Shetland to 'urgently' balance books with reserves set to run out in a decade

Urgent action is required by Shetland Islands Council to get its books in order, with the local authority forecast to run out of reserves in ten years’ time if current spending rates are maintained, a watchdog has found.

Audit Scotland said it was "deeply concerned” about the council’s ability to address its financial situation.

The body found the local authority was struggling to close a funding gap that could grow to between £61.2 million and £142.1m within the next five years, with no clear plan as to how the necessary savings would be made.

The council was criticised for its “very short-term approach” to balancing its budget by dipping in to its reserves, with the funds set to be exhausted by 2030/21 if it continued spending in the same way, the watchdog’s Accounts Commission found.

As a result the watchdog is “not confident” the council is able to show it is financially sustainable, with its approach to transforming services “slow and lacking in urgency”.

Elected members have been told to step up and offer clear leadership to address the issues identified.

William Moyes, chair of the Accounts Commission at Audit Scotland, said: “Councillors must provide the strong leadership needed and have greater involvement in developing robust and viable plans to address the significant issues in our report.

Lerwick, the capital of Shetland. Watchdogs are "deeply concerned" about the council's ability to balance the books. It has been told to take urgent action to address a funding gap which could spiral to over £142m in the next five years. PIC: Swifant/Creative Commons.

"Clear links must be made between plans to save money and plans to change how services are delivered.

"The Accounts Commission remains deeply concerned about the council’s capacity and ability to make the changes needed. A further report will be needed within 18 months.”

The watchdog commended Shetland’s “clear vision” to meet “distinct and significant” challenges around geography, population decline and lack of affordable housing.

The local authority responded well to the challenges of the pandemic and was able to be innovative in the way it delivers and invests in some services, the report said.

"But such innovation needs to become more embedded in the corporate drive to deliver the required strategic change,” the report found.

The watchdog found islanders generally enjoyed high-quality services provided by the council with good levels of customer satisfaction with adult social care services and A-class roads maintenance particular areas of strength.

However, geography and topography impacted the delivery of other services, such as non-emergency housing repairs.

The watchdog warned “difficult decisions” lay ahead and stressed the council had to engage consistently with residents as it worked towards achieving a financially sustainable position.

The council is made up of 20 independent councillors and one representing the Green Party, Labour and SNP.

Council leader Emma Macdonald said: “We have already been working to address some of the issues which are highlighted, and our members and officers will now focus on developing an improvement plan, taking into account all the points raised in the audit.

“I am pleased to see that the commission has recognised how well our services perform, and that we have among the highest service satisfaction scores in the country.

“As the summer recess ends, councillors and officers will be focusing on the challenges immediately facing the council and our community – around the cost of living, energy costs, connectivity and financial planning for the future.”