Budget Setting – Explained

When we set our budget we look at four key things – how much do we need to spend on services this year, how much are we getting from the Scottish Government and from non-domestic rates to do that, and then how much do we need to take from our reserves and how much do we need to ask local folk to contribute to services through Council Tax in order to make up any shortfall.
 
The key thing that we are wanting to avoid is making cuts to council services like schools, roads, bins and care this year. Times are tough for folk and cutting those vital services that people rely on will only make it tougher for the folk who are struggling the most.
 
We estimate we need £101.7m to run our services this year. This is an increase on last year - just like for households our costs have been increasing significantly, particularly for energy which has gone up by 15%.
 
The Scottish Government are giving us £89.0m to run those services but this includes some funding that is ringfenced – in other words it can only be used for particular things -  for example £13.4m to run our internal ferry service.  Effectively what the Scottish Government is giving us to spend on services is £61.5m and we’ll take in £11.5m from non-domestic rates.
 
That still leaves us with a significant shortfall of £28.7m.  This means we then need to look at what need to take from our reserves or  generate from Council tax.

Today’s report recommended taking £17.4m from our reserves – the most we’ve ever taken - and then asking local folk to collectively contribute £11.3m in council tax. This means Council tax would need to increase by 10% from last year with Band D properties set at £1,369.21 a year – an increase of £124.48, or just over £10 a month.
 
We know some people might find the 10% hard when other costs are increasing too, but an increase of just 1% generates an additional £102,000 for the pot that funds those important Council services that you, your family, your friends and your neighbours need and rely on. 

The more we collectively make in council tax, the more we’re working together to protect those services.
 
In Orkney around 11% of our Council income comes from Council tax – in some areas it’s as much as 19%.  We’re still amongst the lowest in Scotland – only Shetland, Western Isles, South Lanarkshire and Angus pay less than us. Following today’s meeting work will also be done over the next year on a strategy on how we bring Council tax up to the national average
 
At 10% we’ll generate £11,229,000 for Council services through Council tax.  A 5% increase would generate £10,718,000 – meaning we’d have to take an additional £511,000 from our reserves. A 3% increase would generate £10,514,000 which would mean we’d have to take an additional £715,000 from reserves.
 
Every year we’ve taking a little bit more from the reserves – but we have to try and maintain them at a certain level for the future.
 
Other charges will go up by the same percentage.
 
Just like householders have been doing, we’re needing to make some changes as we can’t carry on the way things are, as our reserves will just go down and down.  During 2023/24 we’ll be bringing reports forward that look at how we can generate income for the council, how we can change the way we run services to do it more efficiently or as a last resort where we might need to make cuts.
 
One key decision we’ll be making in this financial year for example is whether we should go ahead with Orkney’s Community Wind Farm Project, which the Scottish Government gave us planning permission for last year.  It could generate an additional £6m a year in income for us, as well as providing a community benefit scheme for communities do carry out projects of their own.