20th August 2018
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OPINION: Schools, cuts and resisting temptation on council agenda, Robinson says

Former SIC political leader Gary Robinson, who lost his council seat at last month’s elections, is The Shetland Times’ new columnist. For his first article, published in last week’s paper, we asked Mr Robinson to reflect on the achievements of the last council and to consider what challenges the new administration will have to face up to. He expects age-old issues including inter-island ferries, financial settlements and school closures to feature prominently.

 

A busy scene at the SIC election count last month. But what challenges lie ahead for the new council? Photo: Dave Donaldson

As the dust settles on the election and the 11th intake of members to Shetland Islands Council since its inception in 1974 take their seats, I thought it would be timely to reflect on the challenges that the last council had to face up to and the challenges and opportunities that I expect the new council will face.

The 2007 council had been a stormy one with political disagreements in the council chamber often spilling over into very public and very personal disagreements outside. However, by 2012 there were signs that members were finally facing up to some of the tough but necessary decisions needed to restore political and financial stability to the council.

The 2012 council election brought with it another big turn-over in members with 11 new councillors and two returning after a break. The relative inexperience would be both a challenge – and an opportunity to break with the past.

New and returning members were treated to the now customary week-long induction process to ensure that everyone was as prepared as they could be for the task ahead. This was exceptionally helpful and it provided the first opportunity for new members to get to grips with the council’s complex finances which had only recently hit an all-time low.

Most of the council’s financial problems stemmed from its own historic over-spending but the spectre of reductions in the grant received from the Scottish government was already looming. It was obvious that a gargantuan task lay ahead if the council was to salvage its dwindling reserves while continuing to deliver the best services that could be afforded.

Salvaging the reserves

By the autumn of that year, I was questioning whether the task of salvaging the reserves was remotely achievable. It had become clear that ever-unpopular school closures would be necessary if we were to have any chance of rescuing the situation. Even seemingly straight-forward decisions like moving the pensioners’ lunch club from Freefield to Islesburgh had become intractable as bricks and mortar were put ahead of vital service provision.

Fortunately, this impasse was broken and by the spring of 2013 there were signs that council expenditure was finally edging its way down from the unsustainable £100,000 a day level it had been at. Ultimately the biggest savings were to come from the reduction in staff across all levels of the organisation by over 20 per cent between 2011 and 2014.

The council achieved a significant milestone in December 2014 when it agreed a balanced budget for the following year before going on to deliver it. In any other council, this wouldn’t pass for anything unusual but in Shetland’s case it was the first time in almost 20 years that it had been done.

Throughout the lifetime of the last council we were dogged by the toxic legacy of our predecessors; everything from loans to failed businesses to multi-million-pound civil litigation cases.

As this new council settles in, I expect that finances will dominate the agenda once again. Since setting a sustainable budget for 2015/16 the council has absorbed two consecutive annual cuts to its grant that were far more than expected. While the reserves have helped to cushion the blow, it’s essential for the council to get back on track.

Managing expectation

One of the first challenges that I believe the new council will face is one of managing expectation.

Candidates made many pledges during the election campaign and we shouldn’t be too surprised to find that some cannot be delivered.

At the start of the last council I thought it was telling how one new member, interviewed on BBC Radio Shetland shortly after the election, confessed that he’d promised many things in his manifesto but it was now clear, having seen the books, that he wasn’t going to be able to deliver. I thought this was remarkably candid and an honourable admission in the circumstances. It will be interesting to see if any of the new intake are just as forthright.

Many candidates also highlighted where savings wouldn’t be made – typically schools, social care and transport. Few if any mentioned where necessary savings could come from but perhaps we can assume anywhere else.

By that assumption, Corporate and Executive Services and Economic Development might be revisited for savings although these were the departments that bore the biggest percentage reductions in their budgets during the last council. This could also prove counter-productive given that corporate services costs are already below the Scottish average and far below our island counterparts as demonstrated by the recent annual benchmarking of councils.

With Brexit looming and potential for a second Indyref then I would question whether the time really is right for another raid on economic development.

Ensuring the continuity of Our Islands Our Future is an immediate and pressing issue. The general election may be occupying the minds of politicians but we can be assured that civil servants will be beavering away on the forthcoming islands bill.

There’s much at stake between the islands bill, national islands plan and a proposed islands deal, so it will be fascinating to see how the collaboration between the islands is carried forward by three entirely new personalities.

Spotlight on schools

Close to 1,000 protesters joined the Cure march for rural education during the last council. Gary Robinson predicts the issue will keep coming back until a solution is found. Photo: Dave Donaldson

The process of making savings or alternatively maximising income has become increasingly difficult as time has gone on. Most of the easy options have been taken so the council will be forced, as Audit Scotland has noted, to revisit some of the unpopular proposals that were rejected in the past.

In this respect schools are likely to come under the spotlight again and not because of any desire to centralise education. It’s more fundamental than that – we have more schools than we can afford.

Past councils have repeatedly kicked the can down the road but it keeps coming back.

Despite protests to the contrary it’s likely to keep coming back until a sustainable solution is agreed or the government steps in.

Recent statistics on school attainment haven’t been good so pressure on education is growing. We’re only weeks into the new council but Cosla’s political group leaders have already been summoned to meet with the Cabinet Secretary for Education and Skills, John Swinney, later this month. The only remaining question is what he will do.

The council created an informal alliance with other education authorities in the north of Scotland which temporarily staved off the threat of a formal, regional education board but this remains one possible option. The council has applied for additional funding for education and I expect it will be granted but it’s likely to be conditional upon change.

