OIC to set budget against ‘scandalous’ Scottish Government settlement

Orkney Islands Council is set to make some difficult decisions this morning, as Elected Members meet to discuss setting the Council’s budget for the year.

The budget comes on the back of what Council Leader James Stockan has described as the ‘worst budget settlement in Scotland’ from the Scottish Government.

Councillor Stockan has previously written to First Minister Nicola Sturgeon to raise his concerns - but that letter has so far gone unanswered.

In the letter, Councillor Stockan highlighted the unfairness of the formula that the Scottish Government uses to establish the distribution of funding to Councils which results in significantly less funding for Orkney.

Councillor Stockan drew a comparison with Shetland which, despite having just 450 more of a population, has received £8 million more in their settlement.

Per head of population - and after adjusting for funding for ferry services that are delivered by Caledonian MacBrayne in the Western Isles - Orkney residents will in fact receive £367 (11.5%) less that Shetland and £692 (21.7%) less than Western Isles for 2022/23.

If Orkney was to be funded in the current financial year, on the same basis as Shetland and Western Isles, the Council would have received £8.2 million and £15.4 million more respectively for the delivery of our services.

With ongoing settlement reductions, the Council has faced significant budget constraints in recent years that have required year on year savings - delivering savings of £15,164,000 over the past 10 years.

Councillor Stockan wrote: “Our community rightly expect the same level of service as the other Islands Councils. It is progressively more difficult with our growing population and, with this happening year on year, for this Council to continue providing essential core services.”

A report to a Special Meeting of the Policy and Resources Committee today sets out that the provisional revenue grant funding to the Council amounts to £69,187,000 – with the Council’s budget to be set at £91,260,200.

With Council Tax expected to only raise £10,706,000. this leaves a shortfall of £11,367,200 to be met from reserves.

The report highlights that there are limited options to deal with such a significant spending pressure including:
 
•             An increase in Council Tax.
•             An increased draw from reserves, if this can be done in a sustainable manner.
•             The cessation of services and cuts in employment.
•             An increase in other sources of income.
•             A combination of the above.
 
Today’s report recommends that the shortfall is covered from the Council’s Strategic Reserve Fund and General Fund balances – and an increase in Council Tax.

This will mean that 12.4% of the Council’s budgeted spend will need to be met through its reserves – a position which is clearly unsustainable in the long term.

The budget settlement includes a provisional specific grant allocation of £12,847,000 for provision of ferry services - this is close to £0.5m short of what was requested and still does not include funding for ferry replacement.

In a further sting, this year Orkney Islands Council has also had to increase its contribution to ‘the floor’ – a national funding mechanism which ensures a consistent minimum increase or maximum decrease in funding across all councils.

The Scottish Government has also removed the Council Tax freeze, with the Council being free to increase the level of Council Tax for 2022/23.

Some councils generate relatively high levels of income from Council Tax with, at the higher end, 19% of general income raised from Council Tax.

In comparison, Orkney with a lower level of Council Tax and fewer high banded properties currently generates less than 10% of general income from Council Tax.

Councillor Stockan said: “Increasing Council tax will of course not be a popular option – but it is one of the only options in the face of swingeing cuts from the Scottish Government.  The figures speak for themselves – as an island authority we are treated very poorly by the Government – even in comparison to our island neighbours, which to me is scandalous.

“Today’s reports set out in full the very real challenges we are facing as an organisation in providing local services in such a way that we maintain them to a level that local people expect, whilst also not stretching our resources to breaking point.

“I look forward to discussing these challenges with Elected Members when we consider the budget in full this morning.”