Budget setting underway as Councillors prepare for funding shortfall

Orkney’s newly elected Councillors have started the budget planning process in preparation for considerable financial challenges in the year ahead.

Following the Local Government elections in May, Elected Members have identified as a key priority the need to address a substantial shortfall in funding predicted over the next five years.

Despite recent uncertainties caused by the results of the UK General Election, current financial projections are for a funding gap of around £12 million to develop between 2017 and 2022.

This is likely to be created by a reduction in financial support from the Scottish Government and an ever increasing demand for a range of Council services.

Earlier this year the Council adopted a Medium Term Resource Strategy covering this period.

During their induction following the recent elections, Councillors have been provided with a detailed briefing on the financial outlook the Council faces and, with support from OIC’s senior management team, are now involved in the budget setting process for 2018 to 2019 and the years ahead.

Council Leader James Stockan said: “Given the scale of the challenges we face, the process has started earlier than it has in previous years.

“The last five years have been a time of unprecedented change for local authorities in Scotland. With a year-on-year decline in Government funding, OIC has already made budget savings of almost £11 million over that five-year-period. This included reducing our senior management team by half.

“Looking ahead, at a time of continuing financial uncertainty, we face considerable challenges in bridging the funding gap we expect over the next five years. Our intention where possible will be to find ways to minimise the impact on our community, our staff and the organisation itself.

“The process we are following will provide a firm foundation as we prepare for the years ahead.”

A range of potential options to bridge the funding gap will be carefully considered over the coming months, with final decisions taken at a budget setting meeting of the Full Council in February 2018.

Other actions that the Council is taking include:

• Continuing to press for increased external funding – including fair funding for Orkney’s inter-island ferry service.
• Looking at ways to generate additional income, through investment in projects that deliver a financial return for the Council, including the large-scale wind farm project discussed recently by the Policy and Resources Committee.
• Empowering communities to deliver local services.
• Finding ways to spend less and operate more efficiently, through Change Programme reviews. These are looking at the management of Council buildings, the procurement of goods, outsourcing of services, increased working with partner agencies, increased fees and charges, modernising IT, and the way education is best delivered in Orkney.
• Looking at the potential for an increased but sustainable use of the Council’s reserves to cushion the impact of budget savings on jobs and services.

A Budget Simulator exercise last October gave people an insight into the complexities of setting a balanced budget for the Council – and an opportunity to provide feedback on their priorities for Council services.

People used the online tool to show how they would increase expenditure - by putting up fees and charges, for example - and/or reduce spending on services in order to bridge the funding gap the Council faces over the years ahead.

Some 375 people completed the exercise and a summary of the results is available from the 'Related Downloads' section of this page.

Councillor Stockan said: “We were pleased that so many people took the time to experience for themselves the many challenges we face in balancing our books, with less money to spend and an ever growing demand for many of the services we provide.

”The feedback included a willingness among the public for increased fees and charges, an increase to the Council Tax, and a larger-than-usual draw on OIC’s reserves, to help protect education, social care and other key services.

“This was reflected in the budget set for the 2017/18 financial year and the information provided through the Budget Simulator will continue to be valuable to us as we plan for the future.”

He added: “The people who took part wanted any future savings to have least impact on education, social care and other statutory services. While there was a willingness to give less protection to non-statutory services, it is important to consider the many benefits these services deliver for our community.

“Economic development, for instance, is a driver of growth – in most cases, every penny we invest helps generate significant additional funding for the local economy from other public and private sector organisations.

“Ferry services were another area where a willingness to reduce the cost to the Council was indicated. But the feedback shows that people proposing this felt that the Scottish Government – and not the Council – should be fully funding our internal ferries. That is a view we entirely agree with – and the Council will continue to lobby hard for fair funding from the Government.”

The Medium Term Resource Strategy can be read in full from the 'Related Downloads' section of this page.