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Memorandum submitted by
Introduction & Executive Summary EMRA's submission draws on the experience and expertise of its Scrutiny and Joint Housing, Planning and Transportation boards. The key points are;
a) The East Midlands does not receive its 'fair share' of public funding
b) The East Midlands lags UK spend per head particularly in areas of public order and safety, economic affairs, transport, environment protection and housing and community amenities.
c) The region has the fastest growing population in the UK and requires increased funding for the strategic infrastructure and housing to support such growth.
d) There should be a clear and consistent methodology for decisions by Ministers on funding nationally strategic infrastructure (road, rail etc) that affect regions.
e) Government should clarify the role of regulators (i.e. the rail regulator) in effectively controlling spend on infrastructure.
f) The region's share of funding for affordable housing takes no explicit account of projected household growth,
g) The Region's Police Authorities face a significant funding shortfall.
h) More spending should be devolved from national level and subject to greater democratic oversight by elected councillors.
i) The Regional Funding Allocation (RFA) process is an example of how local authorities and stakeholders in the East Midlands worked effectively together to determine spend priorities. This process should be built upon.
1. Devolution of Funding
1.1 The distribution of public spending around the UK should be demonstrably fair and efficient and provide appropriately for the needs of each region. EMRA considers that the East Midlands does not currently receive an equitable share of public funding.
1.2 The East Midlands has the fastest growing population of the English regions[1]. The Office for National Statistics forescast that between 2006 and 2016 the East Midlands' population will increase by 11 per cent or 0.5 million to 4.8 million. Government needs to provide greater investment in the region to ensure this regional growth is sustainable.
1.3 When the IPPR analysed the distribution of public expenditure it found that the East Midlands got a particularly poor deal. IPPR analysed spend per head against two proxies of need: economic performance (GVA per head) and poverty (relative household income).
1.4 The East Midland's GVA per head (£17,698) is below Scotland's (£19,152). Public spending per head in the East Midlands (£6,827) is 32% less than in Scotland (£9,032). If spending is related to GVA, Scotland receives 11% more and the East Midlands 19% less than it needs, making it the most underfunded region in the UK on this measure. London currently receives 65% more funding per head on this measure.
1.5 Using household income as a proxy of poverty the East Midlands again receives a poor deal on public funding. The East Midlands comes equal bottom with the East of England in spending to address poverty before housing costs and third bottom after housing costs.
1.6 Recognising that this is not a full needs analysis, that overall regional performance can conceal disparities within regions and London, as a capital city, will inevitably attract a large proportion of public expenditure, the IPPR still concludes;
"...public spending across the nations and the
regions of the
2. Expenditure by Theme
2.1 The East Midlands lags behind UK and England levels in many areas of public spending particularly public order and safety, economic affairs, transport, environment protection and housing and community amenities (see Figure 1 below)..
(Regional totals may conceal larger variations in spend per head
within the
2.2 More details follow on the implications of the East Midlands deficit together with EMRA's views on how public funding is disbursed, how decisions are made on strategic infrastructure and the key financial challenges facing local government.
3. How Public Expenditure is disbursed
3.1 In addition to the overall level of public funding in the East Midlands being inadequate, EMRA notes that further difficulties are caused by the fragmented manner funds are disbursed through various agencies each with separate objectives and targets.
3.2 Reflecting the 'Total Place' initiative being pursued in the East Midlands through the Leicester and Leicestershire Multi Area Agreement, EMRA favours mapping and co-ordinating public expenditure at a strategic level. Stronger strategic co-ordination and accountability for public funding, which can bring forward spending and operational efficiencies, should be based on decision making and scrutiny by elected local councillors.
3.3 The Regional Funding Allocation (RFA) process demonstrated how councils and stakeholders work collaboratively to frame strategic advice on major areas of public spending. However, the financial envelopes within which regional priorities are decided are set by Government departments according to a number of different methodologies.
4. Strategic Infrastructure
4.1 Strategic infrastructure is delivered by a mixture of national agencies, private utilities and local authorities, sometimes working in partnership with the private sector. The majority of public expenditure is determined directly by central Government, although regions have greater influence over funding streams that fall within Regional Funding Allocations.
