Review of Scotland's Cities

Review of Scotland's Cities - The Analysis

8.4 FUNDING OUR CITIES

8.4.1 Introduction

Some of the most powerful influences Government can bring to bear on the future development of our cities are of course fiscal. Through both the direct and indirect provision of funding, and incentives to other parties to invest in particular locations or industries/services, governments can seek to encourage, discourage or facilitate changes to the economic, social and environmental structure of our cities, towns and rural areas. Successive governments in Scotland and the UK have varied patterns of expenditure spatially in order to influence the development of services and infrastructure to try to achieve pre-determined aims and objectives.

... it is not clear that information is being collated and disseminated effectively to decision-makers...

Much of the public debate has focused on whether current patterns of expenditure advantage or disadvantage cities, with respect to each other and with respect to towns or rural areas. A working group was formed under the auspices of the Cities Review to consider current patterns of funding and expenditure in our cities. The following section provides an overview of public sector expenditure in Scotland's cities and how, and why, expenditure patterns vary. It provides details (where available) of the patterns of funding being spent in our cities in support of different programmes, the criteria for the distribution of funding, and whether our cities are relatively 'favoured' by distribution patterns. It then goes on to identify a series of issues and challenges around the funding of our cities.

8.4.2 Current Patterns of Funding

The Cities Review team initially set out with the aim of examining overall patterns of public sector expenditure in Scotland's cities and of identifying whether current patterns of expenditure are meeting the needs of our cities effectively. However, it soon became apparent that this would prove a near impossible task.

This is partly because of the way information is currently collected and presented:

There is no single source of information on public sector expenditure in the Scottish cities - different funding agencies record information on their own investment, but no single body co-ordinates/standardises the collection of information on funding at a city-region/local authority scale;
Patterns of expenditure by the Scottish Executive and different agents are not always readily identifiable on a geographic basis - for example agencies such as Scottish Enterprise target some spending geographically, while other resources are spent nationally. Nor is national spend always distributed consistently in consecutive years, since priorities and opportunities for investment vary considerably;
Where funding is disbursed on a geographic basis, the relevant geographic areas will often vary according to the aims and objectives of the relevant programme - for example health board areas do not match local authority areas and some funding (e.g. that on Social Inclusion Partnerships) is targeted at a sub-local authority scale;

It was therefore not possible to compile a single, composite table of expenditure in our cities.

Nevertheless, the review team was able to identify patterns of expenditure in the cities for some of the most important programmes of expenditure by the Executive and other agencies. The following boxes provide details for the relevant spending and seek to explain the rationale for the distribution of funding.

Local Government Services and Infrastructure

Tables 8.3 and 8.4 show gross revenue and capital payments made to the city authorities by the Scottish Executive under the local government settlement.

Funding is allocated to councils to support the provision of local services and infrastructure by means of a formula based approach to indicators of need.

Both revenue and capital funding is distributed under a number of formulae (for example education, social work, local roads) to support the provision of services or infrastructure to a specified standard. Funding is distributed geographically under each formula according to a primary indicator of need (usually, but not always, population based). Allocations under each formula are then adjusted by the application of one or more secondary indicators that are considered to affect relative need (for example deprivation or rurality).

TABLE 8.3: Total Revenue Income and Expenditure by Local Authority 1997-2002

City	Allocation	1997-98	1998-99	1999-00	2000-01	2001-02
Aberdeen	000s	249,893	251,483	260,889	274,664	289,378
Aberdeen	per head	1,157	1,180	1,227	1,300	1,370
Dundee	000s	215,333	221,899	227,408	228,683	237,745
Dundee	per head	1,446	1,513	1,575	1,603	1,666
Edinburgh	000s	555,297	557,059	586,166	602,580	630,294
Edinburgh	per head	1,234	1,237	1,298	1,329	1,390
Glasgow	000s	968,533	969,395	1,041,998	1,082,407	1,119,070
Glasgow	per head	1,583	1,564	1,704	1,776	1,836
Highland	000s	283,652	289,873	315,512	319,741	340,748
Highland	per head	1,359	1,392	1,513	1,533	1,633
Scotland	000s	6,545,340	6,706,905	7,045,118	7,286,317	7,665,954
Scotland	per head	1,278	1,310	1,376	1,425	1,499

