Scotland, UK, Barnett Formula, expenditure, public spending, Scottish Executive, Scottish Budget, population, Treasury, spending, English regions, England, GAE, capital expenditure, government expenditure, police budgets, Arthur Midwinter, Grant Aided Expenditure, England and Wales, London, police salaries, expenditure estimates, Independent Police Complaints Commission, Scottish Police, Revenue Support Grant and Police Capital Grant, The Treasury, Scottish devolution, Scottish Police Federation, the Scottish Parliament, Police Complaints Authority, public expenditure, Police capital, Special Grants, Scottish economy, Police Capital Grants
POLICE FUNDING IN SCOTLAND; A REVIEW OF TRENDS IN THE POST-DEVOLUTION PERIOD PROFESSOR ARTHUR MIDWINTER REPORT PREPARED FOR THE SCOTTISH POLICE FEDERATION EXECUTIVE SUMMARY 1. This report reviews trends in police funding in Scotland in the post-devolution period. 2. It shows that the Barnett Formula had no direct impact on police funding, as it operates in the form of an unhypothecated block grant which the Executive can allocate according to its priorities. Within the block, Scotland receives full comparability with police spending changes in England. 3. The report also shows that public spending in the Scottish Budget grew by 5.6% per annum in this period, and that Scotland's share of the UK budget remained stable. 4. However, the research also shows that police spending per capita is the lowest of all four nations of the UK with England spending 20% more, and Wales 13% more. This is inconsistent with other major Public Services
for which Scottish spending is significantly higher, reflecting higher needs and higher unit costs
in rural Scotland. 5. This results in Scotland having very low levels of spending on support staff costs, running costs and capital expenditure. 6. The report also shows that police funding has been growing by 2.2% less per annum than the Scottish Budget, and the police share of the Budget has fallen consistently since devolution. 7. By contrast, police funding in Local Authority
budgets has grown in line with other local services. 8. In conclusion, expenditure on policing is the lowest in the UK. This has not arisen because of the financial framework for devolution, but because policing has been a low budget priority for the Scottish Executive since 1999, and because of the low baseline expenditure inherited from the pre-devolution system.
TABLE OF CONTENTS 1. Introduction ------------------------------------------- Paragraphs 1- 3 2. The Public Spending Framework ----------------- Paragraphs 4-32 3. Police Expenditure across the UK ---------------- Paragraphs 33-57 4. Police Funding in Scotland ------------------------- Paragraphs 58-65 5. Conclusions ------------------------------------------- Paragraphs 66-74  INTRODUCTION 1. This report provides an independent analysis of police funding in Scotland in the postdevolution period. It has been prepared for the Scottish Police Federation, who asked me to assess the impact of the Barnett Formula on police expenditure; and to compare police funding levels with other Police Service
s in the UK, and other major public services in Scotland. 2. The Barnett Formula is much misunderstood, and subject to persistent misinterpretation and misrepresentation. Yet it is only a minor element of the financial arrangements for Scottish devolution, which applies only to annual changes in expenditure (normally increases), and it operates on a simple, objective basis. This report begins by setting out the role of the Barnett Formula in the public spending framework. 3. The report then analyses trends in police funding on two levels across the United Kingdom
- and within Scotland. This permits a comprehensive mapping of budgetary allocations to the Scottish Police Service.  THE PUBLIC SPENDING FRAMEWORK 4. Public finance in the UK operates on two key principles regarding expenditure and taxation. Firstly, resource allocation is based on relative need, with the objective of funding broadly similar standards of public services across the UK. Responsibility for resource allocation across the UK including funding for Whitehall departments and devolved administrations lies with the UK Treasury. 5. Whilst expenditure need is often expressed through a needs assessment formula, it can also be determined on a simple judgemental basis. In Scotland's case, this has been operationalised in practice by using English spending levels as a benchmark, and then considering additional Scottish needs.