4.2 There is a lack of clarity about how investment in strategic infrastructure is prioritised spatially by Government. Decisions appear to be made on an ad hoc basis by Ministers 'in the National interest with no consistent basis for determining relative priorities between the regions'
4.3 It is unclear how the Government reached its recent decision to prioritise the electrification of the Great Western Line above the Midland Mainline, particularly when analysis from Network Rail indicated that electrification of the Midland Mainline would give an 'infinite' return on investment.
4.4 Whilst it is right that in matters of national significance 'Minsters decide', it is also important that such decisions are made within a clearly understood strategic context linked to the delivery of wider policy objectives. It may be that National Policy Statements for major infrastructure (which appear to have 'in principle' cross party support) could start to address this concern.
4.5 Funding for flood defence works is area where national decisions have a huge impact on the East Midlands. With climate change and sea level rise, greater pressure will be put on existing flood defences whilst the Environment Agency's budget for maintaining and improving them is uncertain. The priority given to protecting London and the Thames puts more pressure on less affluent areas like the Lincolnshire Coast, despite Lincolnshire's national importance for food security. The resulting uncertainty may start to undermine investor confidence in coastal communities.
4.6 Another important determinant of infrastructure investment in public utilities (including rail) is the decisions of the regulatory authorities. The primary role of the regulators is to protect the interests of the consumer where services are delivered by a monopoly provider. Regulators also effectively control investment programmes because companies can only raise revenue from consumers to fund specific infrastructure if the regulator agrees. Improvements needed to deliver regional objectives can be blocked or delayed by the Regulator.
4.7 For example, the decisions to introduce a direct rail service between Lincoln and London via the East Coast Mainline and to fund enhanced signalling improvements around Nottingham were originally blocked by the Rail Regulator, before being agreed 'on appeal'.
5. Regional Transport Funding
5.1 Regional allocations for transport major projects, set out in RFA Guidance are determined largely by current population size. No direct account is taken of traffic growth, infrastructure deficit or indeed future projected population growth.
5.2 This methodology does not benefit the East Midlands, which is projected to have the fastest growing population in England[4], and which until recently also had the highest level of traffic growth. With a dispersed 'polycentric' settlement structure the Region does not have the historic patterns of regional commuter rail lines that exist around Birmingham and Manchester. This makes adapting to a low carbon economy challenging. Persistent under investment in the East Midlands railway system has resulted in the slowest rail journey times to other parts of England of any region.
5.3 The scale of expected population growth is not evenly distributed across the Region. It is higher in Northamptonshire, Lincolnshire, and Rutland, which traditionally have less well developed road and public transport systems, than it is in Nottinghamshire, Derbyshire and Leicestershire.
5.4 Although the Region's Growth Areas and Growth Points had access to Community Infrastructure Fund for new transport infrastructure, grants have been determined nationally and the success rate of local authorities has been poor relative to other regions.
5.5 The difficulties of funding major transport schemes from a limited regional budget were demonstrated by the struggle to deliver the A46 Newark to Widmerpool improvement. The cost, relative to the Region's total transport indicative budget, was such, that without 'fiscal stimulus' money from Government, it could only have been attempted in phases over 10 years.
6. Regional Housing & Regeneration
6.1 East Midlands' housing costs and prices are close to the national average. However the share of social and affordable housing as a proportion of tenure is well below the national average, reflecting very low provision in rural areas. Regional Social Landlord housing is only 5% of the region's stock compared to 8% England-wide.[5]
6.2 The formation of the Homes & Communities Agency (HCA) brought together the very different funding regimes of the Housing Corporation (HC) and English Partnerships (EP).
6.3 Historically the HC based regional allocations for new affordable
housing and existing stock renewal on complex needs indices. The
6.4 Analysis of Unit Grant Costs
in the HC Programme, 2000-05 demonstrated that investment in the region
has delivered excellent value for money in the production and maintenance of
affordable homes. [6]
This continues despite the credit crunch. The East Midlands investment
programme required £40,384 grant per unit (Q3 2008/9)[7], compared for example with
£44,942 in the
6.5 The Region's Growth Areas and Growth Points have accessed Growth Area Funding (GAF) to support housing growth but the success rate of local authorities and local delivery vehicles has been mixed. Recently GAF funding has been significantly cut by Government to support investment in new affordable housing through Kick Start, Local Authority New Build, and increased resource for NAHP. These predominantly nationally distributed programmes take no explicit account of projected future household growth.
