Oil reserves will cushion Shetland from savage spending cuts – council convener

Shetland Islands Council may have to use its sizeable oil reserves to cushion the community from the impact of savage cuts in public spending to be announced by the UK government next week, according to convener Sandy Cluness.

Speaking during a BBC Radio Shetland debate as part of the broadcaster’s nationwide series on the unprecedented programme of multi-billion pound cutbacks, Mr Cluness said he believed the council was “very well equipped” to cope compared with other local authorities.

The full extent of the damage will become apparent in chancellor George Osborne’s comprehensive spending review on Wednesday, with tremors already apparent over glaring anomalies in plans to remove child benefit from those earning £44,000 or more. This week’s report from Lord Browne, meanwhile, suggested tuition fees in England should rise considerably – which could have major repercussions for further education in Scotland.

The Tory-Lib Dem coalition is grappling with a mammoth £155 billion budget deficit inherited from the Labour government in the aftermath of a devastating banking crisis. But some economists fear that cutting public services too deeply and too quickly could jeopardise the economic recovery.

Northern Isles MP Alistair Carmichael, who is a whip for the coalition, was also part of the panel for last Friday evening’s debate at the Hay’s Dock Museum. He defended the government’s approach in the face of suggestions from the audience that the banking industry and wealthy people should be bearing the brunt of the cuts.

The SIC and Shetland Charitable Trust are in the fortuitous position of having nearly £500 million of oil reserves to draw upon to lessen the impact on public services. Mr Cluness said: “Shetland people are not responsible for the debts the UK government are in. Shetland Islands Council is a debt-free council and we have resources that no other council has.”

He pointed out the funds were set up to help the community “during tough times” such as these, although he did stress the council was committed to safeguarding its reserves at or above a floor of £250 million. Bankers’ recklessness had resulted in the loss of sizeable investments on the stock market, Mr Cluness said.

Asked where the cuts would fall locally, he responded: “I would hope that a good deal of efficiencies can be achieved to enable much of our services to remain as they are. If we have to use some of our reserves to do that during a difficult period we will do, because when we set up these funds to begin with we always knew rainy days would come.”

Mr Cluness said he sympathised with the anger of some to the introduction of fees for music tuition and cutbacks to knitting. “I’m a member of this community like everybody else. I don’t want to see cuts of any kind, but we have to prioritise,” he said, and that may mean the closure of some schools.

He rejected fresh assertions that the SIC’s £6 million contribution to cinema and music venue Mareel was foolish given the economic climate: “I believe it’s a huge investment which will pay dividends for Shetland in the years ahead. Not only will it be an excellent amenity for the public itself, but it will encourage students to come here and take part in the courses that will be [provided].”

Mr Carmichael was quizzed over why his party was backing the Tories’ “aggressive” plans, which Brae High School history teacher Irvine Tait suggested were part of a “sickening” ideologically-driven attempt to permanently emasculate the public sector.

He responded that the coalition’s programme was “absolutely right, and absolutely in the national interest”. “We’ve maxed out the credit card and we’ve got to cut our spending. It’s not easy, nobody ever said it would be, but I think it’s very, very necessary.”

School pupils in the audience questioned why bankers were not being made to pay more for the crisis, while Mr Tait said there was a “great sense of injustice”. He pointed to trade union research estimating that the poorest tenth of the population will effectively lose a fifth of their income while the richest tenth will lose only 1.5 per cent.

“It is the people who didn’t cause the crisis who sadly under this government are going to have to pay the price for it,” he said.

Mr Carmichael insisted measures were being put in place to protect poor folk, pointing to a Lib-Dem fostered increase in the tax-free income threshold. He had been “horrified” to discover the extent of the economic legacy in May and had to change his position on a range of issues in the face of the straitened financial circumstances.

Another school teacher, Stewart Hay, said the country he lived in was “certainly not a poor one” and he believed it was “absolutely intolerable” for the Lib Dems to be supporting swingeing Conservative cuts: “What kind of Britain is it we’re living in?” he asked, pointing out the political dishonesty of the three main parties, none of whose manifestos mentioned the scale of the “horrors” now being contemplated.

Mr Carmichael accepted it was a wealthy country and that was why spending on health and international development are being protected. But he dismissed the notion that a “slash and burn” mentality would drive the UK back to a 1930s standard of living, pointing out the cutbacks over the next five years would only shrink the state back to the level of 2006/7.

“I don’t agree with absolutely everything that the government does,” he said, before stressing he would not vote for anything he would not be prepared to defend.

The panel was completed by NHS Shetland chairman Ian Kinniburgh and Christina Irvine from the Shetland branch of the Federation of Small Businesses.

While NHS budgets are being protected, Mr Kinniburgh explained that even standstill budgets were creating huge pressure on the service in Shetland. It has lost eight staff through natural wastage this year and that pattern is likely to continue, with the organisation awaiting Mr Osborne’s announcement.

Ms Irvine said businesses were desperate for the cutbacks not to impact on areas that encourage growth of small firms. She called particularly for action to reduce high fuel prices and improve broadband links: “All small businesses in Shetland want is a level playing field.”