(1) Data for 2001-02 are estimated

TABLE 8.4: Gross Capital Payments¹by Local Authority 1997-2002 (000's)

City	Allocation	1997-98	1998-99	1999-00	2000-01
Aberdeen	000s	37,384	48,656	48,994	40,746
Aberdeen	per head	173	228	230	193
Dundee	000s	34,861	38,575	33,176	29,622
Dundee	per head	234	263	230	208
Edinburgh	000s	79,828	93,011	109,685	77,739
Edinburgh	per head	177	207	243	171
Glasgow	000s	112,668	150,689	147,198	148,704
Glasgow	per head	184	243	241	244
Highland	000s	39,325	36,637	43,744	45,758
Highland	per head	189	176	210	219
Scotland	000s	972,653	1,053,850	1,060,943	968,450
Scotland	per head	190	206	207	189

(1) Gross Capital Payments include payments both funded and not funded from revenue

The tables show that revenue allocations, both in gross and per capita terms, have been broadly increasing in all the cities in recent years. Capital allocations present a more complex picture, with individual cities experiencing growth and decline between individual years. However, care should be taken in interpreting the results since some programmes included in the figures in some years (for example spend on Social Inclusion Partnerships) have been removed from the LGF figures in other years.

In general the figures show that Dundee, Glasgow and Highland Councils (unfortunately figures are not separately identifiable for Inverness) receive higher than average allocations of both revenue and capital funding (Glasgow and Dundee being respectively the 1st and 3rd highest allocations per head of all mainland authorities), while Aberdeen and Edinburgh receive lower than average allocations. This is primarily because Dundee and Glasgow score badly on measures of deprivation (by far the most common secondary indicator used to adjust allocations between authorities). In contrast Highland Council receive higher than average allocations due to their relative rurality (another commonly used secondary indicator). Aberdeen and Edinburgh Councils receive relatively lower allocations per head due to their relative affluence and lower scores on measures of deprivation.

The Enterprise Networks

Table 8.5 shows Scottish Enterprise (SE) and Highlands and Islands Enterprise (HIE) expenditure by local enterprise company (LEC) area and, where available, for the city council areas within each LEC. Figures shown include only that proportion of spend by SE and HIE that is undertaken through LECs and do not include expenditure incurred by Scottish Enterprise nationally.

