THE EXPECTED recession could lead to a spending splurge by the SIC rather than drastic cutbacks, convener Sandy Cluness hinted this week.
He said the tradition during tough times was for councils and government to inject cash into the economy to keep it buoyant by investing in big infrastructure projects. He was commenting after the council’s head of finance Graham Johnston renewed his advice to councillors to avoid knee-jerk reactions to the plummeting value of community funds in the global market crisis.
He said council reserves, its pension fund and Shetland Charitable Trust funds were all “much diminished” by the events of recent months but warned that drastic alterations to the SIC’s long-term financial investment plans were not the solution and could have a knock-on effect on the Shetland economy.
He renewed his advice to “sit tight and ride out the storm”. He told the Full Council his financial planning was based on a long-term view of the markets and his advice would only change if market prospects were permanently impaired. He did not think that would be the case and urged members not to seek drastic alterations in the middle of a crisis.
He reassured councillors that no community funds were in the three collapsed Icelandic banks, Kaupthing, Glitnir and Landsbanki and their UK subsidiaries, which have put hundreds of millions of pounds of British investments in jeopardy. No deposits have been lost in British banks, he said, and the council does not involve itself in derivatives, which have been the source of much of the market chaos.
He promised a detailed report on the state of community funds at the next meeting of the Full Council on 3rd December.