News / SIC executive backs strict belt tightening
SENIOR Shetland councillors have pledged to get a grip on the authority’s finances after being warned their jealously guarded oil reserves could dry up within seven years unless tough action is taken now.
Shetland Islands Council’s executive committee has backed a plan to cut annual spending by £26 million over the next two years, which local government unions believe is “too far, too fast”.
However acting head of finance Hazel Sutherland warned councillors that by March its sacred policy of preserving at least £250 million in its combined reserve funds will be breached, leaving just £219 million in the pot.
Ms Sutherland said that a worst case scenario where the council took no action to cut spending would see the end of the entire reserve, built up over the past 30 years from hosting the oil industry at Sullom Voe.
She said: “We see this as a pivotal point in the planning cycle. If the decision you take now is to do nothing there is a very steep and very quick falling off of reserves where reserves would be depleted by 2018.
“The actual forecast demonstrates a period of very significant change while we turn the tanker around and get revenue expenditure to a sustainable level and that allows you to rebuild reserves in the medium term.”
The committee backed her proposal to introduce a programme of cost cutting measures the likes of which the authority has never seen before, which she claims will see the reserves back up at £250 million by 2022.
The finance chief said the council needed a “change of culture” with line managers adopting a continuous process of efficiency saving, rather than the “stop-start” approach of old.
Chief executive Alistair Buchan warned that while the council has managed to reduce its annual spend by several million without affecting services much so far, this would not be able to continue.
“It’s an extremely challenging programme being set, but nevertheless it is doable. Doing nothing is simply not an option,” he said.
Councillors were told that they could no longer use the underspend on their capital programme to balance the books, and that the annual draw on reserves would have to come down from more than £47 million this year to £13 million annually.
Mr Buchan added that the picture could get worse depending on public spending cuts and inflationary pressures, while earnings on council investments are currently “negative” due to the start of the world’s financial markets.
Managers have yet to identify where cuts will be made, but in July the council said it could be looking to eliminate around 420 jobs from the payroll.
SIC development committee chairman Alastair Cooper said the only way Shetland would survive such public sector constraints would be to spend money on economic development, which would involve dealing with some “sacred cows”.
Social services committee chairman Cecil Smith said the council should consider disposing of some of its assets, such as the Ness of Sound, and look for new ways to generate income.
Ms Sutherland said that two themes for saving money that were emerging through discussion with managers was “early intervention” to avoid extra costs later on and carbon reduction.
The council intends to launch a series of public meetings around Shetland at the end of this month to gauge the community’s views on which services should be prioritised.
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