6. The Treasury's Needs Assessment Study of 1979 (1), concluded that the task involves complex and politically sensitive judgements, and no neat formula could be devised for distributing resources between the four nations of the UK. The key points were that:- · in no service was it possible to express the main policies in terms of the achievement of clearly defined standards; · provision according to needs does not mean that identical provision is made in all areas; · not all factors taken into account were quantifiable; · it is not therefore reasonable to construct a single coherent model of policies, standards and levels of service to which could be related all the objective information needed to determine relative expenditure needs; · the results were by no means final; and · the departments who have carried out the study agree that the methods of assessment are a long way from providing a wholly definitive means of expressing the relative expenditure needs of the four countries. 7. In short, whilst needs-based allocations can draw considerably on objective data to inform the decision-making process, the art of needs assessment remains imperfect, and decisions in the final analysis reflect political judgement, and resource allocation formulae where applied rest on their political acceptability (2). 8. In practice, British Governments have consistently accepted that the three Celtic nations have above-average expenditure needs. For most of the last century, Scotland's allocations have been determined through a population-based formula. The Goschen Formula applied from 1880 to 1959. For the next twenty years, Scottish spending was agreed through bilateral negotiations with the Treasury, in common with Whitehall departments. Since 1979, it has been determined through the Barnett Formula in which expenditure changes to current baseline reflect population shares. 9. This approach removed the need for annual negotiations with the Treasury over small amounts of public money in the UK context, giving the former Secretary of State for Scotland freedom to determine the spending mix between departments, as he was not bound to replicate Whitehall's spending decisions on which the total was determined. This arrangement was continued after devolution. 10. The second core principle is that overall taxation is broadly progressive, reflecting abilityto-pay. All national taxation is taken into the Treasury, and within a uniform system, there is no specific link between spending and taxation on a territorial basis. Put simply, Scottish expenditure reflects political decisions on spending, and is unrelated to the tax revenues
raised in Scotland. Official estimates regularly show public spending in Scotland exceeds the revenues raised, described in the GERS report as a fiscal deficit. It is not the result of economic mismanagement, but reflects the fiscal and budgetary policies of the UK government. In short, public spending decisions are funded on a UK
basis, and reflect judgements over relative need, not revenues raised. Fiscal deficits are not a problem within the UK, and nine of the twelve regions have such deficits. 11. After the 1997 General Election, the New Labour Government adopted a revised fiscal framework to strengthen control of public spending, and public borrowing in particular. On the expenditure side, it was keen to improve financial planning and performance reporting through an objectives and targets approach focussed on expenditure outcomes. (In practice, linking resources to results remains problematic.) 12. Labour introduced multi-year budget plans which operate on a three-year planning cycle. Allocations are fixed for years 1 and 2, and indicative for year 3, which is revisited and becomes year 1 of the next cycle. The process is known as the Spending Review. Labour cancelled the 2006 Spending Review and delayed the 2007 announcement until the Autumn. SR2007 will cover fiscal years 2008-9; 2009-10; and 2010-11. Spending is planned and controlled at the UK level, and on the devolved administrations for Scotland, Wales and Northern Ireland
. 13. Within the public spending framework, spending programmes fall into two categories the Departmental Expenditure Limit (DEL) which covers expenditure deemed to be controllable, and Annually Managed Expenditure (AME) which covers those elements of expenditure which are not readily predictable. In the main, this paper is concerned with the DEL, which is further subdivided into Resource and Capital budgets. This division was introduced to remove the bias against investment in the previous regime (3). 14. Further, budgets are now planned and controlled through a Resource Accounting and Budgeting (RAB) system, a radical departure from the cash-based system applied since the early 1980s. RAB requires a more robust and systematic approach to asset management
, in an accounting format which takes account of non-cash economic costs such as annual depreciation and capital charges. It was assumed that this would enhance decision-making by programme managers. 15. There is also now an End-Year Flexibility (EYF) arrangement which allows the Executive to carry forward unused resources from one year to the next, thus eliminating the need for short-term bursts of "quickspend" as the budget year ends to avoid losing unspent monies to the Treasury. Further, to protect capital investment, money cannot be transferred from capital budgets to resource budgets. Capital budgets traditionally have higher levels of spending slippage, and have lost out in the past through being transferred to meet current costs. 16. The Scottish Budget totals are planned within the UK public expenditure
targets, and controlled by the Treasury as part of its macroeconomic management function. In aggregate terms, it is known as Total Managed Expenditure, or TME. Within TME, the DEL accounts for around 86% of the budget, and it is the DEL which is determined through the Barnett Formula. 17. The arrangements for planning and controlling devolved expenditure are set out in a Treasury document, the Statement of Funding Policy, which is revised for each Spending Review cycle. The Barnett Formula was first used in the 1978 Public Expenditure Survey, and was retained for devolution on the grounds that it has produced fair settlements for Scotland in annual public expenditure rounds.
