Memorandum submitted by Finance Committee,
Scottish Parliament
INTRODUCTION
1. The Finance Committee is a mandatory
committee of the Scottish Parliament and its remit is to:
To consider and report on:
(a) any report or other document laid before
the Parliament by members of the Scottish Executive containing
proposals for, or budgets of, public expenditure or proposals
for the making of a tax-varying resolution, taking into account
any report or recommendations concerning such documents made to
them by any other committee with power to consider such documents
or any part of them;
(b) any report made by a committee setting
out proposals concerning public expenditure;
(d) any other matter relating to or affecting
the expenditure of the Scottish Administration or other expenditure
payable out of the Scottish Consolidated Fund.
2. The Committee has undertaken a number
of expenditure reviews into policy objectives which cut across
more than one Scottish Executive department. We have recently
completed a such a review into expenditure on deprivation and
believe this report will be of interest to the Scottish Affairs
Select Committee. The full report together with all written and
oral evidence, commissioned research and briefing papers can be
accessed via the following link: The Scottish Parliament—Finance
Committee Report http://www.scottish.parliament.uk/business/committees/finance/reports-06/fir06-05-05.htm
We received an interim response from the Scottish
Executive to our report and this can be accessed via the following
link: Executive response http://www.scottish.parliament.uk/business/committees/finance/
reports-06/fir06-05-ExecinterimResponses.pdf
Finally, the report was debated by Parliament
on 7 June and the official report of that debate can be accessed
via: The Scottish Parliament—Official Report http://www.scottish.parliament.uk/business/officialReports/meetingsParliament/or-06/sor0607-02.htm
3. Whilst your Committee is investigating
poverty in Scotland, the Finance Committee's inquiry focussed
on deprivation as although terms such as poverty and deprivation
are used interchangeably when they are in fact related concepts,
they are distinctive for policy and budgetary purposes. Poverty
is defined in terms of income—the adequacy of a household's
financial resources to meet its basic needs and it tends to be
tackled through universal programmes such as benefits available
to all eligible citizens.
4. Deprivation can be seen as more complex,
referring to unmet need caused by a lack of resources, including
finance. In a recent review, it was defined as:
"A multi-dimensional concept, concerned
not merely with material goods but also with the ability to participate
in social life. It is a relative concept where standards are defined
in relation to social norms and expectation. Poverty and deprivation
are seen as interlinked as cause and outcome. Both financial resources
and outcomes should be captured in measure of multiple deprivation"
(Scottish Indices of Deprivation 2003).
5. As a Committee of the Scottish Parliament,
we did not examine budgets which are reserved to Westminster (eg
the benefits system). However, the Committee noted that post-devolution,
the Scottish Executive committed itself to work in partnership
with the UK government, which is entirely appropriate given that
spending on benefits and employment-related programmes which clearly
have a bearing on tackling deprivation come from UK government
departments. A number of programmes have been introduced since
1997 by the Scottish Office and taken forward by the Scottish
Executive since 1999 which were designed to help people into work
or further and higher education, such as childcare and Education
Maintenance Allowances.
OVERVIEW OF
REPORT
6. A summary of the Committee's main recommendations
with paragraph numbers to allow cross-referencing with the Committee's
report is given below. As you will see from this, the Committee
was concerned that although the Scottish Executive has provided
more resources for initiatives aimed at tackling deprivation,
there is a lack of clarity on the eligibility for funding and
an unnecessary bureaucracy has been created through the various
funding streams. This means that it is difficult to assess what
progress is being made on tackling deprivation and how effectively
the money is being spent.
7. Apart from specifically targeted funding
streams, core budgets of local government and the health service
provide services that have a significant impact on deprived areas.
There is also European money and funds sourced from the Department
of Work and Pensions eg through JobCentre Plus and this adds to
the confusion.
8. The Committee recommended that the Executive
should establish a single fund to combat deprivation which would
merge existing funding streams and allow the introduction of supplementary
funding, ensuring best value. Implementation of the fund would
require that national performance indicators should be introduced
alongside "outcome agreements" reached by Community
Planning Partnerships (CPPs) for each local authority area. This
would mean that the success of local and national efforts to overcome
deprivation would be monitored systematically. For your information,
CPPs were introduced by the Local Government in Scotland Act 2003
whereby local authorities were required to initiate, facilitate
and maintain a Community Planning Process involving core partners
such as health boards and police.
