Cross-cutting Deprivation Inquiry
The third item on our agenda is consideration of a paper by our budget adviser, Arthur Midwinter. The paper is the start of our cross-cutting inquiry into deprivation. Members will recall that we agreed that Arthur Midwinter would write this initial paper and that we would then issue an open call for evidence, with people being asked to use the paper as a basis for their submissions. If members agree, we will issue that call for evidence within the next week or so, setting the end of August 2005 as the deadline for receipt of submissions.
Towards the end of June, the committee will want to review the submissions that we have already received, at which point we may begin to decide from whom we want to take oral evidence. I will therefore include in our call for evidence a suggestion that the earlier the submissions arrive, the better. We will be taking oral evidence in September.
Arthur Midwinter's paper is in two parts. For background, part 1 gives an overview of deprivation policy and strategy. Part 2 analyses current Executive spend on deprivation. I hope that our inquiry will concentrate our attention on that aspect.
I remind members that we agreed to commission research into the Executive's new multiple deprivation index and that we have appointed Professor Glen Bramley to carry out that research. I believe that he has already started work.
I will ask Arthur Midwinter to speak briefly to his paper, after which we can, if necessary, seek clarification on any points that arise. The paper is excellent.
Professor Arthur Midwinter (Adviser):
Thank you, convener. I will try to be brief, although the topic is complex.
The first part of the paper sets out the background to the development of a policy that has been around since the 1960s and has been continued and modified under Governments of different colours. As we heard this morning, the policy is now being reviewed again by the Executive.
One of my main concerns when considering the success of spending programmes is the lack of consistency in public discourse. As was said to the minister earlier this morning, differing definitions and concepts are used interchangeably. That is often confusing.
I have tried to focus on what was initially known as multiple or area deprivation. That was the approach taken to urban aid in the 1960s. It defined deprivation in terms of the spatial concentration of deprived households—households with poor housing, poor health, poor diet and so on. Spatial concentration means that such households are concentrated in small geographic communities.
At that time, the Scottish Office considered two alternative measures of deprivation—an area deprivation measure and a household deprivation measure. The latter referred to the people themselves. If a household scored on three or more indicators of deprivation, that household was regarded as being multiply deprived. The conclusion at the time was that we needed policies for areas and policies for people—although I cannot think of a single policy for people from that time. There was urban aid, but I cannot think of any particular programme that was targeted on deprived households—although Des McNulty looks as if he remembers one.
There are people-focused policies, but they are often from Westminster. One could argue that some employment policies are people based.
I was referring to people-focused policies that make particular use of the definition of a multiply deprived household. Such policies may be different from policies to do with poverty or unemployment.
From that period, a standard critique emerged in which area deprivation was identified as being only the worst manifestation of multiple deprivation; it was a simple critique in which most of the deprived households were ignored.
Post devolution, the position has moved on. We have talked before about absolute and relative poverty and it is fairly clear from the social justice statistics that considerable progress has been made with the definition of absolute poverty. Mr Swinburne will be pleased to hear that I will not use the words "relative poverty"; instead, I will use the word "inequality", which is what relative poverty really means. I have to say that progress on the issue is minimal.
About two years ago, the Executive refocused its approach and reintroduced a number of indicators under its closing the opportunity gap strategy. The focus of that strategy is all on what are now described as the worst 15 per cent of disadvantaged communities. Most of the closing the opportunity gap targets attempt to narrow the gap in those 15 per cent of areas. As a result, the Executive's policy on deprivation is now more clearly focused.
The funding strategy that resulted from that policy is based on the assumption that there is an additional need for expenditure in deprived areas, which the Executive describes as filling the gaps in its core programmes. The Executive has tried to do that in three ways, the first of which is targeting spending. I am referring to the kind of programmes that target 15 per cent of all areas—those are the sorts of programme that the committee discussed earlier this morning, the latest of which is the community regeneration fund. By targeting spending in that way, people know that the money will be spent on those areas.
The second and much less successful way is what I call bending spending. I remember Frank McAveety's successor as leader of Glasgow City Council arguing at great length about the need to bend the spend. Frankly, the sums of money that are being bent in the big health and local government programmes nowadays are small. The committee may want to look at that issue. If one were to take a strict definition of multiple deprivation, spend of that type on both those major spending programmes would amount to less than 1 per cent of a total that amounts to £20 billion. There are real difficulties in bending spending in the way that the Executive wants to do.
The third way is what I call supporting spending, which involves the programmes that benefit deprived households but which are not necessarily aimed solely at them. I am thinking of programmes such as the warm deal. The key assumption is that the allocation of additional resources to disadvantaged communities will help to close the opportunity gap in housing, health, education and so forth.
