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Review of Scotland's Cities - The Analysis

8.4.14 Mainstream Funding to Tackle Social Exclusion

It is clear from an examination of funding sources that significant skewing of 'mainstream' resources for education, health, social work and other services does take place. It is understandable that those who deliver services in areas with above average levels of deprivation seek further skewing. Some have suggested that the Standard Spending Assessments used to calculate local authority funding in England give greater weight to deprivation than the distribution formula used in Scotland, but the SSAs are constructed on a different basis.

It is important that formulae used to distribute funds for services are based on the best evidence of the actual impact of deprivation on the cost of delivering those services. There have been numerous reviews of deprivation in the local government grant distribution, all based on evidence submitted by councils. The most recent, in 2000, reviewed all the available evidence and increased the allowance made for teaching in deprived areas. No new evidence that the formula takes insufficient account of deprivation has emerged since then and Ministers currently have no plans for a further review.

8.4.15 Top-up Funding to Tackle Social Exclusion

Any consideration of whether adequate funding is devoted to tackling social exclusion would not be complete without taking account of the significant resources provided in addition to the mainstream funding. Table 8.11 provides details of some of the main sources of funding that are provided to local authorities, in addition to their main financial settlement, that are either specifically targeted on tackling area deprivation or are weighted towards deprived areas to enable them to tackle exclusion more effectively.

TABLE 8.11: 'Top-up' funding for Local Authorities to tackle area deprivation - 2001 to 2004

The table shows that, in total, these additional sources of funding will provide authorities collectively with more than 242 million each year to tackle area deprivation in the period up to 2003-04. However, each of these initiatives places conditions on the use of resources to ensure that they are spent on Ministerial priorities. Review consultees have questioned whether better results might be achieved if funding was allocated to authorities as part of the block grant, to be spent according to local circumstances to meet prior agreed local outcome agreements.

There is plenty of anecdotal evidence of where ringfencing and restrictive conditions placed on the use of funding limit the ability of councils, and their partners, to respond effectively to the unique circumstances of their area. Where additional sources of funding are provided annually, uncertainty about whether funding will continue in future years can cause problems for councils in terms of resource planning. Uncertainty is in turn passed on to the councils' partners who find it difficult to plan long-term co-ordinated action. While the Executive has recently taken steps to ensure that future funding is guaranteed on a 3-5 year basis, concerns remain about the effort and uncertainty involved in 'chasing' different pots of funding and the resulting opportunistic approach to planning.

Such concerns are not new and the Scottish Executive has begun to take steps to address them through reform of the local government finance system and of the way in which new sources of funding are allocated. Increasingly, new resources to tackle social exclusion or other problems are mainstreamed and/or tied to local outcome agreements. But while such steps are welcome, much remains to be done.

The Executive's recently published plan for tackling deprivation Better Communities in Scotland: Closing the Gap makes it clear that Ministers still believe there is a place for additional funding to 'top-up' mainstream funding. But it also stresses the importance of community planning and the joining-up of mainstream budgets to deliver better services in areas of deprivation to tackling social exclusion. Improved delivery of mainstream services can make a real difference to the lives of people living in deprived areas and better co-ordination of flexible 'mainstreamed' funding sources will go a long way towards bringing this about. We welcome this policy development and believe that incremental action to absorb ring-fenced funding into mainstream settlements should continue.

8.5 NEW OPPORTUNITIES - NEW APPROACHES: DELIVERING CHANGE

This report has highlighted a range of new opportunities facing our cities. If they are to fulfil their potential then central government, local authorities and regional agencies must also consider the most appropriate and effective way to deliver the required change.

The importance of delivering change (to both services and physical infrastructure) to the future of our cities has been demonstrated by previous sections of this report. The impact of, for example, good schools or public safety on the image of our cities as places to live, work and visit has been shown to be crucial to all sections of society. The Scottish Executive's drive to improve service delivery throughout Scotland will therefore be no less relevant in Scotland's city-regions than elsewhere.

At the same time our cities also face particular challenges in delivering physical change and regeneration. Chapter 3 has demonstrated the vital importance of our cities' contribution to Scotland's economy and the importance of delivering regeneration on brownfield sites for Scotland's economic, social and environmental sustainability. Meanwhile Chapters 4, 5 and 6 have emphasised the importance of the built environment and transport systems to the image of our cities and their future sustainability.