18. The Barnett Formula determines changes to the Scottish DEL, not the total allocation, which is mainly based on the historic baseline. Scotland receives a population-based proportion of changes in planned spending on comparable services in England (or on occasion, England and Wales). 19. There are three factors which effect the changes to the Scottish DEL in a Spending Review. These are:- · The quantity of change in planned spending in UK departments; · The extent to which the relevant UK programme is comparable with the services carried out by each devolved administration; · Scotland's relevant population share. 20. The calculation is made by multiplying these three factors together. The sum of such changes represents the aggregate net change to the Assigned Budget element of the DEL, but it is for the Scottish Parliament to allocate spending within these budgets according to its priorities. 21. AME refers to those programmes of expenditure which are difficult to forecast accurately, and therefore dealt with outside the block, and not subject to EYF. Increases in costs will normally be met by the Treasury, underspending remains with the Treasury, and increases in AME which result from decisions taken by the Executive must be met from within the Scottish Budget. Local Authority Self-Financed Expenditure (LASFE) is classified as AME, as it is not under Executive control. 22. For Treasury control purposes, police expenditure is classified as part of the public safety
programme, and all budgets are fully comparable (i.e. 100% comparability) for Barnett consequentials (i.e. resources flowing through Barnett based on UK spending decisions). The relevant budgets are: Police Grant; Police Special Grants; Police Capital Grants; Organised and International Crime; Police Complaints Authority; Police Information Technology Organisation; Central Police Training and development
Agency; National Criminal Intelligence Service; National Crime Squad; Organised Crime (Drugs); Crime Reduction; Security Industry Authority; and the Independent Police Complaints Commission. 23. One of the political consequences of devolution has been concern at Westminster that the Barnett Formula is now over-providing Scottish funding levels relating to need, given the improvement in the Scottish economy in recent years. There are intermittent calls for a new needs assessment study, and the devolution legislation, which was endorsed in a referendum, makes it clear that any change to the financial arrangements would only be made following such a study. 24. The Treasury study referred to earlier concluded that Scottish expenditure was 7% above estimated need, but as the assessment was less than robust, the differentials could be entrenched in a population-based formula. 26. It has been argued that in the long term Barnett will result in convergence of Scottish per capita spending with the UK average. This is because the Scottish baseline expenditure in
1978 was 22% above the UK average, but the increment of growth is based on equal amounts of spending per capita, and this will slowly erode the advantage. 27. In practice, however, the differential has been maintained because Scotland's falling share of the UK population has helped offset the convergence effect. Further, Barnett does not apply to supplementary allocations (known as In-Year Allocations); nor to interdepartmental transfers, which normally increase Scottish funding levels. Spending on Barnett related services has fluctuated between 21% and 27% above the UK average since then, and around 23-24% above since devolution (4). 28. Whilst the Scottish DEL has received lower percentage increases under Labour's Spending Reviews, in per capita terms, the differential has remained stable. So too has expenditure outwith the Formula. For the past decade, Scotland has received around 10% of Identifiable Public Expenditure, with around 8.5% of the UK population, delivering spending levels of 18% above the UK average over that period. Barnett protects the baseline as is the norm in UK expenditure planning and as an incremental method for adjusting spending at the margins, has delivered stability in allocations. 29. Many criticisms of the Barnett Formula are made from a particular territorial perspective, and are based on the dubious assumption that "their area" would undoubtedly benefit from replacing Barnett with a needs-based formula (5). Such an assumption is guesswork. Indeed, Scotland continues to score highly on relevant need indicators, such as poverty, sparsity and ill-health. Needs assessment is not rocket science. 30. Neither Labour nor the Conservatives are committed to a review at UK level, and only the LibDems favour a needs assessment model, but as part of a federal structure. It is well recognised in the Treasury that any excess spending over needs involves small amounts of money in UK terms, making the political merit of such a review dubious. 31. My advice to the Federation would be to assume that the Barnett Formula will continue in the short term, and at least throughout the next Spending Review cycle, but probably much longer. Any replacement approach would require an extensive review and consultation process, with stability factors built into allocations to avoid major disruption. For the present purposes, however, it is clear that Barnett has no direct effect on police expenditure in Scotland as it determines the total allocation, not the mix. Nor has it had any adverse indirect effect, as Scotland's share of public spending has remained stable. 32. Police expenditure levels are the results of decisions taken by the Scottish Executive and police authorities. Executive support for police expenditure is provided through Police Grant, Revenue Support Grant and Police Capital Grant. local authorities
