Rocky road ahead as council tackles budgets shortfall

Areport into Highland Council’s capital programme shows the full extent of its investment worries.

It reveals that many projects may need to be cancelled, scaled back or delayed.

And if the current financial climate doesn’t improve, council finance bosses say there will be “significant reductions” to the capital plan.

Highland Council has assessed all its capital projects in terms of the risk to costs, timing and scope. Every item is rated “red” for costs.

Worryingly, all capital spend on roads, active travel, lighting and technology are rated red for all three measures.

This means they may not be deliverable.

At the same time, eight new Highland school builds are listed as “to be confirmed” while the council awaits a funding decision from the Scottish Government.

There’s a paradox at the heart of the Highland Council’s investment problems.

The council has already admitted that its current capital plan is unaffordable. Senior councillors and officials have been working behind the scenes to see what can be saved.

But at the same time, both the main capital budget and the separate housing revenue account is actually underspent.

By the end of this financial year, the general fund is forecast to have spent just under £119 million. That’s a £38.5m underspend.

The housing revenue account looks set to come in £5.6m under budget too.

The council says the significant underspends are down to the limited availability of contractors, consultants and building materials.

It’s now taking as long as two years for new fleet to be delivered, and tenders for housing jobs are often not returning any bids at all. The bids that are coming in, are sky high.

The council says these are global supply chain issues, but they’ve caused big delays with many capital investments.

New school projects also look uncertain. The council was counting on funding from the Scottish Government’s Learning Estate Investment Plan (LEIP) but hasn’t had any news. The council had expected to have funding confirmed by the end of last year. Without clarity over LEIP funding, the council says it’s impossible to set its capital programme.

It has already had to cancel its February 1 budget meeting and now says members will get an update in March.

However, all the LEIP funded schools now look shaky. Nairn Academy,

Culloden Academy and Charleston Academy alongside Beauly, Broadford, Dunvegan and Park primary schools and St Clement’s school are all marked red for costs and “to be confirmed” in every other risk category.

Like all councils, Highland needs to borrow money to invest. But borrowing is now sitting at more than £1.1 billion, with loans accounting for 69% of its capital funds. Council finance boss Ed Foster has highlighted that the council will have to pay back that sum for more than 60 years. And with interest rates on the rise, it’s a significant risk to financial sustainability.

When they meet next month, councillors will have to try to find the balance between investing in growth, and keeping costs manageable.

Members of the corporate resources committee meet on February 22 to consider this latest financial update.

DIM VIEW: Due to budget restraints, spending on road upgrades may have to be curtailed across Highland region.