It seems change is the only constant there is in local government now.

Staying on education, the integration of Shetland’s two colleges is at a crucial stage and momentum must be sustained if the good will of the Scottish Funding Council and the University of the Highlands and Islands is to be retained. They’ve pledged support but we can’t expect that to be open-ended.

My fear is that Shetland College will suffer more than the NAFC if the process isn’t brought to a swift and positive conclusion.

Fixed links

Another area where SIC spending is out of kilter with other councils is on the internal ferry service.

The Scottish government has indicated that talks will continue ahead of the 2018/19 budget setting process but hasn’t given any indication yet as to what it will do in respect of revenue funding let alone capital replacement costs.

I’d like to believe it was encouraging that my last discussion with Transport Scotland confirmed that fixed links were being seriously considered as an option. Failure to reach agreement ahead of the 2018/19 budget will put extreme pressure on services.

Despite a significant reduction in staff, employees still account for almost 70 per cent of annual expenditure.

The last council instigated a report on “business redesign” which will be reported back to the new council in due course. While some appeared to believe that this was about the council going “paperless”, I think it will be much more wide-ranging than that if you consider what has been done elsewhere. Systems of work will be looked at, as will how people interact with the council.

Significant savings can be made in this way but it will lead to further reductions in staff. The challenge for the council will be in how it maintains the good relations with staff and trade unions enjoyed by the last council.

Lastly, but perhaps most crucially, will be the inevitable discussion about the level of government grant that the council receives and the formula that determines it. This will be a risky negotiation.

However, it’s increasingly clear that fragile communities like Shetland and the Outer Hebrides can’t go on absorbing the level of cuts seen in recent years while some central areas are left relatively unscathed.

The ever-present temptation to take the, seemingly easy, option of plundering the reserves must be resisted at all costs. The real long-term impact of this far outweighs any perceived short-term benefit.

• Do you agree with Mr Robinson’s assessment? Email your views to editorial@shetlandtimes.co.uk.

6 comments

  1. Alan Skinner

    What does Mr Robinson think reserves are for? I believe our current reserves are over £300million. If soaring stock markets take those reserves to £500million (which I don’t think will happen), will he still insist that we hold on to those reserves? If the market takes those reserves down to £250million (which I think is a much more likely scenario) will he regret the missed opportunity?
    I am not advocating reckless spending. I am simply advocating the proper use of reserves to preserve many things that are key to the whole character of Shetland.

    Reply
    • Gary Robinson

      Mr Skinner asks a very good question and it’s one that has been considered.

      If the council invested all of its reserves in one stock and it was predicted that a downturn or a crash might adversely affect it then, of course, it would make sense to consider selling it. However, the council invests in hundreds of companies across many different sectors at any given time. Fund managers are constantly buying and selling shares to ensure that our reserves are invested in the shares that will perform best in the prevailing financial climate.

      Share price is just one factor though and in most cases dividends are important too. Many companies give dividends every year regardless of the share price. If you sell the share then you don’t get the dividends and it takes longer for the remaining shares to recover to the value they were at before you decided to sell some.

      Don’t get me wrong – I believe the reserves are for spending but it must be done sustainably. Over the last twenty years the reserves have returned over 7% per annum on average. This means we can spend up to 5% per annum and use the balance to inflation-proof the reserve fund so that it never dwindles away again as it was doing back in 2012. At the moment the reserves can comfortably support teens of millions of pound of expenditure – that wasn’t the case in 2012 when there was only £180 million left.

      All of the council’s reserves are currently committed to providing income to support expenditure on services. If you wish to spend capital then you must find corresponding savings in revenue spending – otherwise you just accelerate the rate at which the money runs out. For every £1 million of capital spent you need to find over £70,000 of savings from services like care, transport or education. The council’s Long Term Financial Plan is worth reading in this respect: https://www.shetland.gov.uk/about_finances/documents/LongTermFinancialPlan.pdf

      This approach is similar to the long term management of Norway’s £900 billion sovereign wealth fund although they spend a significantly lower percentage than the council does. They wouldn’t be in the enviable position that they are if they went on a spending spree every time their shares looked a bit high.

      Reply
  2. Alan Skinner

    Nobody is talking about going on a “spending spree”. Reserves are for a rainy day and, if we are going to go back to discussing school closures, thereby destroying communities, then, in my view, it is not just raining but absolutely pouring down.

    Reply
    • Steven Jarmson

      What happens to our reserves and schools and other services when (not if) local councils are done away with and replaced with regional councils?
      You know its going to happen.
      The SNP dictators in Glasgow and Edinburgh have a pathological desire to centralise everything. They obviously can’t create a Scotland wide council, that would be a rival.
      So, when the Highlands and Islands council is established, do we lose our reserves?
      What can be done to stop Shetlands money being stolen by the our Scottish imperial rulers down south?

      Reply
  3. Robert Sim

    It’s interesting to read the technical discussion between Alan and Gary about the question of spending the reserves. Another major question is what one would spend the money on. Past councils have used the reserves to provide what has been arguably an unrealistic and unsustainable level of service in various areas. Very tight safeguards and very clear criteria would have to be put in place if we were to go down the route Alan advocates again.

    Reply
  4. Johan Adamson

    Bridges to islands, where they are wanted, would surely be a worthwhile investing of these resources and would provide benefits, both financial and non financial for many years to come.

    Reply

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