also finance police expenditure through local taxation. The first two grants are for the core police service running costs, over which local authorities have some discretion, and make a financial contribution, and both are within Aggregate external finance
(AEF) in the local government
settlement. Police capital grant finances all of police capital expenditure, and is referred to as being outwith AEF. 33. There are, however, differences in the control systems within the UK. Whilst police is a devolved function in Scotland, it is a reserved function in Wales and Northern Ireland. Moreover, spending on police (and other public protection functions) has been significantly higher in Northern Ireland for many years because of the security situation there. Much of the subsequent analysis excludes Northern Ireland as appropriate.
 Police Expenditure across the UK 34. I noted earlier that British Governments have consistently allocated higher per capita public expenditure to Scotland than the UK average. This has been recorded in Treasury statistics through the Annual Financial Returns. Practice is to provide an expenditure index, using the UK figure for spending per capita as the average scoring 100. Indices above 100 therefore indicate above average expenditure, e.g. 114 is equivalent to 14% above average. 35. The approach used for the official statistics is to classify expenditure on the basis of who benefits from it. Spending on domestic public services such as health or education is treated as benefiting residents of Scotland, whilst spending on defence or foreign affairs is deemed to benefit all residents of the UK, and classified as "non-identifiable" on a regional basis. Clearly, such a division cannot be exact as, for example, university expenditure in Scotland can benefit students from elsewhere in the UK. Police spending is classified as identifiable. 36. Comparisons of the official estimates confirm Scotland's spending advantage. These have been reported in the Treasury's Public Expenditure Statistical Analyses (PESA) since 1973. Scotland's per capita index relative to the UK averaged 121 from then until 1990, from an initial score of 118. This growth resulted from a period of severe economic recession and manufacturing decline in Scotland, with Scottish economic output and household income
s well below the UK average, and GDP per capita
reaching a low point of 88 in 1988. Scotland's high levels of public expenditure are therefore well established (6). 37. Since 1990, however, the index has averaged 118, and 117 in the most recent PESA for 2006-7. This reflects the narrowing of the differentials in economic performance relative to the UK over the past decade. PESA also provides an expenditure index for the main programmes of government. Police spending falls within the Public Order and Safety programme, which also includes justice and prisons expenditure. Scotland's relative expenditure index varies between 89 for Public Order and Safety to 229 for Employment Spending. Public Order and Safety fares poorly relative to all other major public services in Scotland (see Table 1). The Public Order and Safety programme scores 89, some 11% below the UK average and 28% below the Scottish average. 38. Moreover, this relatively low index is long standing. In 1990-1, the Public Order and Safety Index was 106, compared with the Scottish average index of 119. In 2000, the Public Order and Safety Index was 104, compared with the Scottish average index of 118. This is not surprising given the incremental approach to public spending which protects baselines, and therefore changes occur very slowly. Indeed, in 1976-7, its predecessor, the Law, Order and Protective Services Programme, stood at 93 (HM Treasury 1979). Thereafter it fluctuated from 106 in 1990-1, down to 97 by 1997-8, then increasing again slightly. But within a range of 93 to 106, it is clearly well below the average expenditure index relative to the UK. This has therefore been a long-term funding position. 39. It also compares poorly with most programmes. In the most recent estimates, it scores 82, compared with 109 for education; 112 for health; 166 for housing; and 138 for roads. These results are set out in full in Table 1, which shows that Public Order and Safety spending is consistently lower than all four of these programmes.
