Disquiet as councillors are asked to fill pension black hole for Shetland Towage

Councillors have called for a chapter-and-verse report into the circumstances behind the SIC’s decision to incorporate Shetland Towage earlier this decade as they ponder how to meet an eye-watering £8.3 million estimated contribution to the local authority pension fund for former employees of the tug company.

Several members expressed deep concern about the apparently extortionate amount of money involved and Gussie Angus described it as a divisive matter which was upsetting both the tug crews, who are concerned about being short-changed, and other council employees who feel the former Shetland Towage workers are getting special treatment.

Mr Angus was one of several members to voice their reservations during a special SIC meeting to consider Graham Johnston’s report into the state of the council’s coffers on Wednesday morning.

It was unanimously agreed that Mr Johnston would produce a report outlining how the council came to take on the liabilities of the company, formerly owned by Shetland Charitable Trust, and what options it now has.

North Isles councillor Robert Henderson was another who baulked at the astronomical sums involved. “The Norröna pales into insignificance when you look at these figures,” he said.

The SIC officially took responsibility for Shetland Towage in February 2006, ostensibly to allow various marine services at Sella Ness to be merged into a cheaper, more efficient council-run operation providing pilot boats, towage and berthing services at Sullom Voe. The workforce was cut by 12 staff and crewing levels reduced from five to four.

It cost the council £1.5 million to buy the company, which was no longer trading profitably, from the charitable trust and left it with what had then been estimated to be a commitment to employees’ pensions in the region of £4 million, but that has more than doubled in the intervening years to what Mr Angus described as an “inordinate” sum.

The councillor told The Shetland Times the decision to buy the firm was taken “for reasons which are unclear to me” and even then he felt £4 million was “quite a large sum”, but there are now questions which have to be answered before any commitment can be made. The report will be in front of councillors prior to the end of this financial year, possibly before Christmas.

“I plead guilty to not having asked more searching questions previously,” Mr Angus said. “We seem to have landed ourselves with an inordinate cost to support a black hole in the pension scheme – is this the best option? We have a civic duty to examine this more closely before we commit to it. Let’s review this, see whether or not what we’ve done is the most appropriate use of public money.”

He continued: “I understand that some Shetland Towage employees are saying this is a much poorer pension scheme than they had [while] other council employees are saying here we are taking a busted company, taking employees into the pension scheme and giving them what amounts to preferential treatment – we have to be seen to be even-handed.”

Mr Johnston said the council had to make sure the pension liabilities, which are understood to affect in the region of 60 employees, had to be looked after.

He said the discrepancy between the earlier £4 million and the most recent independent actuarial valuation of £8.3 million was down to a combination of poorer investment returns pension funds have been encountering and the greater longevity of pensioners increasing the cost of pension funds in general.

Meanwhile, councillors approved the broad thrust of Mr Johnston’s financial recommendations during Wednesday’s meeting, including to sanction a £20 million spend on new housing over the next five years to help tackle the huge waiting list and to provisionally spend £100m in the same time period on capital projects.