Stagnation or Growth? Shetland's economic future

[ArabiaTerra]

There's been a lot of debate on this forum about Shetlands future. Whether or not we can afford the Mareel, the new AHS, the future care home requirements, bridges and/or ferries. One thing is for sure, the source of our wealth, Sullom Voe Terminal, is (ahem) entering it's terminal phase. It may stay open for another 10 or 15 years or so but the revenue it will bring will steadily decline to nothing. Even if there are new discoveries off the west coast, I doubt they will come to Sullom, and anyway oil is the fuel of the past, climate change will see to that. If we haven't largely phased out the burning of oil in 30 years time, the environmental consequences will make our current financial woes seem like a storm in a teacup.

 

So, what are the options?

 

We can freeze our capital spending. This will mean no Mareel, no new AHS, no new care homes, no bridges, keeping the current ferries set-up and no investment in renewable energy (either the VE proposal or the community based renewable's). But there will still be a drain on our reserves. All the subsidised leisure centres and swimming pools, the ferries subsidy and the maintenance and upkeep of the existing schools and public halls. And, of course, our reserves will still be subject to the vagaries of the market which is not looking too healthy at the moment.

 

Or we can prioritise our spending, only investing in projects which are required such as new care homes and the new AHS and community based renewable energy and dropping the luxury projects such as the Mareel, the bridges and the VE proposals. This will use up our money a bit faster than the option above, but it won't make any difference, in the long term, to the overall economic prospects of Shetland. We will still be dependant on the same primary industries of fishing, fish farming and tourism as the main drivers of our economy. The trouble is none of these have much potential for substantial future growth. We are already taking as much fish as we can afford to from the sea, the fish farming can't expand any further and the tourism industry is the most vulnerable to the inevitable effects of climate change.

 

There is, of course, a third option. Investment. The Mareel will give Shetland a first class concert venue and cinema along with recording studios and teaching facilities that will allow Shetland to develop it's fantastic musical heritage into something that has the potential to add to the Shetland economy (not to mention the boost such a facility could give to tourism). The VE windfarm proposal will bring an entirely new revenue stream to add to the fishing, salmon, tourism and the declining oil. It will also open the way for further development of renewable energy such as wave and tidal power which could, in the long term, become even bigger than the windfarm itself but which I doubt will happen if we knock back the windfarm now.

 

We currently face a similar decision to that which our parents faced when the oil was first discovered in the North Sea. They made the right decision. Will we?

[Trønder]

I would have thought that Shetland was full of potential. I also think prices and technology will keep the oil drilling going for longer than many fear. Then you have great opportunities for wind and wave energy. Compenies that now are involved in oil drilling could retool for these technologies. There is probably room for new companies as well. The local college should start an engineering education in clean energies and in so doing create a strong local competence in the field.

 

I also think there is much potential in other fields, for example food production. Instead of "exporting" raw materials you should focus on spesialisation and on the protection of local dishes. There is a large market out there, especially in Asia, for products that might seem unusual in northern Europe... there are sea snails, shells, even jellyfish. If at least some, and preferably most, of this could be produced ecologically then that would be another advantage in the global market. There is also a trend, and a legal framework, in the EU/EFTA now to protect local spesialities so that they can only be produced there. This is the case with for example Parma and parmesan and parma-ham, and also a couple of products in my region of Norway. Such a status can again be used it marketing it as a quality product and building a market for it. All of this could again be an advantage in making Shetland more interesting as a tourist destination.

 

Further I think you should play on your rich history, and there I also think the local college, and museum, has a role to play. A strong academic environment in history and local linguistics can be a part of a status lift for the islands. Work to get the treasure permantenly back to Shetland, again that would be important for tourism.

 

There is also now a trend among very many people in urban areas to long for isolation, silence, a less hectic life. Again, here Shetland and tourism comes in.

 

I also think Shetland should encourage artists of all categories to settle in the islands, and here I include artisans like wood boatbuilders, etc. It might not be the biggest cashcow, but it will play a part in the local economy, and again make the islands a more interesting place to visits.

 

Looking at all of this together it seems to me that there is a great opportunity to build Shetland as a brand of quality environmentally friendly products. Use whatever transitional funds you can squeeze out of the government to seize all opportunities.

[Carlos]

While we've done well in facilities from oil money, there has been way too much added to the revenue spends to be sustainable with a lower population and lower council budgets.

 

The capital programme can be controlled much easier, be raised and lowered year to year as it suits, as long as the long term revenue spends are addressed.

At the moment we are happily spending more than we earn and covering it from savings..... the future is less income and less savings, so we need to start preparing for it, while we'd still have some money there to ease the tough changes a bit.

 

The kinds of work that could be developed would also seem to be very different from what's there at the moment. Less well paid fixed hour salaried jobs and a lot more freelance/self employment with hours and income varying week to week.