40. These recent results, however, have been effected by the increasing sophistication in the definition and classification of programme expenditure, and improved data following the McLean Report on spending in the English regions (7). The result has been a "broadening of the coverage of identifiable expenditure in England and Wales in particular, so that almost all spending by Whitehall departments is treated as identifiable where there is equivalent spending by a devolved administration" (8). 41. This had a marked effect on relativities in the Public Order and Safety Programme, which has risen for England and Wales relative to spending for Scotland and Northern Ireland, suggesting the gap was greater than estimates showed in the past. 42. A further important change was the introduction in the post-devolution period of spending estimates for the nine English regions, and further disaggregation of the programme data on a functional basis. This provides police expenditure on a country basis from 2001-2 (see Table 2). 43. The data has been recalculated into a per capita and index basis (Table 3). This shows that police expenditure in Scotland is the lowest of all four nations of the UK, ranging between 75% and 83% of the UK average. Strict comparisons with England because of the high additional costs of policing London and Northern Ireland - are problematic, but the low level of spending relative to Wales is puzzling. Whilst no directly comparable regional statistics are available, CIPFA estimates show that London, with 15% of the population, is responsible for 20% of police expenditure in England (9). That is, spending per capita in London is around 33% above the English average. We can provide a reasonable comparison of spending between Scotland and England by excluding London from the calculation on this basis. This reduces police spending in England from Ј255 to Ј240 per capita, still higher than the Scottish figure of Ј213. 44. The CIPFA statistics referred to allow us to examine the consequences of the Scottish differential. These differ from the PESA statistics referred to above as they include spending funded by reserves, but the broad pattern is similar based on the net expenditure estimates only. The most recent complete data set is for 2006-7. 45. This shows Scotland incurring an above average share on police salaries at 10%, but lower shares of running costs (6.5%) and capital expenditure (6.5%) (see Table 8). In addition, although this will vary from year to year, Scotland records 14.9% of pensions expenditure, and negligible spending on police community support officers expenditure (0.7%). 46. These results are consistent with those highlighted earlier for the Public Order and Safety Programme. PESA also disaggregates English spending data onto a regional basis, which shows that higher Public Order and Safety spending as a whole is inflated by the higher spending in London (158), but that spending in Scotland is also lower than North East England (113), North West England (109) and Yorkshire and Humberside (91), as well as Wales (105). By contrast, Scotland spends more than these English regions on transport, housing, health and education. 47. This raises the question as to whether Scotland's lower spending reflects lower need for policing. The only UK-wide comparative assessment of expenditure need was carried out by the Treasury in 1979, as part of the preparations for devolution. At that time, police expenditure was excluded from that study, as it was not to be a devolved function.
