SIC to receive 2.6 per cent less from Scottish government if it agrees to council tax and pay freeze

The revenue support grant Shetland Islands Council receives for 2011-12 will be 2.6 per cent less than this year, a drop from £95 million to £92.5 million, but that depends on the council signing up to a full settlement proposed by the Scottish government.

If the council does not agree to deliver SNP priorities, including a further year’s freeze on council tax and a pay freeze on public sector salaries of £21,000 and over, the deal will be 6.4 per cent down to £88.9 million.

Following the announcement today SIC chief executive Alistair Buchan said he had instructed all managers to work with their staff to show the effects of taking 15 per cent out of their budgets. He envisaged the council having to make up to five per cent savings next year, with a “substantial amount” coming from increased efficiency.

Head of finance Graham Johnston said the incentive was obviously to sign up to the government’s proposal. A report is due to go before the Full Council meeting on Wednesday 8th December with local authorities having a further fortnight to decide which way they want to go.

Support for capital spending will also be reduced by 17.9 per cent, but Mr Johnston said the amount of capital received was “a relatively modest proportion” in comparison to revenue. The most recent figure was around £3 million which under the proposal would go down by about £500,000.

Mr Buchan said the full details of what the announcement meant for the council, and what its share of the local government pot would be, would only become known in the next few weeks.

He said: “We are facing very challenging times. I’ve spoken in the past few weeks of the need to tackle those challenges head-on. Also of the need to be pro-active in developing options which allow the council to be able to make decisions that put our budgets on a sounder footing.

“The final decision on any changes to council budgets is of course a political matter. Over the next few weeks we will be having meetings with officers and members to discuss the detail. I would anticipate having a report to the council in December leading to finalisation of the budget early next year.”

In his budget plans for the year ahead Scottish finance minister John Swinney also said he would impose a years’s pay freeze on public sector workers earning £21,000-a-year or more and end big bonuses, slash spending on housing, education and tourism, and increase business rates for big retailers.

The pay freeze will apply to Scottish government staff as well as those working in government agencies and non-departmental public bodies, and “set a framework” for discussions on pay with NHS staff, teachers, police and firefighters, Mr Swinney said.

He added that public sector pay represented more than 50 per cent of his overall budget, and restricting it would save jobs.

The deal has been accepted by local government umbrella body Cosla, whose president Pat Watters said that given the government’s priorities on health it was the best that could be achieved.

He said: “This is the most difficult budget settlement I have had to negotiate with any Scottish government since devolution. But as the president of Cosla I know within my heart of hearts that I have put the best financial package with the maximum flexibility on the table for Cosla’s member councils.

“Yes I am disappointed that this is a one-year deal, and yes I am disappointed that we are losing at least 2.6 per cent of the cash in local government budgets, and yes I am acutely aware of the difficulties that reduced capital will cause. However, that said given the UK situation some reduction in resource was inevitable.

“Cosla’s main objective was to retain our share of the public sector cake which we have done. It is doubly pleasing that we have delivered as much protection for our members as possible without boxing councils in and denying them the opportunity to take their own local view on the proposals we have developed with government.”

Meanwhile the decision of the Scottish government to budget for only one year, with impending elections in 2011, was criticised by the Chartered Institute of Public Finance and Accountancy.

CIPFA head Angela Scott said: “The Scottish government will get £110 billion over four years from Westminster. Financial planning is crucial, especially in a time of austerity and cuts, and budgeting for only one year represents a missed opportunity.”