News / Opinion: A do it yourself disaster
by Jonathan Wills
It’s hard to imagine how much sillier this silliest of silly seasons could possibly get, but no doubt there are further delights in store.
One possibility is that the charitable trust really will vote to have a majority of “independent” trustees appointed by a rump of councillor trustees, rather than directly elected. How silly would that be? Remember where you heard it first…
I blame our parents for some of the silliness. For example, whenever people of my mother’s generation saw a bossyboots being particularly biggity, they’d say: “Him? He’s choost a peerie Hitler!” What an example they set for us baby boomers.
It’s a slippery slope and a short step from that kind of sarcastic exaggeration to taking the mickey out of our great leader and helmsman, with a mock Hitler salute prompting the wildest outbreak of silliness among the Shetland chatterabilia since Captain Calamity declared independence.
All this silliness distracts attention from the political volcano simmering just below the surface. Shetland’s financial crisis has little to do with government cuts, unpleasant as they are. It’s mainly a do-it-yourself disaster. I hear the sound of bonxies coming home to roost.
The council has a “financial reserves policy” that says we must keep at least £250m in the kitty for a rainy day. This limit’s already been broken by successive crises on the casino stock markets where your money’s invested.
Even worse news is that the only reserves we can actually use to cover the council’s habitual budget deficit are in the Sullom Voe Harbour Reserve Fund, established by the 1974 Zetland County Council Act.
These real reserves currently stand at about £51m, not the £250m we’re always hearing about. They amount to only a quarter of the current value of total “reserves”, which on 5 August was £198m, well below the £250m “floor”.
In other words, the spare cash for funding council deficits is only a fifth of what some of us were encouraged to think it was. At this rate, the £51m in the Reserve Fund could in theory cover two years’ council deficits. But that’s not an option, because then there’d be nothing left in the Reserve Fund to cover its primary purpose – to meet any deficit on the Sullom Voe Harbour Account.
A deficit on that account is no longer a distant possibility. Nor would there be anything left to pay for the Reserve Fund’s secondary purpose – making grants and loans to industry through the SIC’s Economic Development Unit.
The £51m remaining in the Reserve Fund may be expected to earn around £3.5m a year from interest and dividends. As and when stock markets recover, it could be a little more. But this is all we can spend without reducing the fund’s capital value and seeing its future income dwindle.
We can only afford to use part of the £3.5m to subsidise the council’s annual deficit, which is currently about £17m – assuming we can achieve our savings target of some £9m. So things are very tight indeed and there’s still a gaping hole in the numbers.
The truth about the size of our “rainy day nest egg” – and the restrictions on what we can do with the rest of the “reserves” – was brought home to councillors at a private seminar on 8 June. Quite why it was private, I don’t know. It was embarrassing for some people, of course, but it seemed to me that the public ought to know how deep a hole the Sandynistirs had dug for us over the years, and how many sandy passages they’d excavated beneath the counting house floor.
I suggested this knowledge might even make Da Man i’ Da Stritt sympathise more with the horrible decisions we councillors will shortly have to take. But, no, the press and public were excluded while we heard the extent of the crisis – and some sharp criticism of the political leadership’s unconventional treatment of the “reserves” since 2003.
A financial expert explained to us (and the auditors have recently confirmed it) that three quarters of the combined “reserves” are for purposes very precisely defined by the Local Government (Scotland) Act. We cannot and must not spend this cash on funding our annual deficits.
Almost half of the “reserves” money (45.5%) is in the Capital Fund which, by law, we can only use to build or buy assets (like the new Anderson High School, which the Capital Fund could pay for right now, strangely enough).
More than a quarter (28.7%) is in the Repairs and Renewals Fund which, equally unsurprisingly, is earmarked for repairing and renewing roads, buildings, vehicles and machinery, etc., not for subsidising a deficit habit.
When we invest these two funds to earn interest and dividends, we’re obliged to use the earnings for the same purposes, not to subsidise a deficit on the current account.
Anyone who asks about this central problem is met with leadership platitudes about markets rising as well as falling and the need to be patient and take a long term view, blah di blah… If you ask for details, or even a general outline, of what the leadership intends to do about the deficit, you get more platitudes and patronising, commonplace observations about there being “a lot of work to do”, followed by unsolicited tributes to officials who’re working very hard on solutions, as indeed they are, in the absence of any clear political direction.
What we’re all eager to hear are the leadership’s practical proposals, as elected politicians, for dealing with this unprecedented crisis. The lack of detail is becoming worrying.
How do they propose to protect the jobs and conditions of lower paid council employees who do some of the most essential work? What, exactly, will they cut back on? Visiting fortune tellers or vital public services? We have not yet been told.
As an opposition backbencher, excluded from the private deliberations of the movers and shakers, I have some suggestions of my own but am now reluctant to air them at the council’s infrequent meetings, lest I stir up a new manure storm, complete with allegations of civic etiquette breaches and banishment to internal exile apo’ Da Naughty Step.
As this miserable “summer” limps to its clammy close, all we can do is wait to see what plan the leadership cult will produce, and hope it makes enough sense for a majority of us to support it. As a displacement activity, the Elders and Betters have been in conclave with an academic astrologer at the Simpsonian Institution on Muckle Roe, peering into cracked crystal balls and stormy teacups to “imagine wir futures”. These will be bleak indeed if the Simpsonians don’t deal now with the rather more urgent financial puzzles they were elected, four years ago, to solve.
Perhaps as part of the solution, our leaders have suggested spending £200,000 on a house (I won’t say where) that might accommodate even more consultants and futurologists.
This is where the silly season started and it does indeed seem silly, when we’ve no cash to spare and are in the middle of a housing crisis that gets worse by the day.
But wait, the premises could yet come in handy – `as a workstation for the commissioners whom the Scottish Government will surely have to fly up to run the place, if the Simpsonians can’t balance the books.
As Tacitus didn’t quite say: Dispecta est et Thulensis imperator nudus.
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