 

And none of that sounds very attractive if you are sitting comfortably at the moment, but it is what we would have to support politically for things not to be worse.........

[MuckleJoannie]

I also think there is much potential in other fields, for example food production. Instead of "exporting" raw materials you should focus on spesialisation and on the protection of local dishes.

 

One of Shetland's problems is that it is Third World type economy in the First World. Anything we produce is is exported as raw materials (Animals, fish oil) and processed elsewhere. As there is almost full employment there is no incentive for people to seek self employment. As long as the SIC is the major driver in the economy things will stay the way they are.

[Trønder]

One of Shetland's problems is that it is Third World type economy in the First World. Anything we produce is is exported as raw materials (Animals, fish oil) and processed elsewhere. As there is almost full employment there is no incentive for people to seek self employment. As long as the SIC is the major driver in the economy things will stay the way they are.

Yes, it is a situation I recognise from some comunities here in Norway. It is very easy to just export the raw materials and get the jobs from that. It would be very beneficial for Shetland to refine at least some of those raw materials at home. It would open for many opportunities, and as such be a part of a Shatland brand building over several fields, as I mentioned above. Just making fish blocks of it wouldn't be enough. You would have to diversity in product range, ecological products, strong focus on quality, local specialities, etc. It could be very exiting. Of course, you do need a group of people with a vision on behalf of Shetland to get anywhere with it, but I think there are many possibilities for the islands if you are able to seize them.

[Infiltrator]

Well done Carlos, summed up where I believe things are for the Islands. I don't see the future being 'stagnation or growth', more of a need to reduce to sustainable level.

 

For me the biggest untapped natural resouce in Shetland is tourism, in comparison to Orkney we really are missing a trick - reason being that we've had easier well paid employment elsewhere. Don't agree? - well consider the Clickimin Broch, fantastic attaction for tourists, no visitor centre and the tourists getting off the buses to visist have to dodge the traffic on the main road.

 

Cost of travel to and from Shetland is still a major hurdle though.

[Para Handy]

^^^ (Well done Carlos)

And what happens when the oil money has gone, it can't go on for ever. Some hot shot mite just loss the lot on the next big gamble in the City and blow the lot in one big fluter. And say no wind farms for an example? . How are all those with a life style that would need a lotto win to keep them going because there are not enough well paid jobs to go around. The fishing and the wool industry will never be back to what it was in it's hay day. you wont be able to go to the pub one night a month never mind 7 nights a week buy petrol for your big cars pay for your mobile phones. most will have to work the land if you want food to eat. what if you have to sit in the dark because you can't afford the power bills. What about the people who just stick there heads in the sand and think something will come along. With the history of the male side of my family they all died in there 60s so for me I've got 15 to 20 years left at most so I may well be gone but what about those in there 20s now and into there 40s if it has all goes wrong. and the councilors has spent the lot and mortgaged the Island to the Hilt.But of course I may well be wrong, And I hope I am but I won't be holding my breath

[Styumpie]

My grand parents worked the crofts to survive, times did get hard from time to time, but they managed and they had enjoyable lives. Working for money is a fairly recent phenomenon here in the isles.

 

I think there is untapped potential here, Trønder has some interesting visions, to add to this I think our livestock could benefit from more aggressive branding, and spend some of this oil money on a proper abattoir so local producers can get there animals processed locally for a decent price. The best beef I have ever tasted is from a shetlun coo, the best lamb without a doubt is pure shetland bred. We should take control of our waters, and set our own sensible fish quotas, this fish dumping scandal must come to an end, no one can argue dumping good fish is acceptable. Some form of Independence and stay out of the EU to remove this mire of regulations that currently hinder us.

 

The biggest problem with our local economy, is that is it not really built to last, there are just too many public workers, it relies on government subsidy and money from the CT to keep going. As things are looking, the UK will be in recession in a year or so, our oil revenue is reducing each year, the UK £ is also tipped to lose value against other currencies so all this adds up to leaner times ahead. A heavily public sector based economy will fair worse in recession. We will end up having to trim the flab from the public sector, we need to develop industry instead of strangling it, we must not sell off any more fish quotas or fish farming sites to outside companies, protect, develop and encourage new industry/produce. Invest in efficiency too, community wind farms, grants for micro generation, more grants for insulation etc. Many things we can do.

[nic]

How does an island sustain financial equilibrium as a minimum?

 

Spend all the dividends and growth from the reserve fund on cash deficit organisations. The leaflet that came with my last council tax bill stated that approx 2,700 individuals worked for the SIC?? Get real. When the day comes, as it will, what future do our children have when the party goers have spent the family silver? I know they can work in the £25M industry called Arts, earn minimum wages and spend it all at the weekends on booze at Mareel to make the £250,000 income required as per Business plan.