6.6 English Partnerships determined investment in regeneration schemes
on a national value for money basis. The
7. Local Government Finance
7.1 Local Authorities
in the
7.2 The 2007 Comprehensive Spending Review (CSR) provided for an average annual 1% real terms increase in local government funding between 2008/09 and 2010/11. The Government delayed the 2009 CSR that was to cover 2011/12 to 2013/14. The Budget 2009 confirmed the provisional local government settlement for 2010/11 but increased the 3% efficiency target set in 2007 to 4%.
7.3 There will be a significant pressure on public spending as a result of the recession with downward pressure on grant settlements, and specific grants combined with increased demand for local government services.
7.4 emda's draft '
"between
2006 and 2016 the East Midlands is projected to experience the fastest growth
of all English regions in the pensionable age group (15.6% compared to 10.1% in
7.5 Pressures on
adult social care budgets are increasing through government policy, an increase
in conditions such as dementia, higher public expectations and demographic trends. The demographic pressures are most severe in
the
7.6 Local Authorities are facing pressures to maintain recent improvements in children's and young people services. Pressures include the move to more personalised learning, the transfer of responsibilities for post 16 education from the Learning and Skills Council; dealing with falling pupil rolls, particularly in secondary schools; improving school buildings through Building Schools for the Future and the Modernisation Fund, co-locating services in schools; completing the roll out of the SureStart early years programme; responding to the requirement for all 16 and 17 year-olds to remain in school, training or an apprenticeship until they are 18 and helping young people deal with the impact of the economic downturn.
7.7 Local Authorities and schools are also at the forefront of dealing with safeguarding, child behaviour, obesity, teenage pregnancies and drugs and alcohol. Many of these services are funded by a range of specific grant streams which could be "mainstreamed" into general funding in the next CSR. The current DCSF review of the Dedicated Schools Grant "historic cost+" allocation methodology is likely to result in funding uncertainty that would compound any overall reduction in spend.
8. Policing
8.1 In their East
Midlands Collaboration Plan for Policing 2009-2012, the region's five police
forces and the five police authorities set out their concerns about the level
of police funding in the
"The region has some of the most under-funded forces in the country. All receive less funding per capita than the national average. This is partially due to the government's police funding formula not being fully implemented; reducing funding by £57 million over the three years to 2010/11."[10]
8.2 The Plan analyses the implications of the Government's drive for greater public sector efficiencies in 2009 Budget. Whilst noting uncertainty about Police funding going forward, due to the delay of the comprehensive spending review planned for 2009, the Plan suggests that current trends may exacerbate the region's historic under-funding. It forecasts a widening income shortfall amounting to £35.1m over three years (see Figure 2 below).
8.3 The plan states that;
"We rely heavily on the use of reserves and cash releasing savings to close this gap but this is not a sustainable solution."[12]
8.4 Moreover, it suggests that the true funding shortfall may be greater than the £35.1m suggested, stating;
"A more meaningful measure of the financial state of
the region is to consider areas we have identified as a risk but which have not
been included in the medium term projections.
8.5 The Assembly is
concerned about the implications of the region's current and future shortfall
in police funding for the residents and businesses of the
12 October 2009 [1] Subnational Population
Projections for [2] P25, [3] Public Expenditure Statistical Analyses 2009, HM Treasury, 2009 [4] Subnational Population
Projections for [5] CLG "Dwelling Stock by Tenure and Region", Table 109, December 2008 [6] The Benefits of Housing
Investment in the Midlands" National Housing Federation
and the Chartered [7] HCA Investment Statement 2008-11 January 2009 [8] "The Benefits of Housing
Investment in the Midlands" National Housing
Federation and the Chartered [9] P10, Draft East Midlands in 2009, emda, 2009 [10] P20, East Midlands Collaboration Plan for Policing 2009-2012, Derbyshire, Leicestershire, Lincolnshire Northamptonshire and Nottinghamshire police authorities and forces, 2009 [11] P25, East Midlands Collaboration Plan for Policing 2009-2012, Derbyshire, Leicestershire, Lincolnshire Northamptonshire and Nottinghamshire police authorities and forces, 2009 [12] P25, East Midlands Collaboration Plan for Policing 2009-2012, Derbyshire, Leicestershire, Lincolnshire Northamptonshire and Nottinghamshire police authorities and forces, 2009 [13] P25, East Midlands Collaboration Plan for Policing 2009-2012, Derbyshire, Leicestershire, Lincolnshire Northamptonshire and Nottinghamshire police authorities and forces, 2009 |