Scottish Local Government Finance 'Green Book' 2022-23

2 Changes Since the Last Settlement

2.1 Comparison to 2021-22 settlement

The needs-based indicators used in assessments have, where possible, been updated to use the most up-to-date data available, though a few elements are fixed, for example, with 2011 population census data, and in some areas Covid restrictions have affected data availability.

Since several GAE lines have merged, either with other GAE lines or with FRFGs or redeterminations, individual totals have not remained at the same levels as the 2021-22 settlement. This means that a simple comparison of GAEs relative to 2021-22 is not suitable. The total amount distributed on GAE formulae has increased by over £950 million, sometimes with an equivalent reduction in the amount of FRFGs and redeterminations, though there have also been various increases to GAEs and redeterminations.

2.2 Data issues

The Data Issues Working Group (DIWG) is the technical advisory group, comprising of representatives of the Scottish Government and local government (including COSLA), which exists to assist the analytical work undertaken in support of the allocation calculations. The work programme of the DIWG is directed by the Settlement and Distribution Group (SDG), which was established to oversee all matters relating to the local government finance settlement. Data issues dealt with through the DIWG, and agreed by the SDG, since the last settlement are listed below.

Dual Indicator Review 2021

The Dual Indicator Review is undertaken for two reasons. The first is to establish whether or not pairs of indicators currently used in the settlement calculations, and determined mathematically, continue to be valid by displaying a statistically significant relationship with past expenditure. The second is to produce updated regression coefficients – the measure of the relationship between expenditure and the indicators – for use in the next Settlement. The coefficients determine the amount of funding distributed on each indicator.

Of the eight GAE lines distributed by this methodology in the previous settlement, all returned significant values to confirm that the expected relationships still exist.

SINA methodology

As stated in section 2.2 of last year’s report, the method of calculation of the quantum for SINA had been questioned and so was reviewed during 2021. The working group set up to consider the methodology found that SINA had not kept in line with increases in Scottish Government funding, due to the quantum being based on GAE, which had been fixed since 2008. Increases in funding since 2008 had been through redeterminations, and these should also take into account the additional cost of providing services on islands. It was therefore agreed that all funding lines (GAE, FRFGs and redeterminations) should attract SINA.

However, it was also noted that some funding formulae already take account of SINA, and so it was agreed that each line should be considered individually to determine whether SINA should be applied. Formulae that included island populations, or had particularly large rurality weightings driven by island needs, and distributions based on actuals were to be excluded, as were those funded by specific grants.

Changes column

It was agreed that as the changes column represents increases in support across all services, that it should be distributed in proportion not only to funding classified as GAE + SINA, as in the past, but should also include FRFGs and redeterminations, i.e. on all previous funding lines, but not including new funding lines in the current settlement.

Early Learning and Childcare (ELC)

Following the ending of the previous multi-year settlement for ELC funding, the previous eight separate funding lines (four GAE lines, one FRFG, and three redeterminations) were merged into one formula. The new distribution is based 75 per cent on client numbers, 20 per cent on deprivation indicators, and five per cent on rurality, with the indicators combining data on resident population and centre-based numbers. While the full methodology was designed to use data from the new individual-level pre-school census, a delay in that caused by the Covid pandemic meant that this year a simplified authority-level approximation has been necessary. The new methodology is to be transitioned over three years to dampen the effect of the changes.

Ferries, Harbours, and Air Travel

Following a delay to their review in previous years, seven funding lines related to ferries, harbours and air travel were reviewed, and merged into three lines.

Island populations

Two funding lines, namely Secondary Teaching Staff GAE and Miscellaneous Services GAE, used island populations that only included the relevant populations of the three island authorities, excluding the three mainland authorities who have island populations. This was corrected, with a small adjustment made to the indicator weightings.

Data sources

Several datasets used in funding formulae were unavailable or considered unsuitable due to the effect of the Covid pandemic, and so the previous year’s data were rolled forward. The main dataset affected were as follows:

• Population Survey data. three sets of data, adults on low earnings, disable population, and adults with below SVQ2 education.
• School meals data, particularly school meals taken in secondary
• Tourism data used in adjusted populations
• Expenditure data for 2020-21, particularly on museums and art galleries.

Some doubts existed about the suitability of using the following, and so these were also not used

• Homelessness applications, though these were used in two of the four funding lines
• Elderly mortality rates
• Recorded crime
• Building warrants

Supplementary Table 9 gives a list of the changes to formulae and methodology made during 2021.

2.3 Local Authority naming convention

Please note that City of Edinburgh and Na h-Eileanan Siar have been placed in their alphabetical order, which differs from the order used in the Finance Circular.

2.4 Capital Allocations

In order to give a fuller coverage of allocations to Local Authorities we have again also included the Capital Grant Allocations.