ࡱ> [Root Entryy ! `G F(|@<  WordDocument;@y vgHCompObj`y ;jSummaryInformation;(]  !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGRIcQZSTUVWXYP\^_`ab{defghklmnopqrstuvwxyz|}~Root Entryy ! `G F(|@<  WordDocument;@y vgJCompObj`y ;jSummaryInformation;(]  !"#$%&'()*+,-./0123456789:;<=>?@ABCDEFGRKLMNOQZSTUVWXYP\^_`ab{|}~Preferred Customer023oMicrosoft Word for Windows 95up@JJ@VT~@h(|@  u՜.+,0HPt|  Dell Computer CorporationBC MMonitoring and Measurement Issues Posed by Devolution in tthe United Kingdom FMicrosoft Word Document MSWordDocWord.Document.69qOh+'0 ,8H dp    MMonitoring and Measurement Issues Posed by Devolution in tthe United KingdomDPreferred CustomerCDNormalerPreferred Customerxceptions to the way in which the formula was applied - e.g., major pay awards were, on occasion, exempt. The effect was that, while in principle Barnett should have resulted in convergence in per capita spending levels between Scotland and England, in the early years of its operation per capita spending in Scotland was maintained, or even increased, relative to England. One could characterise the operation of the Barnett system in its early years by saying that, while it was apparently formulaic, in effect there was sufficient freedom for manoeuvre that in many respects the outcome was more akin to that of a negotiation, reflecting priorities and the balance of power within the Cabinet. This became much less true after the early 1990s, when the rules for the operation of Barnett were greatly tightened up: but one feature which did carry over to the later years was that the detail of the Barnett calculations remained largely covert. 5. Devolution, however, fundamentally changed the context within which Barnett was required to operate. First of all, it sparked very lively public interest in the question of the funding of the devolved administrations, with, (in the case of Scotland), a very active debate both in the academic literature (refs) and the press about the consequences of Barnett. Secondly, devolution put in place powerful political entities, (both in the shape of the devolved administrations, and individuals like the Mayor of London) who are not bound by collective Cabinet responsibility: who have a direct vested interest in the outcome of the funding decisions: and who will take it as a test of political virility either that the system is seen to work in their favour - or if not, that they can do something about it. The strains implicit in these arrangements can already be seen at work in mainland Great Britain - even at a time of relative public expenditure plenty, and when all the administrations in mainland GB are of the same political hue: (witness the repeated complaints by Ken Livingston comparing the funding of London unfavourably with that of Scotland). 6. The primary short term implication of this changing context relates to the need for openness. Unless detailed information is available on the funding calculations (on topics which we will discuss in detail in section 2), then there is immense scope for the emergence of myths about how the system operates and debate about whether the system is being operated fairly, or whether some party has benefited from a political fix. Such debate is likely to become very acrimonious as soon as the public expenditure climate turns adverse - or there are different political parties in power in Westminster and one or more of the devolved administrations. The Changing Context for Information on the Interface between Devolved and Reserved Services. 7. Issues concerning the interface between devolved services, (or, prior to devolution, services within the responsibility of the Secretary of State), and services reserved to Whitehall, have always been extremely important. Less than half of the identifiable public expenditure on services in Scotland actually falls within the responsibility of the Scottish Executive: the bulk of the non-devolved expenditure being social security. Other important areas which are reserved to Whitehall, but which involve the provision of services on the ground in Scotland, include large parts of the support for industry and research, (which is within the responsibility of the Department of Trade and Industry): and significant parts of energy, tourism, and transport. To see the importance of effective liaison across the reserved/devolved boundary, imagine the difficulty of developing policy on housing (devolved), independently of policy on rent rebates, (reserved): or of policy on care for the elderly (devolved) independently of Attendance Allowance (reserved). 8 While this question of effective liaison between devolved and reserved services (or their pre-devolution predecessors) is not new, devolution has again quite radically changed the context within which this liaison takes place. Pre-devolution, policy was developed on the basis of ministers taking collective responsibility in a single Cabinet of one political hue. So if, say, the Secretary of State for Scotland and the Secretary of State for Social Security were starting from an inconsistent position on the relationship between housing policy and social security, the Cabinet mechanism would, in principle, require them to come to an agreed collective view - and present a united front on the implementation of resulting policy. Moreover, at the working Civil Service level, there were no barriers, other than geography, to liaison between the Scottish Office and Whitehall departments. This is not to say that