Supplementary memorandum by the Scottish
Council for Voluntary Organisations
MEMORANDUM FROM THE SCOTTISH COUNCIL FOR
VOLUNTARY ORGANISATIONS SUPPLEMENTARY TO THE EVIDENCE GIVEN BY
MR RUCHIR SHAH AT THE PUBLIC EVIDENCE SESSION OF THE COMMITTEE
IN EDINBURGH ON FRIDAY 27 FEBRUARY 2009
INTRODUCTION
SCVO was grateful for the opportunity to present
its evidence at the Committee's public session. There were a number
of issues where SCVO thought members of the Committee might welcome
clarification, explanation or expansion on the SCVO evidence.
Should any further questions arise from consideration of the contents
of this memorandum, we will be happy to try to answer these.
THE CONVERGENCE
ISSUE
In Q409, Lord Forsyth asked about the so-called
"Barnett squeeze" and the related issue of "convergence"
between levels of need in Scotland compared to elsewhere in the
UK. The Barnett formula was originally introduced in order to
reflect the greater need for resources in Scotland to address
persistent issues of multiple deprivation and poor health.
PAST VOLUNTARY
SECTOR CONTRIBUTION
TO CONVERGENCE
It may help if we look at these issues from
the historic perspective of the voluntary sector. Many of the
non-population elements that go into the Barnett formula are the
focus for direct action by the voluntary sector. The sector's
primary objective is to deliver public benefit. This involves
working to return people to gainful and sustainable employment,
supporting and rehabilitating those afflicted by bad health, disabling
conditions, disease and addiction and funding major research programmes
into such afflictions. The sector supports offender re-education
and reintegration into society, helps keep communities safe through
volunteering initiatives as diverse as Community and Neighbourhood
Watch, acting as volunteer firemen and lifeboat personnel, improves
the lives of children by direct help through fostering and adoption,
through community based voluntary youth work and education. In
more recent years, environmental activity has grown to include
initiatives from community energy to local woodlands groups.
WIDTH AND
DEPTH OF
THE SECTOR'S
CONTRIBUTION TO
CONVERGENCE
The sector is active in every facet of national
life. It contributes much of what it does at no cost to the public
purse, the sort of intensive commitment to the resolution of the
most intractable problems facing society, eg care of the terminally
ill, those with high dependency health conditions, the need to
build the national skills base. This all leads to small but measureable
improvements in the well-being of society. These outcomes delivered
by the sector at its own hand or working with its partners in
local and national government and the private sector have achieved
positive shifts over time. These collective efforts of all the
parties in national life are reflected in progressive convergence
in key indicators in health, employment, life expectancy, childhood
mortality and income expectations with the wider UK population.
The gap between many of the individual elements of
the Barnett formula in Scotland and England/UK has narrowed considerably.
REDUCING THE
RESIDUUM—A FINAL
PUSH TOWARDS
CONVERGENCE?
A. A hard challenge
The challenge now for Scottish society, and
the Scottish voluntary sector, is to reduce and eventually eliminate
those factors which account for the remaining differentials, enshrined
in the Barnett formula, between Scotland and the UK as a whole.
By their very nature, the remaining problems are often the most
difficult to resolve. The issues of multiple deprivation will
need the holistic and integrated efforts of several voluntary
organisations to secure better outcomes for society, eg in tackling
persistent high rates of teenage pregnancy, in responding to the
health and employment needs of households with so-called "chaotic
lifestyles" as identified by the DWP.
B. The need for joint research and intelligence
to inform action
Our efforts as the voluntary sector will continue
to address and reduce the gaps in outcomes for individuals and
whole communities, both as between Scotland and the rest of the
UK and within Scotland itself. This will need agreement with Government
and other partners on the outcomes to be prioritised and pursued.
There are already excellent examples of the need to develop the
intelligence from jointly funded research to identify and disseminate
best practice, whether it be in cancer research, victim support,
biodiversity management, numeracy and literacy or reducing addiction.
Joint research into viable treatments for specific conditions
can produce results that eliminate the impact those conditions
have on deprivation outcomes as between Scotland and the rest
of the UK, because such conditions are more common in Scotland
(eg coronary heart disease). Here, altruistic voluntary giving
by the Scottish general public to fund such research remains at
a remarkable level internationally.
C. Challenges to the rate of progress towards
convergence of need
An unrelenting smooth, virtuous curve of progress
towards the achievement of full convergence cannot be assumed.