48. Logically, however, there ought to be an overlap between the pressures which drive spending on other aspects of the Public Order and Safety programme namely justice (courts, legal aid, criminal injuries and compensation), and treatment of offenders (prisons and probation service). This study identified population, crime and poverty as the key factors influencing spending, and assessed Scotland's expenditure need at 5% above average. 49. A more recent exercise in police needs assessment is the report on police Grant Aided Expenditure (GAE) assessments published in 2004. This study reached findings which are broadly consistent with the Treasury study. It identified a range of objective drivers of police expenditure across four components of police workload - crime, community safety, traffic and public order - and it tested these factors via regression analysis for statistical relationships with crime rates, accident rates, etc. 50. This report concluded that the principal factor determining financial allocations should be population, with additional weightings for secondary factors which add to policing costs. The report further established a correlation between deprivation as measured by benefit recipients and crime rates, and high urbanisation. Deprivation factors were weighted at 0.75, and urbanisation at 0.50. 51. The model therefore is based on empirical observation
s and plausible assumptions, that:- · population, deprivation, and urbanisation are fair indicators of the numbers of crimes likely to be committed in any area; · levels of crime are a fair proxy for police workload; and · police workload is a fair proxy for costs. 52. Similar assumptions and arguments were made for the traffic comparisons, which demonstrated a weak correlation between accident rates and population sparsity. The other two components were determined judgementally. 53. This model captures most of the key drivers of police expenditure in terms of expenditure need. My own view would be that it understates the impact of sparsity on police costs, as policing crime levels in a concentrated urban context will be less costly than policing similar crime levels in a rural context, because of the impact of distance in attending to, and dealing with, incidents in remote rural communities. Such cases are reflected in higher costs of provision through small schools in education, small GP practices, and longer hospital stays in health; or elongated roads networks per head of population in transport. Logically, I would expect more policemen per head of population to be needed to police a remote rural population than a city housing estate of similar size, and such rural costs are important drivers across Scotland as a whole. 54. Sparsity of population is a well established factor driving costs of delivery, and provision is made for such costs in local government, health service and further education resource allocation formulae in Scotland. It requires higher manpower levels and higher transport costs in policing. As the most recent Executive report on Government Expenditure and Revenue in Scotland (GERS) observed, Scotland is "the most sparsely populated area in the UK, and lower population density raises costs".
55. Whilst Scotland's economic performance has improved relative to the UK average in the past decade, it still records relatively high levels of poverty and deprivation compared with the rest of Great Britain. The most recent Regional Trends data records Scotland as having unemployment rates
some 25% above the UK average; and benefit recipient rates some 25-27% above average; road mileage networks some 54% greater than average; and sparsity levels four times the UK average. Unfortunately, differences in legal systems, recording practices and classifications means that recorded crime figures for Scotland are not comparable to those for England and Wales, but Regional Trends does publish comparable data for offences committed against households, and Scotland reports a higher rate of offences per 10,000 households at 3,309, compared with 3,001 for England, and 2,608 for Wales. 56. Whilst such factors would probably be weighted at less than 1.0 in terms of needs assessment, they still suggest that Scotland has higher expenditure needs than England or Wales, yet spending on policing is lower in per capita terms than in both, even after allowing for a London effect.  Police Funding in Scotland 57. The Scottish Executive provides funding for policing through Police Grant and Police Capital Grant, within the AEF allocations for local authorities. Police grant is paid at a rate of 51% of eligible expenditure within the GAE provision for police. It also funds common police services directly through its Police central government