the system prior to devolution worked perfectly - it did not: further, given the relative weights of the old territorial departments and some Whitehall giants, there is a suspicion that in many cases liaison involved the territorial department accommodating policy to a Whitehall fait accompli. So the argument being advanced here is not that the system post devolution is better or worse - but rather that it is different, and these differences need to be recognised and allowed for. 9 How is the system different? The first obvious difference, of course, is that the system now requires liaison between different legislatures: even if these legislatures are of the same political hue, there is ample evidence that policy priorities may differ. For example, witness the current well publicised problems arising because the Scottish Parliaments view on the education of the children of asylum seekers detained in Scotland is inconsistent with the Home Offices detention policy. Secondly, and less obviously, it seems clear that in many respects the publics awareness of where the boundary lies between devolved and reserved services does not correspond with the legal boundary - so public concern may be directed at the wrong target. Finally, devolution has put some institutional barriers in the way of working level liaison between departments - with, for example, the Scotland Office having a specific role as the conduit for liaison between the Scottish Executive and Whitehall departments. While this may be constitutionally tidy, it is clear that the Scotland Office is too small, and not sufficiently expert, to perform an effective liaison function. (ref: Cuthbert and Cuthbert). 10. Given these changes in context, it seems clear that there is great scope for boundary issues between devolved and reserved services either to remain unresolved or to be handled badly. We shall consider in section 3 some of the implications of this for monitoring. Issues Relating to the Assessment of Need 11. The previous areas we have discussed relate to the operation of government itself: these are important areas for monitoring, but are not concerned with the actual measurement of society. The third area we want to highlight, however, is an area where devolution will have implications for how society itself is measured: this is in relation to the assessment of need. 12. This aspect goes back to the funding mechanism for devolution - and an unresolved paradox at the heart of the decisions which have been made. The basic principle on funding for public services which has been applied by successive governments was originally enunciated at the time of the original devolution proposals in 1979: namely that all areas of the United Kingdom are entitled to broadly the same level of public services, and that the expenditure on them should be allocated according to their relative needs. (H.M.Treasury, 1979) At the same time, the government has put in place a funding mechanism for the devolved administrations which will, over time, deliver convergence in per capita spending levels between the different parts of the UK. (This generalisation is, in fact, something of an over simplification: convergence in spending levels is effected by relative population growth rates (see Cuthbert), but for practical purposes the point holds). The paradox is that, unless the government foresees that need is converging in parallel with per capita spend, at some stage converging per capita spending levels will depart from need for services. 13. Since there is no agreed estimate of what need for services actually is, no-one can say at what point this divergence will take place. At some point, however, it seems inevitable that one or other of the constituent parts of the UK will feel that financing has diverged from need: at that point, the requirement to arrive at an agreed methodology for carrying out a formal needs assessment will become inescapable. 14. This argument relates to social need: that is, need for services like health and education. But just as the assessment for social need will become an issue, so will the assessment of what we might call economic need. The UK is, after all, a long established monetary union: and one of the well established principles of monetary unions is that there may be a requirement for fiscal transfers between areas within the union to counteract either short term, or chronic, economic imbalance. So, as the debate develops about what levels of funding are justified for the devolved administrations on the grounds of social need, it seems inevitable that a parallel argument will develop based on whether there is a requirement for fiscal transfers to restore economic balance. The implication is that the debate about need will broaden from the purely social into the economic area, some of the implications of this are assessed in section 4. 2. Monitoring the Financial Aspects of Devolution 2.1 When devolution was introduced, the Treasury recognised the way in which the Budget of each of the devolved administrations is determined should be clear, unambiguous, and capable of examination and analysis by the devolved administrations and by the UK Parliament. As its main contribution to this process, the Treasury publishes every two years a Statement of Funding Policy for the devolved administrations: (Treasury 1999, 2000, 2002). 