EXECUTIVE SUMMARY
OF THE
COMMITTEE'S
REPORT
9. Deprivation policies have existed in
varying guises over many years, but there are still too many areas
in Scotland characterised by concentrations of multiple deprivation.
Whilst there have been regeneration success stories, in other
areas change has been limited or partial, preventing further spiralling
decline rather than transforming the life chances of local people
and the prospects for the community. (paragraphs: 19-26, 30-33).
10. There is a need to recognise that a
majority of individuals and families who are deprived in Scotland
do not live in the 15% most deprived communities, although there
is no doubt that deprivation is most concentrated in these predominantly
urban areas. Deprivation exists in rural as well as urban areas,
but unlike urban deprivation, rural deprivation cannot be tackled
by focusing investment on areas where deprivation is concentrated.
Despite the inclusion of an access domain, the Scottish Index
of Multiple Deprivation (SIMD)—which identifies the most
deprived areas across Scotland is not suitable as a basis for
allocating resources to tackle rural deprivation. (paragraphs:
19-26, 156-164).
11. The Committee looked at issues of delivery
and the problems associated with short term funding of social
economy and voluntary delivery agencies. It recommends that the
Scottish Executive examines how the process by which funding is
either granted or withdrawn from projects could be made more transparent,
with the aim of improving quality and value for money. It would
be particularly helpful if a mechanism could be put in place so
that successful pilot projects that meet clear evaluation criteria
could be considered for longer term funding. Consideration should
also be given to establishing an innovation fund which would encourage
delivery organisations to take new ideas forward to the pilot
stage. (paragraphs: 39-44).
12. The Committee recommends that there
should be much greater clarity in the roles and responsibilities
of partners—particularly local authorities and Communities
Scotland. [Note: Communities Scotland is an Executive Agency whose
primary role is as the Executive's main delivery agency for housing
and community regeneration. The Executive established a £318
million Community Regeneration Fund (CRF) and Community Planning
Partnerships are obliged to set out how they intend to use the
CRF alongside their own mainstream resources through three year
Regeneration Outcome Agreements. The development and delivery
of ROAs are overseen by Communities Scotland]. A shift to more
extensive use of a contractual approach, where providers tender
to deliver clearly defined outputs would greatly increase transparency
and improve performance. The introduction of competition between
delivery agencies would necessitate a robust performance monitoring
framework linking allocations to expected outputs to ensure money
is used to best effect. (paragraphs: 67-80).
13. There is a fundamental conflict in the
roles of Communities Scotland in the process of approving and
monitoring the new Regeneration Outcome Agreements (ROAs) as they
are simultaneously strategic partner, project sponsor and adjudicator.
Despite claims from Ministers, the new system does not appear
capable of "bending the spend". The bureaucracy involved
in the allocation of CRF monies is massively disproportionate,
especially for those local authority areas which receive small
sums from the Fund and even in those areas that receive substantial
sums the approval system is seen as unnecessarily burdensome.
(paragraphs: 55-66, 134-155).
14. In order to link projects to national,
strategic priorities and outcomes more effectively, the Committee
has advocated the use of outcome agreements. The Committee felt
that in order to facilitate a more co-ordinated and strategic
approach both at Executive and at local level, the proposed system
of Local Outcome Agreements (LOAs) (currently under development
by the Executive and intended to link national policy priorities
with local service outcomes and to allow local authorities and
other delivery agents the flexibility to deliver local solutions
to local problems) should be brought together with ROAs. The Committee
believes that there should be a single agreement arrived at by
the Community Planning Partnerships (CPPs). (paragraphs: 40-54,
67-80).
15. Councils and their partners should agree
their intended outcomes and the steps they will take to ensure
these are delivered and seek approval from the Scottish Executive
as part of their contribution to achieving agreed national outcomes.
The approval process should include those deprivation specific
funding elements currently covered in ROAs and agreed through
CPPs and deprivation linked monies given to local authorities
through Aggregate External Finance (AEF). (paragraphs: 67-80).
