The Accounts Commission has warned that urgent action is needed by Shetland Islands Council to address a £134.3 million projected budget gap by 2029-30.

“The council has strong services and a clear vision,” said the Commission.

“But it continues to rely on its large reserves to balance its budget. This is unsustainable and councillors and officers need to take a more strategic, long-term approach to achieving financial balance.

“The council has improved its performance management arrangements over the last three years, as well as its engagement with the local community on budget priorities.

“But auditors remain concerned about the pace at which the council is delivering its change programme.

“Shetland has also been slower than other councils in adopting digital technology to support staff and help deliver services.”

The Commission said the council is in a “strong reserves position” relative to other Scottish local authorities.

“However, excluding unrealised investment gains of £120.7 million which can fluctuate until crystalised, the General Fund balance fell to £113.9 million at 31 March 2025, with only £48.5 million unearmarked,” said the Commission.

“This partly reflects use of reserves to balance the budget, which has been a long-term trend.

“The 2025/26 budget included a £43.9 million deficit to be funded from reserves. This is £20.9 million above the sustainable level of General Fund draw according to the council’s own assessment.”

Andrew Burns, Deputy Chair of the Accounts Commission said: “People living on Shetland are getting a good service right now and we’ve seen some improvements in how the council is run since we last reported.

“But the council continues to draw on its reserves to balance its budget. That’s unsustainable and will impact future generations if not addressed.

“We’re calling on the council to urgently increase the pace of its change programme and prioritise the actions that will help it achieve financial sustainability in the medium to long term.”