2.2 This Treasury Statement contains two types of information: first, a general description of how the funding mechanism, that is the Barnett formula, works; secondly, detailed information breaking down expenditure by Whitehall departments to sub-programme level, and showing whether the relevant function is devolved to Scotland, Wales or Northern Ireland. The Treasury Statements are the unique source of this level of detail. The other main sources of relevant financial information are the governments budget reports, (ref), the budget documents of the devolved administrations (ref.) and the departmental reports produced by the various Whitehall departments. These reports show planned and outturn expenditure by the different bodies at varying levels of programme detail. 2.3 We now consider a number of issues which are important in a financial monitoring context - and also consider whether the published monitoring information on these issues is adequate. Issue 1: The Detail of the Barnett Calculations 2.4 The most basic question to be asked about the Barnett formula is, how do the rules about applying the formula, as set out in the Treasury statement, interacting with planned changes in expenditure for Whitehall departments, translate into the resulting changes to the funding grants of the devolved administrations. Surprisingly, the government does not publish the detail of the Barnett calculations. Moreover, in practical terms it is not possible for the outside observer, even at the expense of considerable effort, to replicate the calculations exactly. This is partly because the expenditure programmes in the Treasury Statement do not align exactly with the programmes used in the governments expenditure plans. The reasons for this are not entirely clear, but may relate in part to lags in the system, with the most recent Treasury Statement at any time tending not to fully reflect the most recent changes in departmental organisation or responsibilities. Another reason is that there is lack of transparency about in-year adjustments to plans in the published figures. For whatever reason, the Barnett calculations are not fully replicable. We suggest that this situation is clearly unsatisfactory: and that it would add greatly to openness and trust if a detailed breakdown of the Barnett calculations was published each year as a matter of routine. Issue 2: Information on Convergence and Per Capita Spending Levels 2.5 As already noted, the logic of the Barnett formula, which involves equal per capita increases in spending on services in the different parts of the UK, implies that per capita levels of spending on the aggregate of devolved services should converge through time (assuming that expenditure grows through time - and subject to the caveat on the effects of relative population growth in Cuthbert ( )). This aspect, of whether and how quickly per capita spending levels may converge, has been one of the chief bones of contention in debate about the implications of Barnett. Indeed, it is precisely in this area that one of the most deep rooted pieces of popular mythology about Barnett lurks - namely, that Barnett is good for Scotland because it preserves Scotlands relatively favourable public expenditure treatment. The confusion surrounding this debate is greatly increased because the government does not publish figures on the relative levels of per capita public expenditure in the different countries of the UK on the aggregate of devolved services. (Note that the government does publish figures for identifiable public expenditure per head in the different parts of the UK in its annual Public Expenditure Statistical Analysis: while these figures are split down for Scotland, Wales and Northern Ireland, in a way which virtually corresponds to the devolved/reserved split, the key omission is that identifiable expenditure for England is the aggregate of expenditure in England on devolved and reserved services, and is not split down.) 2.6 It is possible for the outside observer to estimate the relative levels of per capita expenditure on devolved services by combining the information in the Treasury funding statement with the published figures in PESA. This is not, however, an entirely straight forward procedure - for the kinds of reasons described in paragraph 2.4 - and means that the results are still subject to the potential for argument. There seems a clear need for the government to publish consistent information on per capita spend on devolved services in all the constituent countries of the UK. Issue 3: Information on Trends in Receipts 2.7 The expenditure figures to which the Barnett formula is applied, (technically the Departmental Expenditure Limit for Whitehall departments), are net of fees and charges. Hence the gross level of service provision depends, in addition to the net resources made available by Barnett, on the amount of income generated by fees and charges: (it also depends on the amount of income generated from other own resource sources like Council Tax). 