The wider economic climate and technological change have a profound
ability to check progress. The current recession may well prove
to be the most significant check on progress towards convergence
since the Barnett formula was first applied, on the basis of the
pressures already being reported to SCVO by our member organisations.
Convergence can be accelerated by new technologies (heart valves),
exploitation of economic advantage (the oil industry) or new preventive
drugs such as statins. Perversely, the closure of much of Scottish
heavy industry has significantly reduced the previously markedly
higher incidence of industrial injury and related household benefit
dependency in Scotland, which will over time converge with the
UK incidence of such morbidity.
Social factors can interrupt movement towards
convergence. A good recent example is the sudden, sharp higher
increase in smoking among women aged under 20 in Scotland,
when compared to the rest of the UK. The unpredictability of such
changes emphasises the need for careful monitoring to ensure that
the needs based approach at the heart of the Barnett formula is
fully informed by objective and trustworthy data.
D. Policy changes and their impact
Finally, and post-devolution, actual policy
changes, or alterations in funding in the different national territories
of the UK, can produce either more rapid or slower convergence
of need, depending on the differential success of individual funding
or best practice decisions, and the additionality secured. Consider
the recent decisions on the most appropriate level of physical
exercise per week to be provided for in schools curricula across
the UK, or the differential investment in community as opposed
to hospital based consultancy NHS services, the impact of out-sourcing
or the ability to maintain sufficient numbers of highly trained,
motivated and best paid teaching, nursing or care staff. Any differences
in these supply side decisions between Scotland and the UK will
impact on the pace of convergence. The most variable elements
on the supply side will include the human intangibles—professionalism,
quality, levels and application of training, diligence and the
additionality secured from the interactive investment by all the
parties (UK, Scottish, local government, public and private sector
and private individuals) in their pursuit of public benefit.
We now turn to other questions raised by members
of the Committee.
Q371 et seq SCVO would wish to point
out the disproportionate importance of the income dimension for
most Scottish charities, as so few, typically the largest, have
significant reserves. The annual decision process on the operational
percentage to be used to calculate the Barnett formula is of considerable
importance to the sector. SCVO notes the slow progress in moving
to full cost recovery in central and local government service
delivery contracts with charitable and voluntary organisations.
Q383 and Q390 are perhaps best
answered by a press release which SCVO prepared in 2008 on
the impact of the Olympics in cutting Lottery funding in Scotland,
and this is available from http://www.scvo.org.uk/scvo/TFNPR/ViewTFNPR.aspx?pr=8191.
SCVO would wish to note that the scale of cuts in Lottery funding
in Scotland arising from the unilateral funding decisions of the
DCMS in respect of the London Olympics have produced a change
in the type of outcomes as well as their amount.
Q386 SCVO would like to point out that
there are in fact four (4) distributors involved in National Lottery
funding. The highly successful small grants scheme, Awards for
All, awards grants of up to £10,000, and is designed to help
smaller charities and community based voluntary groups. Awards
for All, continues to be able to approve over 75 per cent
of applications for support. It has been of huge help in spreading
the benefits of Lottery funding across Scotland.
Q390 For the distributors other than Awards
for All, as funding availability falls very steeply, the issue
for them becomes one of prioritisation within their overall fields
of responsibility, with some areas being potentially and actually
omitted completely from funding, rather than all applications
competing equally for funding. If this has to be done, then SCVO
would wish such decisions to be taken transparently by the distributors
and publicised accordingly.
Q393 In the particular case of the Third
Sector Action Plan published by the Office of the Third Sector
in the Cabinet Office, there is no clear automaticity as suggested
by Lord Forsyth. This is because the cash, while disbursed by
the DWP, actually was originally part of the resources of the
OTS and, had they been spent by that Department, could only have
been spent in England. There is still uncertainty over whether
such virement between Departments of State will then protect any
such vired funds from a consequential liability for Barnett formula
purposes. This position is made more complicated by the uncertainty
over liability for a levy based on the Barnett formula when the
expenditure is genuinely additional to voted total expenditure
set out in the Finance Act for the Department concerned.
Q398 raises the important issue of the
scope in future for participative budgeting. As a major player
in service provision, innovation and development for large and
expensive parts of the public services, the Scottish voluntary
sector has had issues around the effectiveness of current budgetary
processes, particularly in relation to planning forward activity.
It has often been true that the position of charities at the national
level has been simply overlooked—a good example being the
decision to cut the base rate of tax from 22p to 20p in the 2007 Budget,
without any appreciation of the impact on charitable income via
Gift Aid, an error corrected by the introduction of Transitional
Relief in the 2008 Budget, after campaigning by the sector.