There are real problems in monitoring bending expenditure and supporting spend. As with the infrastructure investment plan, which the committee discussed with the minister this morning, the Executive continues to assert that it will give priority and allocate additional resources to disadvantaged communities. However, the way in which the information is provided does not allow people to see that that is what is happening.
It is easy to see what is happening with targeted funding, as one can see where the money is going. However, in most other areas of the spending review, it is difficult to see how the bending takes place. In relation to health and local government, that is partly because the money is not earmarked for those areas—for example, it goes to the local authorities and what happens to it depends on the local authorities. The paper also highlights the monitoring problems arising from the fact that the different Executive departments use different measures. That returns us to the point that was made earlier about the way in which departments adapt and use in-house measures.
The Health Department uses six indicators under closing the opportunity gap, another measure under Arbuthnott and a third deprivation measure in respect of the unmet needs pilots. That is three different measures in the Health Department alone. With the six closing the opportunity gap indicators, the department is measuring only the progress that is being made in the worst 15 per cent of areas. My reading of the strategy leads me to say that it is not comparing that progress to the change in the national average.
The lead area in relation to deprivation is communities. The Development Department is now using the new Scottish index of multiple deprivation as its measure of deprivation, whereas the Enterprise and Lifelong Learning Department is using unemployment rates and the Environment and Rural Affairs Department is using a measure that it calls rural disadvantage. Most other Executive programmes, including the finance and public service reform programme, have no area-based targets for the worst 15 per cent of areas. Tackling deprivation may be held up as a priority, but it is difficult to see what progress is being made on the ground.
The committee asked whether Glen Bramley could determine if the new index could be used in a way that would give the committee a strategic target that would allow it to see whether overall progress is being made. It should be possible to do that. The examples that the minister gave earlier in a response to a question from Frank McAveety were project-specific output measures. The Executive does not have a measure that allows it to say, "Overall, we have made progress."
As a result, the research that the committee wants to have undertaken and the evidence that members want to take needs to be absolutely precise in relation to the information that Executive departments are asked to produce. If the Executive does not give proper answers in its written evidence, we will need to pursue the issues in oral evidence-taking sessions. We will need to ask which programmes the Executive is using to target deprivation, how it allocates resources in order to ensure that they get through to disadvantaged communities and how it measures performance. Although, in theory, a set of documents exists that should allow us to do that, in practice, it is not possible to do so.
I have one final thing to say, which does not appear in the paper. I spoke to the Minister for Finance and Public Service Reform outside the committee room after his appearance before the committee. I understand that, following Labour group discussions, the Executive plans to bring forward its regeneration rehash—or "refresh", to use the language of "The Framework for Economic Development in Scotland"—in about six to eight weeks. The refreshed version of FEDS will be out before the committee begins to take evidence and we may want to think about what that means—if anything—in terms of the present exercise. In other words, the Executive may decide to change the definitions just when the committee is about to gather evidence on the subject. Perhaps the convener can shed some light on the matter.
I cannot, as the Labour group has not had discussions of that kind. Certainly, the committee will need to be clear about what the Executive means about some of its suggestions. Regeneration is a case in point: some people are saying that it means one thing and others that it means something else. It is difficult for the committee to assess the reality of the situation unless there is a shared understanding of the definitions.
I have three or four points to fling into the discussion, the first of which is how the Executive arrived at the 15 per cent target. An interesting set of issues is involved in the decision. I understand that, if the Executive had gone for 10 per cent, all the money would have gone to Glasgow. By settling on 15 per cent, the Executive has ended up with a Glasgow-plus target; if it had gone for 20 per cent, it would have ended up with yet another set of criteria.
One of the tasks that we should ask not you, Arthur, but Glen Bramley to undertake is a modelling process to see what would happen if a 10 per cent, 15 per cent or 20 per cent target were to be factored in. That would allow us to be clear about the nature of the choice that faces the Executive.
From memory, I recollect that the figures that were discussed in previous documents were 10 per cent or 20 per cent. I have no idea how the 15 per cent emerged, but Glen Bramley could look into the issue.
That leads to a related issue. My experience, which goes back a long time, tells me that the way in which areas are classified—or misclassified—can have a profound effect on their eligibility. Having represented an area that everybody agreed was misclassified under the Strathclyde system, I am anxious to ensure that the Executive uses a robust method of classification, if that is to be the basis on which funding is allowed.
There is also a mechanism for dealing with anomalies—or at least for dealing with the obvious ones. Linked to the issue of percentages is the issue of the size of the areas that the Executive is looking at. For example, if small postcode areas were to be used, a patchwork quilt of eligibility would result. It would not be obvious to somebody who was walking in one of those areas why street X was included and street Y was not. Perhaps there should be some kind of blurring of eligibility, yet the strict application of small postcode areas in the process does not allow for that.
