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Refining his estimate to “com-pare like for like”, he reckoned about £5 million less had been withdrawn from the remaining £193 million in the reserves.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