[Mutton]

And what happens when the oil money has gone, it can't go on for ever

 

I disagree with that. There are currently over £250M of oil funds in reserve and with correct financial management it can remain at that level and even grow. Yes some years we'll lose a few million in the stock market, other years it will grow a few million. When the oil has stopped completely there are just a few simple things we can do to retain the money, for example:

 

Cut increases in public sector salaries/expenses;

Stop the Christmas bonus;

Encourage private investment in what are seen as public services, eg care homes;

Close a number of schools;

Loan from the bank for capital projects.

 

Another way to retain funds is by seeking more autonomy. An interesting post is this one re Isle of Mann:

 

http://www.shetlink.com/forum/viewtopic.php?t=3694

 

They have managed to build up their own reserve fund without any oil or windfarms! So oil isn't everything.

[Infiltrator]

And what happens when the oil money has gone, it can't go on for ever

 

I disagree with that. There are currently over £250M of oil funds in reserve and with correct financial management it can remain at that level and even grow. Yes some years we'll lose a few million in the stock market, other years it will grow a few million. When the oil has stopped completely there are just a few simple things we can do to retain the money, for example:

 

Cut increases in public sector salaries/expenses;

Stop the Christmas bonus;

Encourage private investment in what are seen as public services, eg care homes;

Close a number of schools;

Loan from the bank for capital projects.

 

Another way to retain funds is by seeking more autonomy. An interesting post is this one re Isle of Mann:

 

http://www.shetlink.com/forum/viewtopic.php?t=3694

 

They have managed to build up their own reserve fund without any oil or windfarms! So oil isn't everything.

 

This is what I've been harking on about on the Mareel and Windmill threads - there is enough cash in the CT but only if we stop robbing it to cover revenue shortfall for the council and be very careful about the projects funded from the CT. I don't believe Mareel will be self financing in any number of years let alone 3.

 

Christmas bonus should continue but based on means testing - we have some very wealthy pensioners to whom £200 odd wouldn't make much difference.

 

Council salaries are what they are for the public sector - what we need to do is to reduce the sheer number of council funded posts back to a level comparable with the other scottish councils.

 

Close some schools - yes, from the previous shortlist there are some really obvious candidates, if we ever get councillors with enough balls to follow this through.

 

Loans for capital projects - loans being an odd choice of word here. Just how much is ever returned from the CT grants - most of the big projects seem to collapse without ever returning anything.

[Frances144]

For me the biggest untapped natural resouce in Shetland is tourism, in comparison to Orkney we really are missing a trick - reason being that we've had easier well paid employment elsewhere. Don't agree? - well consider the Clickimin Broch, fantastic attaction for tourists, no visitor centre and the tourists getting off the buses to visist have to dodge the traffic on the main road.

 

Cost of travel to and from Shetland is still a major hurdle though.

 

I completely agree. It is almost as if some forces want Shetland to stay a backwater for tourism. Impossible to get any sense from that quarter at all and I just don't understand why. Though if we get this wretched windfarm, who will want to come and look at an industrial estate?

[Mutton]

Loans for capital projects - loans being an odd choice of word here. Just how much is ever returned from the CT grants - most of the big projects seem to collapse without ever returning anything.

 

Meant loans from banks, although now is probably not the best time to get a loan from a bank!

[MuckleJoannie]

Loans for capital projects - loans being an odd choice of word here. Just how much is ever returned from the CT grants - most of the big projects seem to collapse without ever returning anything.

 

I think you are confusing 2 things here. What Mutton appears to mean is that instead of funding capital projects from SIC revenue as happens at present the SIC should do as most other local authorities do and borrow money from financial institutions to fund capital projects. I don't know if this is a good idea. Banks lend on the basis of the borrower's ability to pay. A local authority is generally assumed to be a good risk as the government guarantees them an income, so we could saddle future generations with debts they will struggle to pay off.

 

 

The Charitable Trust has funded several big projects by grant, leisure centres and care homes for example. I am not aware of any big project of this type collapsing.

 

If you are meaning loans advanced to businesses indeed ther have been some spectacular collapses egg SSG. However the Charitable Trust and the Development Trust have made loans to thousands of businesses and individuals that have been repaid in full with interest.

[Muppet]

I think you are confusing 2 things here. What Mutton appears to mean is that instead of funding capital projects from SIC revenue as happens at present the SIC should do as most other local authorities do and borrow money from financial institutions to fund capital projects. I don't know if this is a good idea. Banks lend on the basis of the borrower's ability to pay. A local authority is generally assumed to be a good risk as the government guarantees them an income, so we could saddle future generations with debts they will struggle to pay off.

 

 

 

I don't have any arguement with what you're saying here, but maybe if the SIC had to borrow, even if that borrowing was from the CT on a commercial basis instead of being a hand out, they might just realise the value of money, just like most of us have had to do.

 

There does seem to be an impression that the SIC have free and easy acess to an incredible pot of money and that when it's gone, it's gonna be somebody else's problem.