16. Authorities with significant levels
of deprivation do receive additional support through both Revenue
Support Grant (RSG) and specific grants. While there is some added
flexibility in the use of specific grants, as a result of the
introduction of the new ROA system, the Committee believes greater
accountability and better effectiveness can be achieved by removing
ring-fencing of resources allocation, giving local partners greater
scope to identify local priorities and implement partnership outcome
agreements. (paragraphs: 34-38, 59-66, 91-96, 97-114).
17. The Committee was impressed with the
approach being adopted by Glasgow City Council where the Community
Planning Partnership is considering whether it can devise a single
structure that would meet organisations' requirements for measuring
outcomes and auditing spending of public money, which would be
much simpler for organisations. (paragraphs: 45-49, 67-80).
18. The Committee was strongly of the view
that the approval and monitoring of the implementation of such
outcome agreements should be a matter for the Executive rather
than Communities Scotland. (paragraphs: 67-80).
19. As it is some time since deprivation
weightings were reviewed for Grant Aided Expenditure (GAE) purposes,
the Committee recommends that they be revisited before the next
Spending Review allocations. In particular the Committee recommends
that Executive reviews the scope for additional weightings within
the funding formula, as there are a number of treatments where
a deprivation weighting does not exist but appears plausible.
(paragraphs: 81-84, 85-90, 97-114).
20. The Committee recommends that the National
Priorities Action Fund, the former Excellence Fund and the Anti-Social
Behaviour programme should be reviewed as they were identified
as benefiting deprivation, but this does not appear to be reflected
in the allocations to authorities with high levels of deprivation.
The Committee also recommends initiating a more fundamental review
of the whole system, recognising that major structural changes
could only be implemented in the longer term. (paragraphs: 115-125).
21. The Committee recommends that the current
safety netting for authorities which sets a minimum level of increase
in GAE should be reviewed in line with the way in which the Barnett
formula works for Scottish Executive spending to provide those
authorities with a population loss a longer timeline to manage
any reductions. (paragraphs: 115-125).
22. In line with the leader of Glasgow City
Council's suggestion that "it would be more productive for
the Executive to allocate funds having taken account of deprivation
issues and not to specify exactly how they should be spent but
what outcomes they should deliver" the Committee recommends
that CPPs should be given more discretion in determining how the
balance of available funding should be directed toward area as
opposed to individual or family deprivation. (paragraphs: 91-96).
23. To complement this, the Committee recommends
that the Executive needs to simplify and better co-ordinate the
funding streams it has initiated with the aim of tackling deprivation
and Closing the Opportunity Gap. To bring together funding streams
coming from different Executive departments, the Committee recommends
that the Executive should consider establishing a single deprivation
fund which should supplement existing area-based programmes with
funding to tackle the wider problems of household deprivation.
Therefore, a single deprivation fund could incorporate all schemes
aimed at tackling deprivation (Community Regeneration Fund—£106
million, Housing Estate Regeneration Fund—£17 million,
Working for Families Fund—£12 million, Tackling Anti-Social
Behaviour—£30 million and Education Deprivation from
GAE—£65 million) plus new monies to deal with wider
problems of deprivation which could come from the growth monies
in the next Spending Review. (paragraphs: 34-38, 126-133, 156-164).
24. This fund could also require some element
of matching funding from the local authority to demonstrate clearly
that this constitutes additional funding over standard spending
on public services. (paragraphs: 156-164).
25. The introduction of a single deprivation
fund requires that alongside outcome agreements reached locally,
there should be a narrow range of national performance indicators
which can be monitored annually so that progress with deprivation
can be monitored systematically. The current Spending Review approach
using targets means performance for SR2004 will not be reported
within the current session of Parliament. The Committee wants
to move to a situation where the money spent on deprivation can
be monitored so that it delivers better results to suit local
circumstances and priorities. (paragraphs: 156-164).
26. Such an approach, combined with the
introduction of partnership outcome agreements would inevitably
help to break down barriers and would bring together a variety
of funding streams and would make it easier to track spending
on deprivation. (paragraphs: 34-38, 91-96, 134-155).
27. This has been a wide-ranging and complex
inquiry and the Committee believes these recommendations can ensure
we start to effect significant and not marginal change.
Finance Committee
Scottish Parliament
June 2006
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