Golden age of spending over

By JOHN ROBERTSON

THE COUNCIL’S golden days of spend, spend, spend are coming to an end with tough decisions looming in the very near future.

Councillors were told this week they will have to start rationing their building plans for future years to cope with a 25 per cent cut in their capital programme budget, removing work worth around £5 million a year from the local economy.

The cut from April 2010 will still leave £15m a year to put towards the £76m of building projects currently on the books, which is set to be added to by huge projects like the £49m new Anderson High School, the Bressay tunnel and fixed links to the North Isles and Whalsay.

But, as councillor Jonathan Wills pointed out this week, if the new AHS costs £5m a year in lease payments to the Charitable Trust, councillors would be left with just £10m a year – half what they are used to – to pay for all the roads, ferries, tunnels, schools, care homes, offices, piers and toilets they desire.

While not the level of capital spending Shetland has grown accustomed to, SIC head of finance Graham Johnston put it in perspective, reminding members that even after what he called the “step down”, their budget would still be much bigger than that any other council in Scotland has at its disposal for schemes, including Orkney.

Councillors were warned about the forthcoming day of reckoning during a meeting of the Full Council on Wednesday. It follows years of warnings about the need to avoid eroding oil savings to below the £250m mark from their present level of £288m.

Mr Johnston had better news for councillors about ongoing efforts to make efficiency savings in the £102m it spends on running costs each year, £4m of which has to be taken from SIC reserves. The authority is on course to reduce that demand to £3m by next year and by a further £1m each year until zero is reached in 2012/13.

An attempt was made on Wednesday to set up efficiency squads to aid the internal search for new ways of cutting back. It was Rick Nickerson’s idea and, perhaps significantly, he is an ex-SIC official who knows a bit about how officials spend our money. He wanted the squads to find at the very least £3m a year to stop that amount having to be siphoned from reserves each year.

Chief executive Morgan Goodlad said there had been efficiency teams when the council’s budget problems were looking worse but their work “tended to lapse” after the new government came across with a much larger support grant than expected.

Mr Nickerson called that a “slightly complacent” approach. He was not alone. Betty Fullerton was worried by the slackening-off in effort too. She said councillors needed to get the message out to staff that it was not the case that the newer members, who have made a lot of noise about wanting savings, were just going to go away.

Services chairman Allan Wishart was dismayed the council had fallen “into a slumber again” because of the extra government cash and he wanted the savings quest re-energised. Money not spent would mean more available for investment in schemes that had been promised to the community, whether it was ferries, fixed links or care homes. “We raise people’s hopes, expectations and aspirations but in reality all these things just go further away from us.”

The vote on efficiency squads was tied 9-9, prompting convener Sandy Cluness to use his casting vote against the idea.

One area where Mr Johnston expects major efficiency savings to start emerging is at Sella Ness where great effort has gone into merging Shetland Towage and the ports and harbours department in order to slash the cost of operating the port of Sullom Voe. He also wants oil companies to be charged more for using the port and its oil services.

Mr Johnston’s main message to councillors was that the council is actually on course to meets its various financial targets this year and in 2009/10 despite recent rampant inflation and soaring fuel and energy costs. But he warned that several factors could yet play havoc with budgets, including the cost of back-pay and changes to staff wages under the forthcoming single status agreement which could blow a £4m hole in his sums.

That could require the reserves to be dipped into or other projects to go by the wayside to pay for it, which is likely to mean cutting economic development or cancelling building projects. He said he preferred to wait and see what the actual amount is to settle the single status issue, which he should have a firmer idea about within the next few months. “Let’s cross the bridge when we come to it,” he said.

Another drag on the council’s reserves is the £7.7m this year for economic development, economic grants and running the NAFC Marine Centre in Scalloway. Mr Johnston wants that fully reviewed.

Services chairman Gussie Angus was keen for the £2.4m annual funding for NAFC to be sorted out once and for all instead of being shunted towards whichever council pocket happens to have surplus money in it each year. He said the uncertainty stemming from the lack of secure funding was unfair on college staff and the fishing and marine industry in Shetland.

On the subject of tackling the government about paying off Shetland’s housing debt of over £50m, Mr Angus said the council needed to rethink its whole strategy in an effort to have more success than in the past, which has amounted to little more than a sympathetic ear before politely being shown the door.