News / Five year plan to prevent bankruptcy
SHETLAND Islands Council has taken a major step towards a more prudent future by approving its first ever medium term financial plan that sets a minimum level of reserves of £125 million.
The local authority has given itself until 2017/18 to turn around its fortunes and overcome a structural deficit of £35 million annually.
The value of the council’s reserves currently stands at £185 million, down from £465 just 12 years ago.
Finance boss James Gray and council convener Malcolm Bell both warned that if council spending was not cut back, the local authority would be bankrupt in five years time.
Political leader Gary Robinson said that the plan “set out the actions that we need to take to get the council to a sustainable position”.
The plan sets out:
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that the anticipated return on reserves is to be reduced from 5.75% to a more realistic 2%;
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that no surplus from the harbour account is expected until 2016/17; but will return to between £2 to £3 million annually by 2017/18;
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that there is limited scope to “manage down” the historic housing debt, currently standing at £40.6 million;
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that council house rents could rise by as much as 10 or even 15 per cent should the Scottish government scrap the Housing Support Grant, currently worth almost £800,000 annually;
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that capital projects will no longer be paid for from reserves but only from the annual capital grant from the Scottish government of around £5 million;
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that a figure of £12 million has been set aside in the reserves to pay for the new Anderson High School, assuming funding from the Scottish Futures Trust becomes available;
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first income from the new Total gas plant to be expected to have an impact in 2016/17;
Mr Gray said: “If this plan is delivered, the council will retain a level of reserves of £125 million and will have achieved a financially sustainable position.
His 40-page plan can read in full here.
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