2.8 If there are large changes in the relative amounts of income generated by fees and charges in England as compared with other parts of the UK, then this could lead to significant shifts in the gross levels of service provision, independently of provision of net resources through Barnett. It is therefore important to monitor whether such changes in income from fees and charges are taking place, since this could indicate the need for an adjustment to the funding package. It would not, of course, be sensible to have any automatic adjustment mechanism. If income from fees and charges was increasing in one country because of local decisions to increase fee rates, then it could be argued that this is a domestic matter for the country in question: and that to automatically compensate the other countries would destroy any incentive for countries to grow their own resources. On the other hand, if income from fees and charges was increasing in one country relative to another even though the structure of charges was essentially the same in the two countries, then that could be taken as an indication of a relatively greater ability to pay in one country: and it might, in these circumstances, be appropriate to adjust the funding mechanism to compensate for this. 2.9 The potential importance of this issue can be seen from some of the information on fees and charges which is available. For example, from information published in successive Department of Health Departmental Reports, it is possible to establish that since 1994/95, fee and charge income in England grew from 2,300 million to a planned figure of 3,689 million in 2003/04, an increase of 60%, while in the rest of the UK the corresponding figure fell by over 35%. If it were decided to compensate the rest of the UK for the relative decline in its fee and charge income over the period, then this would require an additional allocation of about 350 million to the whole of the rest of the UK through an adjustment to Barnett. This would be a significant adjustment. 2.10 Even these health figures, however, are not satisfactory for detailed monitoring: in particular, no breakdown by type of fee and charge income is given: the figures do not correspond to the partial information on fee income in the Treasury Statement: and figures published in NHS departmental reports appear internally inconsistent prior to 1994. More seriously, however, over the totality of devolved services, consistent information on trends in fee and charge income relating to devolved services does not seem to be available for the constituent parts of the UK. We suggest that this is a gap which needs to be filled. 2.11 The above argument relating to fees and charges is also applicable to the introduction of Foundation Hospitals in England and Wales. Such hospitals are capable of generating income and could result in there being less need for public expenditure in health, again reducing the amount to be considered through the bf in health, again reducing the amount to be considered through the Barnett formula. Issue 4: Interaction of European Funding with the Barnett formula 2.11 An important question, to which the answer is currently unclear, is how far non-CAP European funding represents additional resources available to the devolved administrations within the UK, over and above the block grant they would in any event receive through Barnett. Consider for example the following statement relating to Scotland, taken from note 2.4.2 of Scotlands Supply Estimates for 199-2000: namely:- There is provision in the Estimates which is not included in the total budget for Scotland for control purposes. For instance, the Estimates include receipts from the European Communities, expenditure on NHS and teachers superannuation and receipts from the National Insurance Fund towards the costs of the NHS in Scotland. A reasonable interpretation of this note would be that receipts from the European Communities are not included in the total Scottish budget for control purposes, and hence that European receipts in the Scottish budget would be over and above the DEL element of the budget, as determined by the Barnett formula. However, comparison of the DEL figures in Chart 2.2 and Table 2.1 of the Estimates volume indicates that 150 million of non-CAP European receipts is subtracted from the DEL figure as determined by Barnett in working out the financial provision in the estimates. This indicates that this element of European funding is not actually additional to what would have been provided anyway by way of Barnett - unless the original DEL figures had been adjusted upwards at some point in the past by the anticipated future stream of European receipts in Scotland. It is not possible to establish from published sources whether such an adjustment was ever made to the Scottish DEL. 2.12 While this may appear at first sight an obscure technical issue, this is a point of considerable importance. If the devolved administrations do not in fact benefit from non-CAP European funding, (in the sense of experiencing a net increase in their available resources), then this has a direct bearing on the nature of their relationship with the European Union, and their capacity to benefit from EU initiatives. It was in relation to precisely this point that the Welsh Assembly made a successful case to the Treasury for a one-off adjustment to their DEL when large parts of Wales qualified for Objective 1 status. Recent changes in EU Fisheries agreements saw the potential of Scottish fishermen receiving compensation with no corresponding increase in the Scottish DEL to pay for the compensation - again due to the operation of the Barnett formula. From an overall monitoring viewpoint, what is required is a clear account of the detail of the interaction of EU funding with the Barnett process. Issue 5: Monitoring the Effect of Changing Programme Mix 2.13 The Barnett formula is applied at programme level: this reflects the way the public expenditure planning process works. When a programme consists of a mix of devolved and reserved expenditure, this