‘Grim’ scenario as councillors approve budget for islands

Grim reading, a shocking situation, sobering, and frightening were among the descriptions used by elected members before approving Shetland Islands Council’s 2024/25 budget yesterday.

The key concern is the near £23 million draw from reserves which is deemed “unsustainable”.

It led to repeated warnings that difficult decisions will need to be made on savings, but some councillors stressed the need to take action sooner rather than later.

Many councillors also said government was underfunding the local authority, with some taking aim at Westminster and some at Holyrood.

The council plans to spend £168.8m in the 2024/25 financial year to deliver services.

It anticipates receiving total income of £146m, which comprises core government funding, money from charges and council tax – as well as a “sustainable” draw from reserves.

But there is an overall gap of nearly £23m that will also have to come from reserves, which are invested to make positive returns.

A report from finance manager Paul Fraser said: “There is still work to be done to reduce reliance on reserves, or other unsustainable sources, in order to achieve financial balance each year.

“Thus the council is not yet able to demonstrate it is in a financially sustainable position.”

Unlike last year the budget does not include the “vacancy factor”, where unfilled posts were included in the budget and generally created underspends on staffing.

Speaking during a meeting of the full council, Mr Fraser said it would be “remiss” of him not to mention his “unease” at the draw on reserves, and said it was an “increasingly worsening situation”.

Shetland Central councillor Davie Sandison noted that 37p in every pound the council expects to spend over the next year will come from reserves.

He said it is “quite a shocking situation we are in”. But he said it is not the council’s fault but because it has been underfunded by government.

Lerwick councillor Neil Pearson said the level of planned unsustainable draw is “frightening” and said it is the “tip of a very big iceberg” if changes are not made.

Allison Duncan, who represents Shetland South, said the figures made for “grim reading” and said the council was in a “dire position” with unsustainable draws.

He said it was paramount that the council comes forward with a financial plan for future years.

Its leader, Emma Macdonald, added: “We do need to change and that scale of change is really, really significant.”

Shetland South’s Alex Armitage, who represents the Greens, said the Scottish Government was “strapped for cash” and said decisions at Westminster about distribution of wealth are “really critical”.

But Ms Macdonald said the Scottish Government chose to fund a council tax freeze when that money could have been spent on local government.

The Shetland Islands Council HQ at North Ness House.