All of our city-regions must deliver major changes to services and their physical infrastructure if they are to realise their future potential.

• Glasgow must regenerate vacant and derelict land throughout the city and deliver family housing, jobs and business infrastructure if it is to maximise the potential contribution of its households and businesses to Scotland's economy and society.
• Edinburgh must deliver improvements to its transport system and secure new sites for both housing and business if it is to sustain recent growth.
• Aberdeen too faces problems of lack of space for business expansion/development and growing traffic congestion. It must secure improvements to its transport infrastructure and increase the availability of high quality business locations if it is to remain an internationally important centre for the energy industry.
• Dundee must build on recent improvements to its city centre, regenerate deteriorating residential neighbourhoods and provide better business facilities if it is to reduce population loss and maintain its viability.
• Inverness must re-invigorate its city centre and create new 'must-see' visitor attractions if it is to build on existing tourism and realise its ambition to become a major cultural capital for the Highlands.

Meeting these challenges will require strategic action on a number of issues across the city-region, which will in turn require substantial resources and co-ordinated action by a range of interests and agencies. Local authorities and other public sector bodies will need to work in partnership to identify and prioritise the projects central to the realisation of their vision for their city-region, and to commit financial and human resources to achieving change on the ground. This in turn will require a willingness to be flexible about the most effective way of delivering change.

8.5.1 New Approaches

Scottish cities are already experienced in delivering major development projects that require substantial physical change. Our cities can demonstrate many examples of innovative delivery and in many ways can be considered to have been in the vanguard of attempts to introduce innovative 'vehicles' for delivering change.

Despite many examples of effective delivery, however, the review has identified considerable frustration among many 'development' professionals at the sometimes significant delays that can hold-up or prevent the implementation of major projects. Those working in the field, in both the public and private sector, expressed frustration at the length of time taken to deliver some projects and identified a number of barriers to quicker, more effective delivery.

While Scotland can therefore point to a wide range of successful vehicles for delivering change, those involved in the review believe there to be scope for even greater experimentation, to learn from best practice, and to consider ways to break down barriers to effective delivery.

8.5.2 Defining Delivery - what, where and how?

When considering how to 'deliver' a desired change or outcome there are essentially three variables that the public sector has control over. These are:

Purpose - i.e. what change needs to be delivered? New/better services (e.g. a new school or better healthcare)? Physical infrastructure (e.g. housing or a new road)? Economic development (e.g. new jobs or more SMEs)? Or some combination of multiple objectives (e.g. the holistic regeneration of a particular community)?

Scale - i.e. for what geographical area is the change to be delivered? The city-region? A local authority? A 'community'? Or a particular brownfield site?

Type - i.e. how will the required physical or service change be brought about? Through the creation of a single purpose, arms'-length company? Through contracting with the private or voluntary sector? Or through a partnership approach?

Over time, successive governments have given greater emphasis to approaches that placed a particular emphasis on one or more of these variables when seeking to encourage the delivery of particular types of change. For instance, during the early 1980's there was a particular emphasis on encouraging vehicles with a single-purpose remit for delivering change in a particular field (for example, economic development, housing or physical regeneration). During certain periods a particular emphasis has been placed on delivering change at a particular scale within our cities (for example at the community scale through social inclusion partnerships). At various times throughout the last three decades distinct phases can also be identified where there was a particular 'vogue' for the use of certain types of vehicle (for example, an emphasis on the use of arms'-length companies in Edinburgh during the 1990's or for broadly based partnerships to deliver community regeneration in the latter part of the 1990's).

Approaches that focus on varying one dimension of delivery have achieved success to varying degrees, but in recent years increasing emphasis has been placed on identifying the most appropriate vehicle for delivering the desired change in the particular circumstances faced. Increasingly authorities and agencies have been encouraged to adopt an 'holistic' approach to delivery, to adopt a 'best value' approach and to rely on partnerships between public, private and voluntary sectors to bring about the desired change.