TABLE 8.5: Expenditure by Enterprise Networks 1997 to 2002

Local Enterprise Company	1997/98		1998/99		1999/00		2000/01		2001/02
Local Enterprise Company	000s	Per Head	000s	Per Head	000s	Per Head	000s	Per Head	000s	Per Head
Scottish Enterprise Grampian	18,884	35.95	18,200	34.65	17,670	33.64	16,294	31.02	15,610	29.72
of which Aberdeen	11,680	54.93	11,338	53.32	10,293	48.40	9,173	43.14	8,898	41.84
Scottish Enterprise Tayside	21,181	54.55	20,851	53.70	19,124	49.25	20,081	51.72	18,879	48.62
of which Dundee	11,070	76.65	10,720	74.22	9,972	69.04	10,568	73.17	9,416	65.19
Scottish Enterprise Edinburgh & Lothian	31,788	40.83	43,516	55.90	48,474	62.27	39,974	51.35	39,090	50.21
of which Edinburgh	n/a	-	22,264	49.29	20,444	45.26	18,227	40.35	21,373	47.32
Scottish Enterprise Glasgow¹	49,853	81.53	49,643	81.19	50,058	81.87	49,945	81.68	38,892	63.61
Scottish Enterprise Total/Average²	389,901	83.15	380,880	81.23	384,623	82.03	368,171	78.52	385,503	82.22
Inverness & Nairn Enterprise³	N/A	-	N/A	-	5200	67.56	3900	50.67	N/A	-
Highlands & Islands Enterprise	N/A	-	N/A	-	40,008	92.99	42,600	99.01	N/A	-
Total/Average^{3, 4}
1 A population figure for the Scottish Enterprise Glasgow area is not available. Per head calculations use Glasgow City Council population instead. 2 The total or average for all Enterprise Company areas within Scottish Enterprise. 3 Figures for INE & HIE are payments to Local Enterprise Companies only and do not include 'central' spend by HIE across the whole HIE area. 4 The total or average for all Enterprise Company areas within Highlands and Islands Enterprise. The table shows that patterns of enterprise company spend vary considerably both between LEC areas, and within LEC areas between the core cities and their surrounding regions, reflecting relative needs and enterprise network priorities. Spend by each of the Scottish Enterprise 'city' LECs is lower than the Network average. Within the individual Scottish Enterprise LEC areas, spend in Grampian and Tayside is relatively weighted towards their respective cities, spend in the Lothians less so. Trends in the distribution of resources between LECs since 1999 reflect changes to the Scottish Enterprise's planning and resource allocation process, with a move away from competitive 'bidding' towards a more strategic, planned approach to tackling the task of economic development in each area, to meet the objectives set out in 'A Smart, Successful Scotland'. The distribution of resources within the network reflects both economic opportunity and need. Measures used to determine allocations include the proportion of Scotland's businesses in an area, the proportion of Scotland's vacant and derelict land, and the proportion of Scotland's unemployed people. Such measures broadly explain the differences in allocations between LEC areas and the focus of expenditure within them. In addition to spend on broadly similar 'programme' activity in each area (for example support for businesses; delivery of training; intervention in the property market), expenditure in each of the LEC areas is supplemented by spend on project activity with a more direct national impact. For example, Scottish Enterprise has supported the development of key national projects such as Lomond Shores, the Alba project and support for key industry clusters. Since this work is designed to address market failures manifest at a national level it is considered unreasonable to expect individual LECs to devote resources to achieve their implementation, so additional resources are made available from SE national for such projects. It is the presence of these national projects within the LEC budgets that account in part for the large variations in resource allocations year-on-year within SE Edinburgh and Lothian and SE Glasgow in particular. Within the HIE network an explicit decision has been taken to focus growth away from Inverness and to disperse it throughout the rest of the Highlands and Islands. Accordingly expenditure per head in the Inverness and Nairn Enterprise area is significantly below the average for the HIE network area.

Communities Scotland

The main Scottish Executive programme designed to tackle social exclusion in the housing market is the housing development programme, introduced in 1998 and delivered by Communities Scotland (formerly Scottish Homes). Communities Scotland in turn rely on local housing associations to deliver the majority of programmes on the ground. Table 8.6 shows expenditure by city council area since 1998.

TABLE 8.6: Communities Scotland (Scottish Homes) Expenditure by Area: 1998 to 2003

		1998-99	1999-00	2000-01	2001-02	2002-03
Aberdeen	Capital m	5.0	5.9	6.4	5.1	4.8
	Revenue m	0.2	0.3	0.3	0.5	0.3
	per head	24.45	29.16	31.51	26.33	23.98
Dundee	Capital m	5.5	7.3	8.1	6.6	6.1
	Revenue m	0.0	0.0	0.0	0.1	0.4
	per head	38.08	50.54	56.08	46.39	45.00
Edinburgh	Capital m	18.0	18.2	17.5	13.1	14.1
	Revenue m	1.1	1.2	1.3	1.5	1.3
	per head	42.28	42.95	41.62	32.32	34.09
Glasgow	Capital m	57.7	61.0	63.0	59.3	58.0
	Revenue m	1.4	1.5	1.4	1.4	1.6
	per head	96.66	102.22	105.33	99.27	97.47
Inverness*	Capital m	1.5	1.9	1.6	1.6	1.1
	Revenue m	0.2	0.2	0.2	0.2	0.0
	per head	N/A	N/A	N/A	N/A	N/A
Scotland	Capital m	192.0	201.4	207.5	216.1	192.7
	Revenue m	7.8	8.2	8.3	8.3	8.9
	per head	39.02	40.93	42.16	43.84	39.38

* N.B. Inverness Area - population figure not available

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