arts in its various forms has contributed immensely to the international name of Shetland’s creative industries through the hugely respected and popular festivals, Wordplay, Screenplay and Fiddle Frenzy, all of which attract big names, showcase local talent and provide various artistic learning opportunities through workshops, seminars and lectures.

Care for Shetland’s elderly population has consisted of the provision of care homes/respite centres across the isles, a Christmas bonus scheme and money given to help people to live in their own homes as long as possible.

The charitable trust is at pains to make clear that it is completely separate from the council legally and arrives at its own decisions, but because the majority of trustees are councillors many people find it hard to distinguish the two. Moves designed to remedy this include the creation of the posts of general manager and financial controller in 2002 (the trust’s staff now being directly employed, not by the council as was the case) and a change of name on 13th June 2003 to simply “Shetland Charitable Trust”.

For some people this has not been good enough, and the Trusts Reform Group was set up last year demanding change and wanting to see trustees directly elected. The group’s campaign began by stating that with all the councillors being trustees on the board it creates a conflict of interest, and means the trust is open to political manipulation and effectively acts like a bank for the SIC.

The controversy over this was ignited in September 2007 when the trust agreed to take on the council’s 90 per cent interest in Viking Energy’s very controversial 150 turbine wind farm project.

Last year a complaint was put in to the Office of the Scottish Charity Regulator – the national body that monitors charities – about this investment, but after a meeting with the trust the OSCR said that they had no comment to make on that issue. Despite this, on 19th February councillor-trustees deferred making a decision to spend £2.25 million of trust money on the wind farm because so many of them declared conflicts of interest at the meeting, though at a second meeting in March the decision was finally made in favour of Viking Energy.

The OSCR did say that they want to see more non-councillors on the board of the trust and asked for an action plan to be submitted to them by 1st July that outlines proposals for distancing the charitable trust from the SIC. It is expected that this document will propose a working group is formed, offer a time frame for change and suggest a specific recruitment drive is put in place to plug gaps in areas of knowledge within the trust, to reduce the number of councillors on the board.

One thing that few people can doubt is that the glory days of mass spending are gone, and severe belt tightening will be needed to weather the storm and keep what facilities are there up to standard before building new ones is even mentioned. The amount of money that was available has spoilt the people of Shetland to some extent and now new facilities are generally expected to be of the greatest innovative standards, but this too will have to change as more economical projects will need to be considered, and certain cut backs are going to become essential.

Gavin Morgan