Shetland Islands Council: The audit of Best Value and community planning – a progress report.  Podcast transcript.

Anne: This is Anne McCubbin here to talk with Gordon Neil about the Best Value progress report on Shetland Islands Council.  Hello Gordon.  So Gordon, what did this report find?

Gordon:  Well, the weather hasn’t got any better but the council have taken out report seriously.  Each of the main issues in the report has been addressed but in most cases the action’s been fairly slow, the changes have only been made recently so really it’s too early for us to say the changes are fully embedded and that the council really has changed in the way it does its business.  

Anne: How’s this council doing compared to others?

Gordon:  Well formally we don’t compare councils but I think it would be fair to say that Shetland, when we did the initial report was well behind the game in terms of Best Value management arrangements but I would say it’s now starting to catch up.

Anne:  Your report says there are concerns about the council’s financial sustainability but Shetland’s known for being relatively wealthy because of the money the oil companies put in so why the concern?

Gordon:  Well, that’s true Shetland is wealthy.  It’s got £300 million of reserves but in some ways being wealthy brings its own problems it makes it more difficult for people to prioritise, to focus on what’s important, and make the hard decisions.  So basically the council’s got into some bad habits over the years.  There’s a never-ending wish list of capital projects that everybody wants to do and it’s got used to very high levels of service.  The problem is that the additional income that’s been coming from North Sea oil is starting to go into long-term decline.  The council’s now having to make some tough decisions.  It’s used its reserves to subsidise its revenue expenditure and this can’t go on indefinitely if it does they’ll just run out of reserves and then they’ll have to make even more dramatic cuts in their services.  The council themselves have realised there’s an issue and they’re starting to take issue.  For example, they’ve prioritised their capital programme and this year they’ve initiated a series of service cuts.  But it’s early days and in fact the projected budget for this year sees an increase in the use of reserves compared with last year so there’s still a long way to go.  

Anne:  The council’s arrangements with the trusts are also mentioned in the report.  What’s the problem here?

Gordon:  Part of the problem is it’s very complex.  There’s a lot of different trusts and different relationships with the council.  The main trust is the Shetland Charitable Trust – it has assets of about £300 million – so we’re talking about a large significant organisation and the charitable trust carries out, or provides services, that normally might be seen as part of a council’s core activities, providing care homes for example or sports facilities or subsidising cultural initiatives throughout Shetland.  So there’s an issue about co-ordinating the activities between the council and the trusts to make sure they’re not doing the same things.  There’s an issue about prioritising how they’re using that pool of public sector money in the widest sense.  There’s also the issue about the clarity of the relationship between the council and the trusts.  At times it’s difficult to tell who’s who.  For example, the trusts’ general managers now sit on the council’s corporate management team – that’s a very unusual situation.  And as you’d expect we’ve got that issue about following the public pound as well with the council handing over some of its funds to trusts to carry out activities.  Also in the media, I told you this was complex, there’s an issue about state aid.  Shetland is very different, it’s very remote and the council and the trusts are interested in supporting and trying to develop the local economy – that brings its own problems.  We’ve had a fair bit of media controversy in early years about salmon farming, recently about the Smyril Line Ferry Company with public sector bodies for perfectly good reasons trying to support local economic development but leaving themselves open to accusations of interfering in the free-market.  

Anne: So what happens next?

Gordon:  The external auditors will be due to monitor how the council does and they’ll provide some follow-up work.

Anne: Thanks Gordon.