20th August 2018
Established 1872. Online since 1996.

SIC not digging so deep as last year

Shetland Islands Council has spent just £4 million from its dwindling reserves so far this year compared to £12 million at this stage last year, according to head of finance James Gray.

Refining his estimate to “com-pare like for like”, he reckoned about £5 million less had been withdrawn from the remaining £193 million in the reserves.

The local authority has also shaved £2 million from its wage bill for the first three months of the financial year and paid out £1.5 million less in general payments, Mr Gray told the audit and standards committee on Tuesday.

The positive signs of spending restraint show that some progress is being made in tackling the over­spend­ing crisis which, if it continues unchecked, could wipe out the reserves by 2017.

Mr Gray told councillors that if this year’s target of cutting revenue spending by £15.4 million to £120 million is met it would lead to the drain on reserves being reduced from around £100,000 a day to £68,000 a day.

The “full picture” on how well the drive for cuts is going after the first half of the year will be revealed next month, he said, when the Full Council meets on 20th September.

At Tuesday’s meeting the vice-chairman Jonathan Wills toyed with a Dad’s Army “Don’t Panic” pencil case he had been given and asked whether there was reason to panic. There was a tendency for the public and council staff to do so, he said, when the local authority was facing such “grim figures”.

But Mr Gray said “good progress” was being made. “I sus­pect we’re probably behind where we should be on the £15 million but there are eight months of the year to go.”

At next month’s meeting coun­cillors are expected to settle on a much lower figure to set as the floor which reserves should not fall below. Until now it has been set at £250 million but the SIC has left that in tatters. Mr Gray said a floor of £150 million would be chal­lenging but £125 million might be achievable if the £30 million-a-year saving is achieved by the end of next year.

One way in which the need for service and job cuts could be avoided this year would be to stop spending so much on bricks and mortar. This year £5.6 million of the draw on reserves is to pay for extra capital projects that the local authority wants but cannot afford from its income. Dr Wills said the choice seemed to be to continue employing people or “build nice shiny things”.

With councillors having been in office for 100 days, he called for more openness about the progress made in making savings. He criticised the council for holding its finance seminars behind closed doors. “People are asking what’s happening,” he said.

Mr Gray dismissed reports else­where in the local media that an extra £7 million would have to be found this year because of an accounting oversight. The figure is made up of a bridging loan and grants provided to Hjaltland Hous­ing Association and others which will push up the draw on reserves for a single year.

“It’s a technical accounting difference,” he said. “It doesn’t mean there’s any more money going to be spent.”

Asked by The Shetland Times to set the record straight, he said: “It is not an additional £7 million of savings that need to be made.”

Meanwhile, an investigation into how the council got itself into such a financial mess will not be as thorough as once proposed.

Dr Wills called for the probe in Feb­ruary but it has now been agreed that it would not be a good use of officials’ time to carry out a full investigation. Instead, corporate services director Christine Ferguson is to pull together existing infor­mation to present in a report to the next audit and standards meeting.

Dr Wills said he raised the issue before because he did not feel the public was aware of the reasons for the “dire situation”. However, since then he believed a lot more infor­mation had been com­municated. The external auditors would also eventually publish their explanation for the crisis.

He felt a major investigation was perhaps not a good use of scarce resources, believing instead that it was more urgent to do something about the overspending.

However, new councillor Mich­ael Stout said it was important that people had a sense of how the council got itself into this mess to help avoid repeating the past.

As is already well known, councillors repeatedly failed to heed warnings given regularly over the past 20 years that they were living way beyond their means.

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4 comments

  1. Stewart Mack

    I can give a summary of the report right now for anyone thats interested -It will consist of “as a result of the current economic climate” “Its no-one’s fault”, “No-one is to blame” and “Lessons have been/will be learned”. Of course there will be padding – probably running to approximately 3000 words, but those will be the key phrases in some way shape or form.

    The end result will be the same- the capital reserves, the envy of almost every local authority in the Country will be halved to around the level of a good Euro-millions win. Maybe thats the answer, “invest” in hundreds of thousands of lottery tickets in the hope that they can be lucky enough to bail themselves out with a win.

    Its lucky this is a local authority and not a business with share holders, because other than the National Banks that continue to reward failure with bonuses, no other private company would have “directors” in post that had presided over such mess and halved the capital reserves of the Company in around 60 months.

    Maybe its time for what some treat as the “Bank of Shetland” to be privatised – there certainly wont be a government bailout

    Reply
  2. Johan Adamson

    Premium bonds, that is the answer. A lot of councils have vast holdings and the million pound winners are usually local authorities. At least you get your money back and there are no fees to pay, which is more than can be said for the other investments!

    Reply
  3. Stewart Mack

    Johan you may well be right!

    Reply
  4. Robert Lowes

    The SIC could also stop paying expensive licenses for Microsoft Windows & MS Office on staff computers, and switch to free, equally good software like Ubuntu & Open Office, which don’t come with costly licenses. Linux operating systems like Ubuntu, etc are typically a lot lower in their system requirements and can operate perfectly well on older computers, so in effect, desktop or laptop PCs last a lot longer than might otherwise be expected and the cost of replacing hardware is slashed.

    Reply

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