Editorial: The Old Rock 14.08.09

The council, according to its finance chief Graham Johnston, is in rude financial health. By comparison with other local authorities in Britain and the Treasury, which will have to sell £220 billion of bonds this year to avoid having to be bailed out by the International Monetary Fund, that is certainly true. Fears that the precipitous slide in the stock markets might take the authority’s reserves below £250 million, below which it is policy not to spend, have not been realised. The general fund is valued at £280 million, although this is at book, not current value.

What is more open to debate, surely, is Mr Johnston’s suggestion that the council no longer needs to cut back on its capital programme expenditure, from £20 million annually to £15 million. As things stands, we were told in a report last year, this programme is equivalent to the annual spend on capital projects of the whole of the Highlands. Mr Johnston argues that it is necessary to maintain this spend for the sake of economic stability locally. Yet one of the key reasons that the books look better than anticipated is a capital underspend of just over £5 million. The economy has clearly not suffered as a result of that, so why should it be adversely affected by an annual reduction of £5 million?

The need for financial prudence more generally should also be uppermost in councillors’ minds when they debate Mr Johnston’s report next week. After the next general election it looks as if we will have a government in this country which will be determined to impose severe budget cuts. That will have a knock-on effect on the council’s revenue budget. It may be necessary in such circumstances for the council to dip into the reserves to help fund service provision.

The proposal to move to a five-year capital spending programme is certainly very wise. Perhaps it ought to be a little less ambitious in funding terms.