A third issue that I want to—
It is the fourth issue.
Sorry. A fourth issue that I want us to consider is the efficiency or otherwise of the mechanisms for allocating funding. One issue that arose with urban aid and which has never really been dealt with subsequently is that funding is given for a relatively short period. People spend two years working out what funding they want and then spend it for two years, after which the money is removed or reallocated for some other purpose. There is no consistent application of resource to meet the need. That is not really an allocation issue; it is to do with inflexibilities in the system or method of allocation, which produce certain patterns in the use of resources.
That brings me to the sixth issue.
I am still on four.
Okay. The fifth issue is the lack of fit between eligibility for different kinds of support. For example, in education, resources are often distributed to schools in poor areas based on the number of children who qualify for free school meals, but area-based and unemployment-based systems are also used. That can produce a complex pattern in which the same school or area can qualify or not qualify, depending on the system that is used. That might not apply in some parts of Frank McAveety's constituency, but it applies in many other parts of Scotland. Given that people are not clear how the system works, we need to analyse how complicated it is and consider how we can simplify it.
The Education Department is in the "other" category of departments; although it talks about additional funding for deprivation as central to its strategy, it uses an authority-wide poverty measure.
The other issue that I want us to consider is that of identifiable funding for deprivation. Such funding goes through in different ways, but we need systematically to examine the funding allocation model for local government, to find out the extent to which the existing population-based model is justifiable, bearing in mind that many of the services that are linked to deprivation and poverty are supported through mainstream, not additional, funding. In other words, we should consider how the funding allocation model operates in the context of the wider issue of deprivation. That would perhaps widen out the issue quite a bit.
That is a huge piece of work.
If we are to move away from a strictly population-based model—I think that we should—the committee needs to have a sense of how far we can go in mapping out what needs to be included, perhaps by considering other existing models. We should certainly ask that question in our evidence gathering, because, if we do not do so, people will question whether we are tackling the core or fundamental issue.
Arthur Midwinter's paper is lucid, clear and to the point and should be required reading for all MSPs. Paragraph 24 is the only one on which I will take him to task—it takes a bit of believing that the proportion of low-income pensioners has fallen from 29 per cent to 8 per cent. In 1997, our good Chancellor of the Exchequer gave us a 75p increase in our pensioned income—I do not know how that relates to an improvement in low-income pensions. Could the figure for the reduction between 1997 and 2003 be broken down year by year?
From memory, I am fairly certain that we can do that. Those are the Executive's data, from the social justice milestones. The issue arises because Mr Swinburne is thinking about the general level of pensions, whereas the pensioners who are helped are those who apply for the benefit supplements that are available. Low-income pensioners are defined almost wholly as those who are dependent on additional benefit from the state, whereas somebody who is just above the benefit level—whom Mr Swinburne might regard as having a low income—is not a low-income pensioner under the Executive's definition. However, we can get the data for each year.
To be fair, I point out to John Swinburne that the chancellor was generous the following year.
I have two or three points that follow on from Des McNulty's comments. A fundamental issue for us to explore is that, when one drills down into grant-aided expenditure, one sees that it is driven by the historic record of where spend has been plus population. There is only ever a 1 per cent or 1.5 per cent shift. Exploring that issue would be a massive piece of work, but I know of no individual who is more capable of doing it than Arthur Midwinter is.
Did he buy you lunch last week?
Some folk have done work on the issue behind the scenes at various times in ministerial office. Although the debate will become complex, difficult and challenging, it would be helpful to explore the issue.
I am not too worried about whether, on the median levels, an inequality gap has been emerging, although I might have been obsessed with that issue when I was a bit younger; I am more interested in what is happening for the low-income pensioner or family. I would like to get a sense of the effect of strategic decisions by the Executive, local government and Westminster, which are interchangeable, in a sense. To give a perfect example, in the Gorbals in my constituency, money is available from the Department for Work and Pensions and Reed in Partnership to expand the availability of child care and to create five jobs, but it has been hard to get information on that into a paragraph in the local newsletter without breaking the Trade Descriptions Act 1968, because eligible people must live within postcodes X, Y and Z, depending on the criteria that the DWP uses. However, the money will, I hope, benefit the wider area. I would like to get a sense of how we are helping the most disadvantaged and poorest people in Scotland and whether we have a strategic grasp of the issue.
