Council / SIC medium term financial plan figures a ‘stark reminder’
SHETLAND Islands Council could face a cumulative budgetary deficit of over £100 million by 2025/26 if things don’t change, according to a new medium term financial plan.
Finance manager Jamie Manson concedes in the document, which will go in front of councillors on Wednesday, that he is unable to “sugar coat” the outlook for the next five years.
He said the figures are a “stark reminder that we are not living within our means”.
The medium term financial plan presents three different scenarios for the next five years – a most probable outcome, a best-case outlook and a pessimistic scenario.
They are underpinned by an anticipated year-on-year reduction in core government funding, as well as increased costs, while the financial impact of Covid-19 and Brexit is also factored in.
In the most probable situation, financial pressures – if unaddressed – translate into annual budgetary deficits which range from £17.2 million in 2021/22 to £26 million by 2025/26.
The plan says that on a cumulative basis, this amounts to £103.6 million by the end of 2025/26.
That figure for the optimistic scenario is £57.8 million, but for the worst-case outlook it is £143.6 million.
Manson said the SIC is not the only council to face significant financial challenges, “but we have tolerated year-on-year funding reductions and growth in our cost base by using our reserves in an unsustainable way”.
He warns that if this continues then the council’s reserves, which are valued at well over £300 million, could “ebb away” in just a decade.
“Contrary to popular belief, our reserves are not held as cash nor hidden away in a kist,” the document says.
“Our reserves are held as long-term investments, managed by external fund managers on our behalf and have provided us with a source of income to supplement the funding we receive from other sources.”
Looking ahead, Manson said that a suite of strategies and plans will “enable us to consider our priorities from a range of different perspectives and should facilitate a holistic ‘one council’ approach to making lasting, and sustainable, change for the benefit of everyone in Shetland”.
Councillors will set the budget for the 2021/22 financial year in March.
Manson warns that it is “essential” that the council commits to delivering “tangible, cash-releasing savings” as part of the budget if it wants to make progress on its deficit.
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