8.5.3 Delivering Change - the Scottish Experience

Scotland can point to an impressive record of delivering change within our cities for a variety of purposes, at a range of geographical scales, through a range of types of vehicle. This section sets out some of the historic and current approaches to delivery adopted in Scotland, which reflect a wide spectrum of approaches and have an impressive history of delivering regeneration.

Some of the types of 'vehicle' used to deliver change in our cities include:

Local Authority Companies - some authorities have experimented with the use of 'arms'-length' companies, in which the local authority holds a (usually majority) share. Companies receive an initial contribution from the local authority of funding and/or land and then enter into deals with private sector developers to deliver an agreed set of objectives. 'Arms length' companies can offer managerial focus and are often better placed to tap private sector skills, either directly or through partnerships. But they also raise issues of accountability and control. Examples in Scotland include the EDI Group and Stirling Ventures.

Joint Ventures - a large number of local authorities and public agencies throughout Scotland have entered into joint ventures - with each other or with the private sector - to deliver particular projects and objectives. Joint ventures rely on two agencies recognising the inter-dependence of their mutual aims and objectives and coming together to deliver the necessary change. Existing examples of joint ventures cover a range of activities and objectives and include the Dundee Medipark, Edinburgh Waterfront Limited and the Edinburgh International Conference Centre.

Strategic Partnerships - whereby a range of local partners (primarily, but by no means exclusively, public sector) identify the key developments required to bring about change in an area/community. The partners then agree between them to focus their respective efforts and pool resources to deliver an agreed action plan. Successful examples in Scotland include the Dundee Partnership and the Crown Street Regeneration Partnership in the Gorbals .

Area regeneration agencies - through which regeneration efforts across a range of topics (e.g. housing improvement, economic development, skills training) are co-ordinated and focused in the target area by one particular agency. Usually focused on areas of relative deprivation, sometimes through an existing agent (e.g. a housing association) regeneration efforts are not restricted to particular approaches or actions and often expand/change over time. Existing examples include the Queen's Cross Group in Glasgow and Castlemilk Economic Development Agency.

8.5.4 Learning from Best Practice

The above examples illustrate the impressive track record that Scotland's cities have of developing successful vehicles for delivering change. Different models and approaches have been employed to excellent effect in a range of locations for a range of purposes according to local circumstances. However, review consultees did question whether existing efforts to learn from experience and to exchange good practice were sufficient and whether we were always sufficiently flexible to adopt new ideas and approaches from elsewhere.

While the approaches adopted to date are not directly comparable with each other it is impossible to say whether one approach is 'better' than another. However, it is possible to draw a number of lessons from existing examples and to highlight a number of features which might be regarded as 'good practice' when designing new delivery vehicles.

The box below highlights 'good practice' features drawn from the examples considered in detail by the review team. The list is not meant to be comprehensive, nor does it seek to provide a definitive guide of the factors to be built into the design of new vehicles. Indeed the 'best' vehicle for delivering a particular development will vary with local circumstances and in some instances may not demonstrate some of the properties identified here.

Experience in Scotland therefore demonstrates that careful planning and consideration at the design stage are vital, that providing the vehicle with powers and a degree of autonomy that are fit for purpose is essential, and that there is no 'one size fits all' solution. The most appropriate design will depend entirely on the specific circumstances of the change required to be brought about - flexibility and a willingness to innovate are key.

It is important that the culture of innovation continues to be fostered and encouraged. A number of existing proposals - including the proposed duty of best value, the power of well-being for councils and the duties of community planning, along with amendments to the capital consents regime for local authorities - will go some way towards helping to cultivate new approaches and partnerships. Nevertheless, it remains vital that the Scottish Executive continues to free local authorities and public agencies to experiment with new approaches to delivery and that it provides incentives for them to do so.

The review process has also demonstrated that there is a wealth of experience in Scotland in delivering change effectively. Yet at present there is no mechanism for facilitating the exchange of practice between areas and agencies and, as a result, some areas or agencies may tend to become blinkered by following one particular approach. The review team therefore believes that there is a need to encourage a greater exchange of experience and good practice and to co-ordinate training for local authorities, agencies and communities in the design and use of vehicles for delivering change.