A third central issue that Des McNulty mentioned relates to the experience of the urban aid programmes over the years. In a sense, although we reinvent the language, 90 per cent of the objectives are similar—different trends or social change impact on the other 10 per cent. We need to get a sense of which areas are eligible. The issue is not just about resources—they are sometimes not that great, but, because the infrastructure of local government and other agencies kicks in when an area is eligible, that gives confidence to navigate the wider system. A number of members who represent disadvantaged communities—obviously, I include myself—are frustrated because, when areas miss out on structural support, people become disillusioned and think that they are not on the train. Those who have worked in local government know that it is easy to criticise the system, but the issue is how we change the culture.
My final point is about evidence sessions. The paper makes a passing reference to the social inclusion partnerships, but I have a partisan interest in that issue. I would like the committee to hear voices from some of the most challenging areas, in which I include the triangle that I talked about earlier with the Minister for Finance and Public Service Reform. All the deprivation indicators point to three or four local government wards, all of which are at the centre of my constituency. The real challenge is to shift and change the situation in the next five to 10 years. It might be useful to hear voices from individuals from those areas, or from people who are charged with responsibility in them. That would give us a greater sense of how the inquiry connects. We can do wee things such as give small allocations to SIPs or community regeneration projects, but the real test is whether the big spends have a coherent impact. The Executive's evidence this morning troubled me, because it did not really answer the questions of what the investment should be, how we should track it and how we can achieve outcomes that make a real difference. At the end of the day, we will all be held culpable for the outcomes.
I will let members comment before I invite Arthur Midwinter to respond.
The paper asks interesting questions about what poverty is, where it is found and what it really means. I was interested in the split between urban and rural poverty and in identifying what poverty is in a rural situation as distinct from an urban situation. I was particularly interested in paragraph 26. Perhaps I should know this, Arthur, but you refer to the difference between average incomes and median incomes and state:
"To be officially poor was to live on less than 60% of median income".
What do you mean by "income"? Are you talking about all the resources that go into a family—including social security and tax credits—added together?
I mean household income. The median means the mid-point of people's incomes, rather than the average income, because the average income is dragged up by the top earners.
That leads to a further question, although I am not sure whether it is proper to raise it in this discussion. When I have spoken to people in my constituency who took out student loans, I have been exercised by the fact that the requirement to pay back those loans means that it is not in their interest to get a job that pays more than a particular amount a year—they are better off being in a poverty trap. That is just one example of people who find it difficult to escape from poverty. However, that is a wide area and I do not know whether it is possible to address it in this context.
It is probably not within the committee's remit.
It is beyond the committee's remit. It also deals with reserved matters. I recognise why, in the short term, those people might adopt that position, although I cannot see staying poor for ever as a long-term strategy.
If we are to take an overview of deprivation, we need to identify where the gaps are. I would like to hear from grass-roots people who are working in deprived areas and who can tell us where the gaps are. In my area, there is a rural group working on that issue. I do not know whether similar bodies are working in urban areas—I am sure that they are. I would like to tap into their experience and take evidence from them.
We are not at the stage of deciding what evidence to take; we will take a view on it in June.
The paper is very good and gives us a clear basis on which to proceed. We should pursue it.
As requested.
Exactly.
To return to Ted Brocklebank's point, paragraph 26 says that median income is a better benchmark than average income. Surely—if I am mathematically competent—30 per cent of average income should be the same as 60 per cent of median income.
You are a better mathematician than I am.
I am just asking the question. Am I right or wrong, Arthur?
Median income is different from average income. I cannot see the connection in the way that you pose it.
Average income—
That is simple.
Median income is 60 per cent of—
Yes, but median income will be different from average income. It is definitely not the same thing. I will sit down with you outside the committee and take you through the issue. That is probably the best way of dealing with it.
The convener's first three points can all be competently dealt with by Glen Bramley in reviewing the index. We need to think about the convener's fourth and fifth points, on the efficiency of funding mechanisms, when we draft the letter calling for evidence.
I realise why Frank McAveety wants to do it, but examining the whole local government funding formula is a high price to pay for the loan of a book from him on the history of rock. I would not like it to be known that I was prepared to work for such fees.
We need to think about how we handle the issue in the context of the evidence. It is pretty clear from the current indicators that, on the narrow area measure, we are talking about just 0.6 per cent of the total. The matter has become even more complicated. Since we first spoke about it, I have had a look at the new version of GAE. A lot of the money is now just allocated and frozen around the share that it was in 2000. The Executive is not even using the population figure any more; it has just frozen the authorities' shares and in some cases there are no changes.
