Employees who depend on charitable trust funding facing long pay freeze

Hundreds of people in Shetland whose wages are bankrolled by Shetland Charitable Trust could be facing a four-year pay freeze as the trust seeks to further tighten its belt.

Those affected include staff employed in Shetland’s main museum, the leisure centres and swimming pools, arts and amenity trusts and some voluntary groups.

At their meeting tomorrow the trustees of the charitable trust will be asked to continue limiting the money paid out to the bodies they fund to £11 million a year until at least March 2015, making no allowances for rising costs due to inflation.

If the “cash standstill” is agreed it would leave organisations like Shetland Recreational Trust and Shetland Amenity Trust having to balance their books in the face of rising costs. To increase staff numbers or award wage rises they would have to pay for it from savings or by attracting new funders.

While such a funding freeze may seem tough it is likely to be a breeze compared with what the council and the organisations it funds are facing over the next few years with cuts of 20 per cent or more.

Advocating the “cash standstill” plan for the trust for the next three financial years to the end of 2014/15, its financial controller Jeff Goddard says he does not believe a freeze will be difficult to implement because the main cost that the funded bodies face is their wages. He expects wage levels to mirror those in other public sector organisations like councils and health boards where a virtual wage freeze prevails “for the time being”.

In his report to Thursday’s meeting he advises trustees they should signal to the organisations they support that if they do increase their wage costs the money should not come from using up a larger percentage of their annual grant.

Most affected by the funding constraint will be the biggest beneficiaries of trust cash: Shetland Recreational Trust received £2.52 million this year to pay its running costs, Shetland Amenity Trust got £1.05 million and Shetland Arts Development Agency got £696,000.

Other major beneficiaries include the social enterprise Cope, which got £330,000; Shetland Youth Information Service, £189,000; Voluntary Action Shetland, £144,000 and the Citizens’ Advice Bureau, £132,000.

As well as being a major funder of those organisations and their employees’ wages the charitable trust spends another £2.49 million helping meet the running costs of Shetland Islands Council’s care centres.

However it remains to be seen how trustees decide to divide up their £11 million payout over the coming years, whether to stick with those it has backed up to now or to dispense at least some of its money elsewhere.

The reasons for the trust cutting back and effectively freezing its spending until at least 2015/16 are different to those driving the cuts at bodies like Shetland Islands Council, which depends almost entirely on central government funding, which is being slashed. The trust is having to be cautious because the money it earns from returns on investments in the markets and from local property is not keeping pace with the inflation rate, which it had been relying on.

The trust also has potentially expensive new challenges on the horizon which it has no contingency plans for, including the expectation that it will be called on to fund more services for the increasing elderly population.

According to Mr Goddard it also needs to grasp the nettle at some time and start a fund to cover the increasing costs of maintaining and eventually replacing the 30 buildings it pays for just now, including all the sports centres.

A plan existed to do just that in the 1990s but was scrapped when the trust’s pot of money took a severe dent in the early noughties during the dot.com crash.

Mr Goddard says there are only three ways that the trust can afford to fund new ideas: spending its invested “pot” of £220 million, ceasing funding some of its existing beneficiaries, or increasing income.

Of course, the great white hope on the horizon for the trust is the £23 million-a-year cash injection it has forecasted it will earn from the proposed windfarm as a 45 per cent owner of the Viking Energy Partnership.

The trust has drawn in its horns a long way from its heyday when it had £300 million in the pot and was spending as much as £18 million a decade ago to fund organisations as well as building leisure centres and care centres all over Shetland. Over the past nine years the trust has worked to cut spending to a level that can be sustained without eating into its pot.

It is currently coming towards the end of its first three-year financial plan agreed in 2008 to cut spending to £11 million by March 2012. The target was met a year early, in the budget for the current financial year.

Since 1974 the trust has spent £248 million supporting other charities and charitable aims in Shetland. The funds were grown from the £81 million the trust was given by the council from its disturbance agreement with the oil industry in return for building the Sullom Voe terminal.