Council leaders deny financial crisis is getting worse

The leaders of Shetland Islands Council have dismissed claims that overspending by the local authority is getting worse despite the massive ongoing efforts to slash costs.

Political leader Gary Robinson and convener Malcolm Bell rejected suggestions that a private councillors’ seminar called for today was an “emergency” session to address a worsening deterioration in finances, leading to increased spending of dwindling reserves.

There are reports that if further savings are not found the draw on the oil reserves may rise to £42 million.

Mr Robinson said the session had been scheduled back in June following a similar seminar. “It’s been in the planning for two months now.”

One of the main motivations, he said, was a desire from some councillors – as expressed in their manifestos – to have better medium-term financial planning put in place.

Mr Robinson said the seminar would also be the first opportunity for officials to brief councillors on their progress in identifying £15 million in savings and completing the 52 service reviews that have been ordered since February.

He disagreed with suggestions emerging from the council that an element of panic was setting in due to anticipated savings not going to be achieved. “There’s somewhere in excess of £5 million of those savings already in the bag and we’re only four months into the financial year. In terms of what we set out to do I think that’s reasonably positive.

“I think ultimately we will be able to keep to our strategy.”

He admitted to setbacks, as there had been in previous years when savings were sought. One king-size obstacle to curbing the £40 million education spend is the moratorium on rural school closures imposed by Scottish minister Mike Russell.

Mr Robinson said it was hoped that a report from the minister’s Commission on Rural Education would have been issued this month, allowing the council to incorporate its findings in its “refreshed” blueprint for education. But indications now are that it will be delayed until next year, leaving little time to agree changes to help save the expected £3 million a year.

The delay means savings cannot be found from closing schools this year and a consultation planned shortly about closing Olnafirth Primary may be pointless.

Mr Robinson said: “We’re going to have to have a serious look at how that might otherwise be achieved.

“I think Tavish Scott was right in what he said: it’s time the minister made his mind up about what direction he’s going to go in, in terms of rural schools. I think he really does need to set out what his intent is.”

Mr Russell is due up in Shetland at the end of this month, days before a meeting of the SIC education and families committee. There is speculation that he may make an announcement about government funding for the long-delayed new Anderson High School.

Another setback in the quest for savings, which will be discussed today, is the failure once more of Sullom Voe to generate the expected income due to BP’s problems with its Schiehallion field west of Shetland, leading to lower tanker numbers and less need to use the council’s oil harbour, tugs and pilots.

Mr Robinson said: “It’s no big secret that Schiehallion closed down … and clearly it has a knock-on effect to our budget strategy. It has had a negative impact of somewhere in the region of £1 million.”

Service priorities will also be debated in the seminar today and the agenda includes discussions on the level of financial reserves required, which the council currently sets at a minimum of £250 million but has dwindled to just £190 million and falling.

The annual problem of budgeting to spend £20 million a year on capital projects but managing to spend only a fraction of that will also be debated. Mr Robinson said that budget was likely to be reined in somewhat, although it was for members to decide to what level it is constrained.

Convener Malcolm Bell also dismissed the impression that the seminar was an emergency one. “It’s one of a number of seminars that have been in the pipeline for a while.”

While there had not been a sudden or marked deterioration in the state of council finances, Mr Bell repeated previous statements about the gravity of the annual overspend. “We are in a very serious situation. There is no question about that.”

His fear is that – as happened in the past – the council fails to tackle the crisis or face the tough decisions on spending cuts which must be made, creating the risk this time that control over Shetland’s affairs could be taken away.

“This is the council that is going to finally have to deal with the problem,” he said. “However tough it’s going to be it’s far better that we have local councillors, local people, making the decisions in as measured a form – and taking care over decisions like fiddle tuition – because that means a lot more to me than it would mean to an accountant coming in from Edinburgh.”