Outgoing finance chief warns of threat to policy on oil reserves

The council’s policy to maintain its oil reserves at or above £250 million may have to be revisited. That is the farewell message from outgoing finance chief Graham Johnston, who said straitened economic circumstances would make the target more and more challenging in the years ahead.

Mr Johnston estimates that the reserves will be worth around £260 million at the end of 2011/12, which councillors pointed out left very little wriggle room. That does not take into account a liability of up to £5.9 million which the council will have to pay Lerwick Port Authority to resolve the Bressay Bridge dispute.

The head of finance said work over the past few months had reduced the projected draw on reserves for the upcoming financial year from £51.8 million to £35.7 million. But even that level of reliance on the nest egg would “not be a sustainable position” and members would need to slash spending further or abandon the target of keeping reserves over £250 million.

That figure was set back in 2005 but, as councillor Allan Wishart pointed out, if the effects of inflation were taken into account the figure would be nearer £300 million today.

Councillor Alastair Cooper said this council had inherited the LPA debacle from the previous administration and, whatever the final outcome of lengthy legal wrangling between the two parties’ lawyers, it would lead to “a bill and a significant one at that”.

Meanwhile, members this week agreed to reduce spending on capital projects next year from £27.4 million to £22.4 million, close to a target of shedding £5.2 million from the budget.

Head of capital programming Robert Sinclair said the cuts had come from a combination of slippage and on-site savings, meaning no projects have had to be abandoned.

Chief executive Alistair Buchan told councillors at Wednesday’s Full Council that the reduced capital programme outlay was “the minimum the council needs to do” given the dire public spending backdrop. He said it would be vital to get to grips with a longer-term budget strategy in the next few months.

Councillors Gussie Angus and Betty Fullerton were both unhappy at the length of time it has taken to get the wheels in motion for a new Eric Gray care centre. Mr Sinclair said an indicative planning application could be ready by the end of the month.

Mrs Fullerton believes the message about the impact cutbacks are going to have needs to be further hammered home to communities which are understandably still looking for “their pet projects to happen”.