Programme. 58. GAE is the amount the Executive believes a police authority requires to spend to provide a standard service efficiently. The statistical data shows that police GAE has grown significantly in real terms, from Ј910m to Ј1071m, an increase of 17.7% at 2006-7 prices, but less than the 28.2% increase for the Scottish Budget overall. Police grant has grown broadly in line, at 17.8% (Draft Budget 2007-8). 59. Table 6 shows that the police share of GAE has remained broadly stable at around 11.8%, fluctuating slightly from year to year. GAE is funded by Police Grant, Revenue Support Grant and Council Tax, with any spending above GAE wholly financed by local taxation (see Table 4). Table 5, however, shows that police GAE as a percentage of the Scottish Departmental Expenditure Limit (the block allocation) has fallen consistently each year, from 4.61% in 2002-3 to 4.11% in 2007-8, equivalent to around Ј134m of funding. 60. When all the components of police funding are added together, Table 4 shows that spending grew by 16.8% compared with the 28.2% growth in TME. That is, by 3.4% per annum for policing, compared with 5.6% for all services. The clear conclusion is, therefore, that whilst police funding has grown in real terms since devolution, it has done so at a much slower rate than other Executive programmes, and its share of the Departmental Expenditure Limit has fallen as a result. In short, despite the rhetoric of tackling crime in Executive policy, policing has been a low priority in terms of the public finances. 61. Police Authorities and Joint Police Boards are requisitioning bodies, with the precepts levied on the constituent authorities. Police GAEs are disaggregated and allocated to the constituent authorities for expenditure control purposes. In 2002-3 and 2003-4 police
authorities set budgets equivalent to the police GAE total for Scotland. Since then, they have set budgets slightly above GAE, e.g. by Ј1 million over a total of Ј1045m in 2006-7. 62. In the previous section, the evidence showed that policing had been a low priority in budget-making for the Scottish Executive, even though reducing crime was one of its key priorities in Spending Review 2002 (9). Local authorities operate classic incremental budgetary systems operating through marginal adjustments to the current baseline. 63. Table 7 shows clearly that, as for GAE, police funding has remained broadly stable over the five year period, with slight annual fluctuations. The police share fell slightly in 2003-4, then increased marginally for each of the next three years. In short, police funding was treated similarly to other local services, in contrast with its low priority in the Executive Budget. 64. As with Executive funding, police budgets have been growing in real terms, in line with increases in local government expenditure, but at a slower rate than funding for the Executive's own departmental programmes.  Conclusions 65. The first part of my remit is to examine the impact of the Barnett Formula on police expenditure in Scotland. The research undertaken shows clearly that the Scottish block allocation is based on full comparability with police expenditure in England, and this is reflected through the operation of the Barnett Formula. 66. My judgement is that the Formula itself has had no adverse effect on police funding in Scotland as the Barnett related increases for all comparable spending in England is used to build up an aggregate total which is available to the Scottish Executive as a block grant which it can allocate according to its own priorities. There is therefore no direct link between the Formula and police funding in Scotland. 67. However, it could have been adversely affected if Scottish public spending as a whole had been reduced as a result of the Formula. This did not occur, as public spending grew in real terms by 5.6% per annum over the period, whilst Scotland's share of the UK Budget remained broadly stable. 68. The second part of my remit is to undertake comparative analysis of police spending in Scotland relative to police spending in the rest of the UK; and to other major public services in Scotland. The research reveals that police expenditure per capita is significantly lower than in England, which is almost 20% higher than in Scotland, or 13% if London is excluded; and also than Wales, which is 12% above Scotland. Northern Ireland spends 122% more than Scotland because of the security problems there. But overall, police expenditure in the UK is 21% higher than in Scotland. 69. This is a significant difference from the conventional pattern, as for all other major public services, Scottish spending levels are well above the UK average. 70. This higher spending is a reflection of Scotland's higher levels of social need, reflected in measures of poverty, deprivation and poor health, and through higher unit costs associated with service provision in rural Scotland. The report shows that these need factors also
drive police expenditure, which makes Scotland's low level of funding a puzzling anomaly.
71. Analysis of the Scottish Budget shows that one reason for the funding gap is the consistently low priority given to police funding since devolution. Whilst the Scottish Budget has been growing by 5.6% per annum in real terms, the police budget has only been growing by 3.4% over the same period.
72. This is the direct result of Executive decisions, rather than Whitehall or local government. Police funding in local budgets has grown in line with all local services, but below the growth in public spending in the devolved budget.
73. In conclusion, therefore, expenditure on police in Scotland is the lowest of the four nations of the UK. This has not arisen because of the financial framework for devolved government, but directly from the political priorities of the Scottish Executive exercised in the three Spending Reviews since the establishment of the Scottish Parliament, and the low baseline inherited from the pre-devolution system.
