At an Extraordinary meeting of Full Council on 10 March 2026, Councillors approved a balanced budget for 2026/27. You can watch the livestream of the meeting on our YouTube channel and read the budget and fees and charges reports on the committee pages of our website.
In his budget report, Russell Ashman, Chief Executive and Section 151 Officer, Council of the Isles of Scilly, explained that balancing the budget had only been possible thanks to a successful application for Exceptional Financial Support (EFS) from government, and that the proposed savings and cost-reduction plans would still need to be delivered over the next 2 years.
How and why Exceptional Financial Support is provided
Exceptional Financial Support can only be provided by government in support of councils facing unmanageable financial pressures, and only after the Council has demonstrated that it has taken all reasonable steps to manage these pressures locally and deliver services sustainably. The support comes in the form of a loan of up to £2.121m, which will need to be paid back over 20 years, with a rate of interest at 1% above the Public Works Loan Board reference rate on the day the loan is taken out. The Section 151 Officer explained that the loan would buy the authority enough time to further lobby government over the Council’s inadequate financial settlement. An increase in the settlement of £850k would not only enable the Council to safeguard its services, and run them even more efficiently, it would also help to rebuild the authority’s depleted reserves.
Increased costs relating to both Adults and Children’s Services were cited as the main reason for the Council’s current financial position. The financial pressures have arisen from the need to deliver these statutory services to the levels required by regulators, coupled with a shortage of care staff on the islands, and an increase in complex cases. The Council had hoped that the new fairer funding system for allocating resources to local authorities would formally recognise our unique challenges and help cover the associated costs of delivering modern, compliant services to a tiny community, spread over 5 islands and separated from mainland UK by 28 miles of water. However, despite early indications that the Council might receive an uplift of over 6% in core spending power for 2026-27, and a cumulative increase in excess of 15% for the next three years, the published settlement fell far short. It transpired that these headline increases were based on an incorrect assumption that the Council would be able to collect Council Tax from an additional 200 new houses by 2028. When adjusted for a realistic level of Council Tax receipts, and allowing for a collection fund deficit, the increase in Council Resources for 2026-27 was only 2.3%. The 11% increase granted for the next three years put our Council well below the 17.6% average increase for unitary authorities, and resulted in the need to apply for the EFS.
When asked what would have happened if the Council had not been successful in acquiring the EFS, the Section 151 Officer explained it would have been difficult for the Council to meet its legal requirement to set a balanced budget. As Section 151 Officer, he would then have been left with no choice but to declare the Council’s expenditure to be greater than its income and issue a Section 114 Notice to alert government to the Council’s future financial unsustainability. Section 114 notices impact services detrimentally and can lead to unsustainable service provision, meaning they result in direct government intervention and a loss of local decision-making. The EFS process was introduced by government to support Councils in serious financial difficulty and to prevent statutory Section 114 notices being issued.
Changes to fees and charges
The budget approved by Councillors on 10 March took into account the need to show government that the Council has done everything possible to manage its financial pressures locally and provide sustainable services. This included proposals to increase Council Tax to the maximum limit and increase fees and charges for all chargeable services which were not previously recovering their full cost, such as those for St Mary’s Airport. A recent independent review by Northpoint Aviation, Travel and Tourism Consultants found that, when benchmarked with other small regional airports, St Mary’s Airport was already efficient and making the best use of its resources. The review concluded that “there is very limited scope to make any significant savings in the cost of operating the airport,” and that “the opportunities that do exist to reduce costs are being implemented by the council,” meaning the only realistic option remaining was to recommend raising airport charges to meet the full cost of the service.
Responses from Councillors
During the Extraordinary Full Council meeting, Cllr Nixon, Lead Member for Finance, Governance, Risk and Performance and Corporate Services, acknowledged that the proposed budget was risky, even with mitigations in place, considering the significant financial constraints it places on the Council. However, he also expressed confidence that the budget recommendations would be achievable through the collective effort of Councillors and officers. Cllr Nixon noted that the public sector has been under intense financial pressure, nationally, for around 20 years and observed that we are not the only local authority having to apply for the EFS. However, he also expressed disappointment that our settlement from government had failed to take our uniqueness into account, particularly as the Council had been led to expect that government’s fairer funding changes would finally resolve the longstanding funding issues posed by our extreme remoteness and the complexity of the challenges we face when delivering high quality, compliant services to our community.
Councillors also delegated powers to authorise the publication and promotion of a statement made by the Chairman of Council about the Council’s financial position and negotiations with government, which he made following confirmation of our financial settlement for 2026/27 – 2028/29. You can read this statement at the end of this news item.
Next steps
Following the approval of a balanced budget for 2026/27 using the EFS, the Council will need to intensify its efforts to deliver its savings plans. Under the conditions of the EFS, we are also required to continue working closely with government over the coming year to ensure the Council is financially sustainable in the future.
The newly approved fees and charges will come into effect across services in the coming weeks. If you, or someone you know, will have difficulty paying for any Council services over the next year as a result of these increases, please make contact with the relevant service to discuss your options as soon as possible.
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Statement from Cllr Robert Francis, Chairman of the Council of the Isles of Scilly – February 2026
“The Local Government Settlement is extremely disappointing and a real blow for the islands. Over the past 5 years, the Council has worked consistently with government officials from both the Ministry of Housing, Communities and Local Government and the Department for Transport with the specific aim of helping them to understand the unique and complex challenges and inequalities faced by our community on a daily basis. We have been clear throughout that these issues cannot be adequately addressed without an increase in our funding settlement.
During this period, officials have repeatedly told us that they understand these challenges are unlike those experienced elsewhere in the UK, and that we are simply not able to address them in the same way, or without further funding. Our attempts to seek reassurance that the islands’ unique circumstances would be adequately reflected in future funding arrangements were met with responses that nothing could be done to address our funding shortfall until the fairer funding review could be used as a vehicle for these decisions. During the long wait for this review, we were led to believe that ‘fairer funding’ would mean fairer funding for Scilly. This has not been the case – and if anything, we are in a worse position as a result of the review.
We believe the criteria government has based our allocation on is deeply flawed. We have already pointed out that assumptions made around Council Tax and second homes are incorrect, but the settlement was announced without any correction to these errors. The review promised to help Councils better meet the needs of communities disadvantaged by their geographical remoteness and lack of access to basic services – but our island-based Council was not even included on the list of authorities affected by these issues, and we now feel our most complex problems are being deliberately ignored. For instance, we still have no answer from government as to why we are the only area in the UK that is not covered by a Local Transport Authority, meaning we are precluded from any funding and investment in public transport.
Our Council is inspected by government bodies with the same intensity and regularity as large mainland unitary authorities, which inspectors recognise have vastly greater levels of resource and do not share many of the issues we must address. However, we are still lacking the funding uplift necessary for us to fully comply with government’s ever-increasing requirements and recommendations. We welcome and share government’s ambitions for every community in the UK to be able to access and sustain high quality services – but our funding allocation has been out of step with this ambition for years, and equality of opportunity for our residents just took another hit.
By accepting, last summer, that the Council of the Isles of Scilly needs a bespoke funding arrangement, government acknowledged that we are not adequately accommodated by national funding formulas. This gave us hope that government had finally recognised the impact of this legacy of underfunding and would set it right with the necessary uplift. Instead, the new settlement has left us with a funding gap that we simply cannot overcome without emergency measures.
There is no doubt in my mind that the relevance of the islands to government’s national agenda, and the need for further support for a functioning community to exist here in the future, are not recognised by those making decisions for us in Westminster. We are left with no choice but to continue to challenge this government to do what is right, fair and reasonable for these islands.”