That one decision caused a potential loss of £10 million
to the Scottish charitable sector. The required diversion of effort
for senior finance staff in major UK and Scottish charities to
secure the Transitional Relief Scheme was substantial, even with
the active support on the issue from the Charity Tax Group.
Such unilateral action can have damaging impacts.
There have been real problems involved where changes to provision
have been made unilaterally by funding parties, causing real issues.
However, what is of greater concern is where real, new additional
financial resources are made available in either reserved or devolved
areas and there is uncertainty about whether or not this new spending
attracts a levy based on the Barnett formula. Sometimes we do
not even discover the reasoning when a consequential is not generated.
This issue is of equal concern to the growing problems caused
by a lack of policy fit between the intentions of reserved and
devolved Governments.
SCVO believes there should be a requirement
placed on all statements made by way of Press Notice or to the
Westminster Parliament that makes it plain whether and what are
the Barnett formula implications for any additional expenditure
generated in-year, when it is clearly in addition to resources
approved by Parliament via the Finance Act of the year in question.
While HMRC and the Treasury have held meetings with representatives
of the charitable and voluntary sector on issues of mutual concern,
SCVO believes it is essential for both parties to these discussions
to continue to have the opportunity to discuss these existing
sources of concern, how these might best be alleviated to save
unnecessary bureaucracy and for there to be both transparency,
consistency and compliance with agreed Guidance for Departments.
Q400 raised the important areas of hybridity
and potentially cross-cutting types of spending. Included in this
are policy areas such as skills and educational development and
how these fit or not with the UK benefits system and how that
is structured. As has been well evidenced in the debates on the
Welfare Reform Bill currently before Parliament, it can be extremely
difficult to "translate" spending intent when that intent
is focussed on a policy architecture that is totally different
in different parts of the country. An example would be current
plans by DWP, contained in the Bill, to assume for spending purposes
that all clients of the benefit system have a statutory right
to child care, when, in fact, there is no such right in Scotland.
This creates a really bad fit between DWP policies and those in
place in Scotland. If the pound follows the statutory right, how
can it then not follow those who do not have that right? How then
is equality of treatment to be delivered, both for the benefit
claimant and any dependent child(ren), ie the family or household
unit? There cannot be an assumption that a level of resources
already exists in a particular policy area, or that those resources
will be ring fenced to contribute towards the realisation of another
policy by another arm of government. Control of the spending power,
once the Barnett formula has been triggered and received by the
devolved Government, then lies with the Scottish Government, not
DWP. The clear policy intent in the current Welfare Reform Bill
breaches that convention by, in effect, demanding net new cash
from the resources of the devolved government. The devolved Government
should receive a properly considered Barnett formula derived amount
to balance the policy assumptions. This need to balance assumptions
is of course necessary in order to secure a policy fit that is
consistent on reserved matters, but also fully recognises the
legislative and policy position on devolved matters.
Q402 referred to variations of the Barnett
formula deployed by Westminster Departments, and the particular
case of the Barnett Plus version used by the National Lottery,
approved by DCMS, as the Lottery's sponsor Department. Although
the details have still to be announced, SCVO understands that
there may be a variation on the Barnett formula which will be
deployed in relation to the distribution of the proceeds from
the Dormant Bank Accounts legislation (this was referred to in
Mr Shah's response to Q387). SCVO is not aware of any coherent
listing of such departmentally controlled variations, but believes
publication of such a listing would certainly improve fiscal and
financial transparency if these arrangements could be fully detailed
by those Departments exercising reserved powers. They should be
obliged to arrange for any changes to those variations to be publicised
by appropriate means.
Q404 dealt with the sensitivity of the
Scottish voluntary sector to funding decisions. The interplay
of income from all sector funding sources is particularly important.
There is evidence from past recessions that the level of public
giving replaced temporary drops in the level of central or local
government support for the sector, or when corporate giving is
depressed, or when market circumstances depress the value of investments
held by charitable Trusts and Foundations. What makes the current
recessionary situation so threatening to the capacity and sustainability
of the sector is that all these adverse circumstances have come
together in something of a perfect storm. This has happened just
at the point when the demand for the sector's services is exponentially
increasing. It is in such circumstances that the Committee needs
to consider how the Barnett formula can anticipate, then recognise
and reflect the fact of reversal of the trend towards convergence.
Scottish Council for Voluntary Organisations
20 April 2009
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