Index of Public Spending in Scotland on Key Public Services (UK = 100)
Source: GERS and PESA
Police Spending Across the UK (Ј per capita)
Wales N. Ireland England
Source: PESA 2007
Index of Police Expenditure Across the UK (UK = 100)
England N. Ireland
Source: PESA 2007
Police Spending in the Scottish Budget (Јm 2006-7 prices)
2002-3 2003-4 2004-5 2005-6 2006-7 2007-8
Police Central Government Police Capital Police GAE Police Loan Charges Total Police
81.6 104.2 109.9 103.8 104.6
32.9 909.7 15.0
28.4 955.1 14.6
32.9 982.3 14.2
32.2 1028.1 13.9
31.4 1045.2 14.7
30.6 1070.4 14.3
1043.9 1079.7 1133.6 1184.1 1195.1 1219.9
23767.9 25408.2 26697.5 28059.1 29748.1 30473.6
Growth in Police Spending +16.8% - Growth in TME -28.2% Source: Draft Budget 2007-8 Table 5: Police GAE as a percentage of Scottish DEL
Police GAE (Јbn)
Scottish DEL (Јbn)
Source: Draft Budget 2007-8
Table 6: Police Share of GAE
Source: Draft Budget 2007-8
Table 7: Police Expenditure in Local Authority Budgets
All Services (Јm)
Source: CIPFA Rating Review, Scotland
8348.6 9204.1 9688.2 10247.2 10586.1
% Share (%) 9.85 9.67 9.68 9.82 9.88
Selected Elements of Police Expenditure 2006-7
Other Staff Salaries
Source: CIPFA Police Services Estimates 2006-7
References 1. HM Treasury (1979) Needs Assessment Study Report (London: HM Treasury). 2. Arthur Midwinter (2002) "Territorial Resource Allocation in the UK: A Rejoinder on Needs Assessment", Regional Studies, Vol.36, pp.563-577. 3. Ed Balls and Gus O'Donnell (2002) Reforming Britain's Economic and Financial Policy (London: Palgrave). 4. Arthur Midwinter (2006) "The Barnett Formula and its Critics Revisited: Evidence from the Post-Devolution Period". Scottish Affairs, No.55, Spring, pp.64-86. 5. See, for example, Ian McLean (2000) "A Fiscal Constitution for the UK" in S. Chew and T. Wright (Eds) The English Question (London: The Fabian Society); Mike Tomlinson (2002) "Reconstituting Social Policy: The Case of Northern Ireland" in R. Sykes, C. Bochel and N. Ellison (Eds) Social Policy Review 14: Developments and Debates, 2001-2 (Bristol: Polity Press); and K. Morgan (2001) "The New Territorial Politics: Rivalry and Justice in Post-Devolution Britain", Regional Studies, Vol.34, pp.343-8. 6. The official statements of this position can be found in Scottish Office (1997) Scotland's Parliament CM 3658 (Edinburgh, HMSO Ch.7) which states that the Barnett Formula has delivered "fair settlements" for Scotland. For a review of the position over time, see G. McCrone (1999) "Scotland's Public Finances from Goschen to Barnett". Quarterly Economic Commentary, Vol.24, No.2, pp.30-45. 7. Iain McLean (2004) "Identifying the Flow of Domestic and European Expenditure into the English Regions" (Report prepared for the UK Government, London). 8. HM Treasury (2007) Public Expenditure Statistical Analyses 2007, (Report: London, HM Treasury). 9. Scottish Executive (2002) "Building a Better Scotland Spending Proposals 2003-6" (Edinburgh: The Scottish Executive). The Author Professor Midwinter retired as Dean of the Faculty of Arts and Social Sciences at the University of Strathclyde in 1999. Since then, he has concentrated on research and consultancy in public finance. Midwinter was the Budget Adviser to the Finance Committee
of the Scottish Parliament from 2002 to 2007. He is currently Visiting Professor at The Institute of public sector accounting research
at the University of Edinburgh