Council tax rise of 7.3% agreed for Shetland

Council tax in Shetland will rise by 7.3% for the next financial year.

The decision, which represents an increase of £1.95 a week for a Band D property, was made by councillors at a meeting on Wednesday.

SIC leader Emma Macdonald proposed a 5.3% rise, which she said was in line with increases to other council charges, but it lost by 13 to 4.

An increase of 7.3% had been proposed in the report to councillors, and was pushed forward by depute leader Gary Robinson, who stressed the need for the SIC to continue to work towards a more balanced budget.

The SIC’s budget for 2026/27, also approved at the meeting, includes an unsustainable draw from reserves of £26.1 million.

At the end of December, the value of the SIC’s reserves was nearly £400 million.

It is said that a 7.3% increase still sees Shetland having one of the lowest rates of council tax in the country.

A key message from Wednesday’s meeting was that the core funding the SIC receives from the Scottish Government is not keeping pace with rising costs, particularly in areas such as pay awards and inflation.

Finance manager Paul Fraser reiterated that the budget is not the case of council departments wildly overspending.

The budget as a whole for 2026/27 has been set at £189.4 million, against income of £163.3 million.

This income figure includes a draw from the SIC’s reserves of £15.4 million.

The remaining deficit is set to be funded from an unsustainable draw of reserves of more than £26 million.

Council tax only plays a relatively small part in the SIC’s income; after a 7.3% rise, it is expected to bring in £13.5 million.

But SIC leader Emma Macdonald argued that this needed to be balanced against the cost of living.

She said the difference between 5.3% and 7.3% was “minimal” to the SIC but could help people in the community, especially those who are not eligible for support.

Macdonald said she went for a 5.3% rise because it reflected other increases to charges for SIC services.

But Robinson – who successfully pushed for a 10% rise last year – said the SIC should be working towards a more balanced financial position.

He said the “sweet spot” for the SIC would be when the level of taxation and charges becomes in line with what the council spends.

The depute leader also pointed to council tax rises already approved elsewhere in the country for 2026/27, which in some cases have reached 10%.

Robinson also said discussing council tax every year was like “Groundhog Day” – especially given that the SNP previously pledged to scrap it in favour of a different system.

The two proposals came down to a vote, with Robinson’s motion a clear winner.

Shetland Central member Ian Scott said he disagreed with both options but said proposing a freeze – like he did successfully for 2022/23 – would have been a “waste of time”.

Lerwick North and Bressay councillor Stephen Leask questioned why Macdonald was choosing to go against the officers’ recommendation at this moment in time – especially when the SIC was in financial “dire straits” and a 10% rise was voted in last year.

He felt that the SIC could lose credibility with auditors scrutinising the council’s finances.

But Macdonald said she did not vote for last year’s 10% rise, and while the SIC needs to take account of auditors, it also needs to care about the impact on the community.

The leader’s proposal was supported by Shetland Central member Davie Sandison, who felt a 5.3% rise was fair, while Lerwick South member John Fraser said it showed consistency with other charge increases.

Lerwick South member Dennis Leask backed Robinson, saying the cumulative impact of council tax decisions can be significant.

On the budget more generally, Shetland South councillor Allison Duncan warned that the SIC continues to “spend, spend, spend rather than save, save, save”.

He encouraged councillors to work with SIC officers to find savings.

Meanwhile, Fraser said: “Until you can manage to put personal agendas or pet projects aside, we’ll never make progress”.

Shetland North councillor Andrew Hall said having to draw more than £40 million from reserves was “eye-watering”, adding that “we’re in a right pickle here”.

Shetland Central member Moraig Lyall also described the SIC as “walking a tightrope”.

She said there are dangers in both directions – by reducing costs, there is a danger of failing to deliver services.

But by not focusing on sustainability, there could end up being more financial challenges ahead, she said.

She said the SIC is aiming to “find the sweet spot between those two extremes”.

Lyall said there were some proposed savings reviews which should be achievable, but some which are not.

She also encouraged the SIC to continue down its path of rationalising its estate, highlighting a figure in a report which said the council could save up to £1 million a year on energy costs if it reduced the size of its estate.