Shetland Islands Council faces urgent pressure to address a projected £134.3m budget gap by 2029/30, auditors have warned, raising serious concerns about the authority's long-term financial sustainability.

While the council has strong services and a clear vision, the Accounts Commission say it has continued to rely too heavily on its large reserves to balance its books — a practice they describe as unsustainable.

Councillors and officers have been told they must take a more strategic, long-term approach to achieving financial balance.

Although the council has improved its performance management and community engagement on budget priorities over the past three years, auditors remain concerned about the pace of its change programme.

Shetland has also been slower than many other councils in adopting digital technology to support staff and service delivery.

Andrew Burns, deputy chair of the Accounts Commission, said: ‘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.’

Emma Macdonald, leader of Shetland Islands Council, commented: ‘The gap between the funding we receive and what services we are expected to deliver is significant – and it is an unsustainable situation.

‘Despite the extremely challenging financial environment in which we operate, difficult decisions need to be made. We are determined to ensure the council addresses its unsustainable use of reserves, whilst innovating and collaborating to address our population challenges, reduce inequalities, and sustaining and growing our economy.’