introduces an element of arbitrariness into the process of applying Barnett. The intention of Barnett is that the devolved country should receive the same per capita change in funding as the planned change in England on those services which are devolved. But where the Whitehall programme is mixed, both the devolved and reserved portions of the Whitehall programme will generate Barnett consequences. The answer on applying Barnett will come out right, (in the sense that the devolved country receives the same per capita change as the planned change in English spending on devolved services), if and only if the planned percentage changes in the devolved and reserved portions of the Whitehall programme are the same. If reserved expenditure in the Whitehall programme increases by a larger percentage than devolved expenditure in the programme, then the devolved country will get a bonus from the application of Barnett- and vice versa. 2.14 In most circumstances, this is hardly likely to matter. As long as the devolved and reserved portions of mixed programmes move broadly in step, any effect is likely to be small- and is as likely to benefit as to penalise the devolved country. Nevertheless, from a monitoring perspective, it would be desirable to be able to check that no consistent bias was being introduced into the Barnett allocation process through the operation of mixed programmes. At first sight, it might appear that one way to carry out this check would be to look at the percentage of expenditure which is devolved for each of the main mixed programmes in successive Treasury statements. If this percentage is rising for a particular programme, then that would imply that spending plans in the devolved part of the programme were increasing at a higher percentage rate than in the reserved part: this in turn would imply that the application of Barnett to the programme would tend to penalise the devolved countries- and vice versa. 2.15 It is not really feasible, however, to extract the information suggested in the previous paragraph from available published sources. The problem is that the extent of departmental reorganisation, and of transfer of functions between departments, renders successive Treasury statements inconsistent. We recommend, therefore, that future Treasury statements should contain extra information, relating back to the previously published statement, to enable the percentage of expenditure which is devolved in each programme to be tracked on a consistent basis through time. 3. The Interaction Between Devolved and Reserved Services 3.1 In the first section of this paper, we identified the importance for the efficient implementation of policy of having effective articulation between devolved and reserved policy areas. At first sight, this appear to be primarily an issue relating to the machinery of government: it is not obvious that there are important implications for monitoring. We will argue here that monitoring information does have an important role in this area. 3.2 From the point of view of an outside observer, the starting point in attempting to establish whether there is efficient interaction between reserved and devolved services is to know precisely which services are reserved and devolved. As already noted, the uniquely detailed published source of information on this are the Treasury funding statements produced every two years. This was the starting point in an exercise carried out by the authors on monitoring various aspects of the operation of devolution: (see Cuthbert and Cuthbert ()). It is not enough, however, just to know in the abstract which sub-programmes are reserved or devolved: it is also necessary to relate the information in the Treasury statements to the appropriate departmental reports, so that the relevant reserved functions can be identified within the organisational structures of the Whitehall departments. A first stumbling block in the exercise carried out by the authors was that the correspondence between the Treasury statements and departmental reports was in many cases poor. In several cases, the expenditure data did not obviously cross relate between the two sources: and in some cases different sub-programme categories were used in the two sources. Our first recommendation, therefore, is that the Treasury funding statement, and relevant Whitehall departmental reports, should be compiled on a consistent basis, so that reserved sub-programmes can be readily identified by outside observers within the organisational structures of Whitehall departments. 3.3 The next step in the exercise was to establish, for selected sub-programmes, whether the available evidence indicated that the interface between cognate devolved and reserved policy areas was operating efficiently. Areas which were examined included the LINK programme (a reserved function operated by DTI, but which is clearly cognate to the devolved economic development responsibilities of the Scottish Executive: the reserved policies operated by DTI in support of trade and inward investment: and the reserved function carried out by DCMS in terms of tourism strategy and international tourism promotion. (which are clearly cognate to the devolved domestic tourism responsibilities of the Scottish Executive). 