As I said, I think that the paper is very good. It does not propose calls for evidence; it focuses on the role of the Finance Committee and does not encourage us to trespass into what are properly policy areas. We learned a hard lesson from our economic growth inquiry, in which witnesses came and gave us their views of the world, which was deeply frustrating for committee members. If we rush to evidence taking in this inquiry, we will run the same risk.
I like the fact that the paper gives us a clear analysis of how different bits of the Executive take a totally different approach, both in percentage terms and on indicators. Let us get clarity on that matter and consider the policy issue that emerges around it. We might then want to talk to people on the ground. If we try to talk to people on the ground before it is clear to us what the Executive is trying to do in terms of coverage, we will give ourselves an awful lot more work and it will be less clear what we are trying to do. I am in favour of the approach that is outlined in the paper, which is to pursue the issues with the Executive and to report back before making calls for evidence from external parties. At that point, it will be a bit clearer to us where we want to drive the next stage to.
I agree with you, Wendy. If we start going round the country at this point, that will not be a good use of our time. The paper throws up a number of issues on which we need a clearer sense of the Executive's thinking. Some of those issues will be at least embarrassing to the Executive, if it wishes to be considered intellectually consistent.
We should argue that there are several issues around deprivation. Perhaps we could take evidence from some of the technical people at the appropriate point—the people who put forward the multiple deprivation index, the people who are responsible for its application or the people who are involved in looking at the Arbuthnott formula. That might be a good use of our committee time in the shorter term. We can then progress from there, as you say.
There is another important dimension. In our anxiety to track the way in which allocations are made and their consistency or otherwise, we should also be open to submissions from people who want to argue that things could be done in a different way with greater effectiveness. There are an awful lot of people out there who have an interest in the issue and who probably have an agenda; we need to take evidence from them, although in the careful way that has been suggested. We do not want to get tied up in policy issues; we want to hear how, practically, the funding could have come in a different way and how, if it was allocated differently, it could be made to work better. We also need to hear about the current problems with the funding formulae.
The big conceptual question that emerges from the paper is whether it is right, as a first principle, for different departments to have different criteria for allocating resources on the basis of deprivation. Is it right that the allocation in the enterprise and lifelong learning budget is 10 per cent? Is it right that the allocation in the communities budget is made using one formula whereas the allocation in the health budget is made using the Arbuthnott formula? Stage 1 of our inquiry should answer that question. We must interrogate whether it is right, in principle, for each department to use a different measure of deprivation.
When we have answered that question, it will be possible to move to the second stage, which will be to consider how things might be done better. That will involve getting the Executive to engage with the question whether it is right for each department to have a different formula for deprivation or whether we need, in principle, to move to a common measure of deprivation irrespective of department. That would set a different policy agenda for calls for evidence and, indeed, for what we will invite people to do. I would like us to try to reach a common view on that question. I do not have a completely fixed view. The question seems interesting but in some ways quite straightforward and I believe that we should try to answer it in the first stage of the review with technical officials and perhaps ultimately with ministers.
That is very academic. If you are poor, you know that you are poor. It is all right to talk about definitions and lay down certain criteria, but there are some things that one just cannot put down in black and white. Deprivation can be illustrated, but to define it as a common factor across various diverse areas is exceptionally difficult.
These are difficult issues, which have been wrestled with since the 1970s—to my certain knowledge—in considerable depth and detail. My point is that we need to focus on the consistency or otherwise of the allocation mechanism. I suggest that we seek written evidence from the Executive as planned and that early in June—we might need a couple of sessions—we assess what we have got from the process and decide at that point how to proceed. Arthur Midwinter has heard what we have to say.
There is an argument that, as well as considering the technical aspects, we should be interested in improved performance for the expenditure that is made. Where it is demonstrable that resource has produced outcome or that there are positive mechanisms as opposed to negative mechanisms for the allocation and co-ordination of money, we want to get at that as well. We seek not just a technical assessment of how the system works, but a focus on where it is working well and where it is not. I believe that that could be a useful debate for us and a productive route for our inquiry. I am still keen to do the work on GAE; in that context, we can discuss whether Arthur Midwinter goes beyond borrowing a book from Frank McAveety.
It is a fascinating read.
Seminal.
In the context of the Burt inquiry into the future of council tax and mechanisms for determining how council services should be paid for, a piece of work that examines the formula through which resources are disbursed, its appropriateness and its likely impacts will be an important contribution. Perhaps we need to think about that and consider what can be done. We will report back to the committee on how that work might be taken forward and whether it can be achieved. Is that agreeable?
Members indicated agreement.
I thank Arthur Midwinter for his paper. I ask members to agree that we make a call for evidence on the committee's website, giving a link to Arthur's paper. We will discuss the timing of that, work out what we need to get from the Executive and consider how we should collect evidence.