8.5.5 Learning from Experience from Outside Scotland

Despite its excellent track record in delivering change in innovative ways Scotland must not rest on its laurels. Some of those involved in the review suggested that Scotland may be losing the advantage that it had over the rest of the UK (and other countries) in delivering change in innovative, joined-up ways.

We must therefore ensure that we learn from effective new approaches from outwith Scotland. We must remain open and receptive to new ideas and must proactively seek to exchange information with our counterparts in the rest of the UK on what works and what doesn't. In particular we need to learn from the innovations adopted in England following the Urban Task Force.

8.5.6 Urban Regeneration Companies

Urban Regeneration Companies (URCs) are one concept proposed by the Urban Task Force ⁷⁹ in England, and which have since been introduced, which some development professionals have recommended as a possible model for adoption in Scotland.

The Urban Task Force in England recommended the creation of URCs because it was felt that existing regeneration models were failing to achieve results as effectively or as quickly as necessary and that therefore a new approach was needed. In particular the recommendation to create URCs reflected recognition of:

• the need for a strategic approach to area regeneration;
• the need to integrate economic, social and physical regeneration measures to achieve success; and
• the need to concentrate limited resources on priority areas.

Three pilot URCs - Liverpool Vision, Sheffield One and New East Manchester - were originally designated in 1999 and 2000, and the Urban White Paper of November 2000 ⁸⁰ announced that a further twelve would be established by 2003/04.

It is important to recognise that URCs are not formulated upon a fixed model - although most tend to operate as companies limited by guarantee and all share some common key features. These include:

• Operating within a defined area - the 'designated area';
• Operating as a partnership at 'arms'-length' from the partners - and in particular the local authority (each has three core partners - the local authority, the Regional Development Agency and English Partnerships);
• A board - usually comprising the public, private and community sectors, with both local and national private sector interests and elected members from the local authority;
• A dedicated Executive staff team - including both new appointees and secondees from the public and private sector.

A more detailed description of New East Manchester, one of the pilot URCs, is provided below.

URCs do not receive additional resources from central government, nor are they given additional powers. Instead they are reliant on the allocation of resources by their core partners and the use of the relevant powers of partners (for example the compulsory purchase powers of local authorities) where necessary.

The primary role of URCs is to provide strategic co-ordination to achieve the physical, social and economic regeneration of an area in a comprehensive way. As such, URCs are primarily charged with undertaking a baseline study for the area, creating a regeneration framework (or Masterplan) for the area and translating this into a forward strategy (or action plan). The way in which URCs add value to existing initiatives is by influencing and co-ordinating the activities of partners and others - in effect providing the strategic leadership necessary to permit areas to realise their development potential and to raise investor confidence to the point where physical regeneration becomes self-sustaining.

Research into the operation of the three pilot URCs, commissioned by the Department for Transport, Local Government and the Regions and published in July 2001, ⁸¹ found that they were making significant progress and that they offered significant potential for the improved focusing and co-ordination of physical and economic regeneration in specific areas.

The research identified a number of factors (shown in the Box below) that contribute to the success of the URC approach. However, the single most important success factor identified was the need to engender confidence in the private sector, by creating a favourable climate for investment through the perception of a well-managed area, the commitment of key decision takers, and significant public investment in early actions to establish the conditions for growth.

URCs have therefore made a promising start in re-invigorating regeneration efforts in their designated areas in England and could offer potential for doing the same in Scotland were we to choose to adopt the approach.

The URC approach offers little that is particularly new or unique in terms of a model. Indeed many of the success factors identified in the table can be demonstrated by a number of existing Scottish delivery vehicles. What the URC model does offer, however, is a renewed focus and dynamism for regeneration efforts, improved co-ordination of existing activities behind a comprehensive strategy and independence from local authorities and other public agencies.

The Cities Review team therefore believe that there is potential in introducing key elements of the URC approach to Scotland, to provide a new impetus for regeneration efforts in areas of our cities where existing initiatives are failing to deliver. In particular, we believe there to be benefit in the role that the designation of URCs by central government plays in identifying national priorities and signalling to the private sector the intention of public agencies to focus efforts and investment to drive forward regeneration in particular areas. But to be effective national priority status would need to be reflected across the range of central government funding programmes and in the developing national planning framework.

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