3.4 It is not our purpose here to go into our detailed findings in each of these areas (see Cuthbert, and Cuthbert and Cuthbert for more details). But consider the following figures in relation to the LINK programme: [insert relevant table] This table suggest prima facie evidence that the reserved LINK function is not operating as fully for the benefit of Scotland as it is for some other parts of the UK. The paper by Cuthbert indicates some reasons for this, which again we need not go into here. The important point for present purposes, is how this example illustrates the way in which statistical monitoring information of the kind published in the above table can be very useful in indicating where there may be problems within the operation of a reserved programme and its interaction with devolved areas of responsibility. Note too, that the above figures are not official statistics: they were compiled as a special exercise by the author in the course of preparing (Cuthbert). It would be much more efficient if, where relevant reserved programmes like LINK are being operated by Whitehall departments, relevant monitoring information showing the impact of the programme by country, (or country/ region) were published as official figures as a matter of course. 3.5 Exactly the same point holds as regards financial information on reserved programmes. For example, in the course of the study carried out by the authors on DTIs functions in support of inward investment, it was established that elements of this reserved sub-programme were being used to provide services for England, with no corresponding expenditure on services for Scotland or Wales - calling into doubt the accuracy of the classification of the expenditure on this sub-programme as being 100% reserved. If, whenever a reserved programme involves the provision of a service whose geographical location can be reasonably identified, then expenditure figures for that service are published with a geographical breakdown, then there would be an excellent chance of readily identifying the existence of problems. 4. Social and Economic Need 4.1 In 1979, when the original proposals for devolution were being considered, the Treasury undertook an inter-departmental exercise to assess relative spending need in the four countries of the UK. (ref) This exercise was concerned with what we have called social need - that is, need for expenditure to fund services like health and education. The approach adopted by the Treasury was to seek to reach a consensus between the departments involved on what the main objectively measurable factors were which accounted for differences in need: and what weights should attach to these factors. The factors were then weighted together to produce an overall index of need to spend. 4.2 The limitations of the type of exercise conducted by the Treasury are clear. First of all, there is fuzziness about what constitutes the basic underlying standard of service being aimed at. Secondly, there is a lack of an objective basis for assessing the costs required to meet standards. Thirdly, there is the scope for disagreement - with the danger that, if the exercise were being conducted for real, no consensus view might emerge. Finally, there is the point that officials who are concerned with administering a service within a given country may not be best placed to identify between country factors which might in fact be significantly affecting costs. 4.3 Future needs assessment exercises, however, would have to confront an additional difficulty - a difficulty which will grow more severe with the passage of time. Prior to devolution, while the Secretary of State of Scotland did have freedom to develop policy separately from other parts of the UK within his areas of responsibility, nevertheless this freedom was in practice circumscribed both by the fact that he was a member of a UK administration - and that any separate Scottish legislation had to pass through the UK Parliament. Post devolution, neither of these constraints hold. It is therefore likely that there will be increasingly significant policy divergences between the different parts of the UK: indeed, this is already happening - witness free care for the elderly, top up fees, foundation hospitals. There is, of course, nothing wrong with this: indeed, it is the very rationale of devolution that this should happen. 4.4 However, from the point of view of carrying out an assessment of social need, this poses a fundamental problem. It is difficult to see how such an assessment could be carried out without, in some sense, fixing upon an agreed common basket of social goods reflecting what is held to be a reasonable standard of social provision: and then attempting to cost this basket in the different constituent parts of the UK. But where social policies are diverging markedly, it becomes very difficult to see how such an agreed standard basket could be arrived at. 4.5 Assessment of social need looks, therefore, to be a difficult if not intractable problem in the context of devolution. Interestingly, however, the same cannot be said about the other important side of the needs coin, namely, what we termed economic need in section 1. (By economic need we mean an index of the relative economic buoyancy of different geographical areas: the term should not be confused with poverty). There would probably be a fair consensus about what the key indicators are which would be considered in such an assessment. High on most lists would be indicators like GDP and GDP growth: fiscal balance and growth of tax revenues: unemployment and growth in employment: industrial start-ups: research and development spend: trade balance: demographic indicators and population