Attempts to increase the number of affordable homes in the isles were dealt the latest in a series of blows on Thursday after the Scottish government announced that its grant to Shetland’s housing association was being cut from £3.8 million to £2 million this year.
It mirrors a nationwide cutback in funding from £50 million to £27 million in 2010/11, which Holyrood ministers explained was because funding originally allocated for this year had been brought forward in the past two years. Housing minister Alex Neil said the Scottish government would still meet its targets for making houses available to first-time buyers and blamed the UK government for not providing enough funds.
Hjaltland Housing Association (HHA) property services manager Bryan Leask said news of the cut had not come as a shock in the straitened financial circumstances faced by the public sector because of the banking crisis, but the extent of the reduction was “particularly disappointing”. He pointed out that, while the 50 per cent cut was broadly across the board in Scotland, Orkney’s housing association was – at £4.3 million – still receiving more this year than Shetland had last year.
“What can you say?” said Mr Leask. “Any 50 per cent cut in funding is not great. It doesn’t come as a surprise; the size of the cut is what’s disappointing. We still have a development plan, because we have a funding arrangement in place with the SIC that allows us to effectively be able to carry on and claw the money back next year.”
He said HHA had just received approval to start work in Cullivoe in Yell and was looking to get started there in May, while work in areas including Aith and Eshaness will still go ahead.
“It doesn’t really slow us down,” he said. “It just means we can’t do as much as we hoped to. Rather than being over three years, it might have to be over four years.”
He continued: “What disappoints us is we got £3.8 million last year but we actually spent £4.5 million. Since 2005/6, we’ve met our targets and bettered them, pulled in money from other associations that haven’t been able to spend their allocation. If you look at Orkney, which got £8 million last year, their cut in this bad year is still more than we got last year.”
Mr Neil defended the Scottish government’s position, saying that chancellor of the exchequer Alistair Darling had “turned a deaf ear” to Scottish calls for more expenditure on housing next year.
“We brought forward £120 million accelerated funding from 2010/11 into 2008/9 and 2009/10 providing work for the construction sector and accelerating Scotland’s economic recovery,” he said. “Obviously when you bring forward money, the year you bring it forward from is always going to show a lower figure.
“The impact of the housing crisis puts into sharp relief the limits of Scotland’s current fiscal framework.”
Meanwhile, the SIC has had to dip into its reserves to allow it to continue with ambitious plans for a new generation of council houses while it continues to lobby the Scottish government to try and safeguard a £1.2 million-a-year housing support grant.
Elected members agreed on Wednesday to authorise the use of the council’s housing revenue account repairs and renewals fund to continue with groundwork for separate new housing projects in Brae and at Hoofields in the north of Lerwick, approving a budget of £1.25 million.
Councillors agreed last year that they would spend £19 million in the coming years in an attempt to tackle the housing shortage which has left around 900 people on a waiting list for homes. But Mr Neil has indicated that the SIC’s £48 million housing debt – largely run up building houses for incoming workers during the oil boom days – meant any future bid for funding would not be looked upon favourably.
Head of housing Chris Medley said he had hoped by this stage to be putting forward a complete funding package but that suggestions from the Scottish government that a housing support grant of £1.25 million could be phased out over the next five years had thrown things into “some uncertainty”. The rest of the money for the house-building programme was to be found from a combination of borrowing, the use of council reserves and a possible increase in council rents.
While negotiations are ongoing, however, the £1.25 million budget is to be restricted to groundworks. Mr Medley said this was in order to “keep such expenditure to a minimum and avoid committing larger sums to contracts for the main construction of the houses”. The 76-home Hoofields development alone is expected to cost £8 million.