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Orkney Council in ‘fragile’ position with £27 million cuts looming

Council leaders across the Highlands and Islands are among those grappling with "difficult decisions" as budgets are squeezed.

Image: Andrew Stewart/DC Thomson.
Image: Andrew Stewart/DC Thomson.

The leader of Orkney Council James Stockan warns the local authority is in an “incredibly fragile” position as it looks ahead to setting its budget next year.

The islands leader is raising the alarm about the financial pressures the council is under, saying the situation has “never been so bleak and black”.

Local government body Cosla last week warned councils face a bankruptcy risk unless more funding is forthcoming from Holyrood.

And council leaders across the Highlands and Islands are among those grappling with “difficult decisions” as budgets are squeezed.

We hear how:

  • Orkney Council would have raised council tax by 10% this year – if it were not frozen – and want to see this increase fully funded by government.
  • Shetland Council faces significant workforce challenges, spending around £2.7m last year on agency staff to deliver key public services.
  • And that Highland Council faces “difficult decisions” as it seeks to close a funding gap of £62m.

‘Most challenging time’

Mr Stockan said Orkney is using its financial reserves at a “very unsustainable rate” with 17% of its budget taken from reserves last year to maintain public services.

The council faces a £27m funding gap over the next few years on a £100 million budget.

He added: “That’s the worst in the UK. It is going to be the most challenging time.

“We have been holding our breath for years waiting for a turn of the tide.

“The governments have determined moving away the money in tax breaks is a better way to serve the public than providing the services.

“We would rather ask for the money from the public and provide the service they want rather than cut them further.”

Council tax freeze

Orkney Council chose to raise council tax by 10% during its budget-setting process early this year and would have sought to do the same again for 2024-25.

But speaking at SNP conference in October, Humza Yousaf announced he would freeze council tax in the next financial year.

He has promised the policy, which was agreed without consultation with local councils, will be “fully funded”.

But two months on and cash-strapped councils are still waiting to find out how much money they will get.

First Minister Humsa Yousuf announced the council tax freeze at SNP Conference in Aberdeen. Image: Kath Flannery/DC Thomson.

Mr Stockan has been asking the Scottish Government for years to give Orkney Islands more funding, as it gets less per head than Shetland and the Western Isles.

The independent councillor said the cost of living also disproportionately hits remote and rural areas to a greater extent where costs for goods are higher.

And he highlights that over the last 10-15 years, councils have had to deliver “more services because of new ambitions of government, with really no extra finance for it”.

“We are now in a place where the government’s position is undeliverable”, added Mr Stockan.

“That is an impossible situation to continue. I’ve never seen our budgets at this time of year so much overspent since the early 2000s.”

‘Recruitment challenges’

Meanwhile, in Shetland, council leader Emma Macdonald said the local authority faces a £37m budget shortfall and “spends unsustainably from our reserves”.

However, the independent councillor said their biggest challenge is around recruiting the staff they need with around 90 vacancies in community health and social care.

This is exacerbated by the ageing population of the islands, with the council spending £2.7m on agency staff last year.

She said: “We really need to look at how we redesign some of our services.

Shetland Islands Council faces recruitment challenges. Image: Chris MacLennan/DC Thomson.

“We have recruitment challenges across the whole of our workforce.”

And the situation is also stark across the Highlands, where they are working to find savings of £62m to balance their budget.

Highland Council leader, Raymond Bremner, said: “Highland Council anticipates a budget gap of £62m in 2024-25, however significant work is currently underway to find savings to close that gap.

“This is not an easy task and difficult decisions will be required, however we aim to balance the council’s budget.”

READ: Are councils heading to bankruptcy? Here’s how Moray, Aberdeenshire, and Aberdeen respond to budget warning

Ministers held an emergency cabinet meeting on Thursday in an effort to tackle a budget black hole of at least £1 billion ahead of setting the budget on December 19.

A Scottish Government spokesman said: “Scotland is facing the most challenging budget settlement since devolution as a result of sustained high inflation and a UK Government autumn statement that failed to deliver the investment needed in Scotland’s public services.

“The Scottish Government has increased the resources available to local government in 2023-24 by more than £793 million, a real-terms increase of £376 million or 3%, compared to the 2022-23 budget figures.”