Next week Scotland’s finance secretary John Swinney will announce how his government intends to spend the £27.9 billion in revenue and capital funding for 2011/12 it was allocated by the coalition in the October spending review – a fall of almost three per cent in cash terms, and much more if inflation estimates are factored in. In common with other local authorities, Shetland Islands Council will receive less money than it did last year. Finance director Graham Johnston is expecting a reduction in the block grant of £3-4 million and a substantial cut in the £3 million capital grant. At the same time, under the concordat with the government council tax will remain frozen.
The consequences of this for an authority which has embarked on a “root and branch” review designed to haul it out of the mire and which is struggling to find savings of almost £10 million in the current financial year are potentially very grave.
It is clear to anyone who lives in Shetland that the provision of public services is of a very high standard. Yet, as Audit Scotland reiterates in its latest report to go before councillors next week, they are very expensive. The council must learn to be more frugal. However, it is in the fortunate position of being able to cushion the impact of the national cuts by drawing on the oil reserves. Such action, as one senior council official put it this week, will be the difference between maintaining economic stability in the isles and meltdown. “Why switch the lights out?” he asked.
It is not difficult to understand why councillors and the public in general might be resistant to this course of action given the chequered history of reserve spending. But the notion being bruited about by the conspiracy theorists that the government would cut Shetland’s support even further in 2012/13 must be seen for the nonsense it is – the government has a general duty of reasonableness when it comes to allocating resources and no-one in Edinburgh is even discussing such a proposal.
The state-dependent nature of our small island economy means cuts in public spending will have a much more detrimental impact here than elsewhere in the country. We need to do what we can to soften the blow. However, any draw on reserves must be accompanied by a major review of non-statutory spending, the draw must be stepped down in successive years to zero by 2015 or 2016 and the “floor” of £250 million below which councillors cannot currently take the reserves must be index-linked to prevent its real value diminishing, as has been happening since the policy was introduced.