change. Indeed, economic assessments based on a range of indicators like these have been for some time a standard product of government, academic, and commercial sources: and the results of sܥhc exg"8(1``(=RX_2PQ`4@b PdWMonitoring and Measurement Issues Posed by Devolution in the United Kingdom Introduction 1. This paper looks at some of the key monitoring and measurement issues posed by the introduction of devolution. Our experience is primarily with Scotland - so we ܥhc exn"8(1``(=RCXnPQ`4@< PdWMonitoring and Measurement Issues Posed by Devolution in the United Kingdom Introduction 1. This paper looks at some of the key monitoring and measurement issues posed by the introduction of devolution. Our experience is primarily with Scotland - so we will mainly illustrate what we say with reference to Scotland: but the fundamental points we make are of general relevance. 2. While devolution is clearly a very significant constitutional change, from another point of view devolution represented a fairly minor executive change. By and large, the services for which the Scottish Executive assumed legislative responsibility were those that had been administered separately in Scotland by the Scottish Office, and between which the Secretary of State for Scotland had freedom to switch funding: moreover, the mechanism for determining the funding for the major part of the Scottish budget remained unchanged before and after devolution. So, if the same services are being administered in Scotland as before, funded by the same mechanism, it is perhaps not immediately apparent that there will be major monitoring implications of devolution - apart from perhaps a need to collect rather better information on devolved services, reflecting a probable increase in democratic scrutiny and accountability. This, however, is to take too simplistic a view. We will argue the changing context implied by devolution has profound implications for the requirement for monitoring information, particularly in the following three areas: namely, finance: the interaction between reserved and devolved services: and in the assessment of need. In this section, we look at how context has changed in these areas. In later sections of the paper we look at each of these areas in more detail, examining what information is currently available, and how this compares with the requirement. The Changing Context for Financial Information 3. One of the major decisions made when devolution was being introduced was that the major part of the funding for the devolved administrations should be provided through block grant from Westminster - and that the same mechanism for determining the size of the block grant, the Barnett formula, should be applied as had been used to calculate the pre-devolution block grants to tNO[U +i$ $ %%**-A.-6[6;<mAAGGJ0JJJeV"W#WWW̒ęۚ8ޜLz  z z z z z z z z z z z z z z z z z z z z z z z z z z z z z z ,DocumentSummaryInformation8 4L"[\]fghtuvwx789=>QbȯɯЯѯVWijz z z z z z z z z z z z z z z z z z z z z z z z z z z z z z z z z `%+K@Normala c"A@"Default Paragraph Font@TOC 1a  @ Footer 9r )@ Page Number discussion of some of the specific issues considered here, see the papers by Cuthbert and Cuthbert, (1999, 2002). () (1999,2000,2002), tish Executive, 121. 11.more1.1.1.e.g., Kay, 19981.,1.aretwo thirds1.locally administered and Whitehall administered in particular1. tween z z  z z  z 9:<=>?PQ_`abdghikoqsuȫի׫ثޫZacikmoptz|~®ʮˮ Rt~ǯȯɯ˯ίϯЯѯү ,@CEFGHLMX`aVu^Paa (responsible for education) and the Home Office (responsible for immigration issues), as regards, , 20021.111.a, J., 20011.1.H.M. e.g., Budget Report, 2002e.g., The Scottish Budget Report, 2002, (e.g., Department of Health, annual) TTalso in, J. (2001The implications of relative changes in fee and charge income will potentially become even more important following the therefore the netfor being reducedwith potentially adverseconsequences for Scotland 2.11 O 2 An important questionthe Scotlands Supply Estimates, (tish Office (1999))3, for example,On the other hand, rforis4562002), M.,(2001), (2002)scourse of the analysisthe four countries of the UK. (H.M. Treasury (1979)-fors7 worth Cuthbert, J.R: (2001) The effect of relative population growth on the Barnett squeeze: Fraser of Allander Institute Quarterly Economic Commentary, May 2001. Cuthbert, J.R., Cuthbert, M.: (2001) The Barnett squeeze in spending review 2000: Fraser of Allander Institute Quarterly Economic Commentary, May, 2001. Cuthbert, M.will mainly illustrate what we say with reference to Scotland: but the fundamental points we make are of general relevance. 2. While devolution is clearly a very significant constitutional change, from another point of view devolution represented a fairly minor executive change. By and large, the services for which the Scottish Executive assumed legislative responsibility were those that had been administered separately in Scotland by the Scottish Office, and between which the Secretary of State for Scotland had freedom to switch funding: moreover, the mechanism for determining the funding for the major part of the Scottish budget remained unchanged before and after devolution. So, if the same services are being administered in Scotland as before, funded by the same mechanism, it is perhaps not immediately apparent that there will be major monitoring implications of devolution - apart from perhaps a need to collect rather better information on devolved services, reflecting a probable increase in democratic scrutiny and accountability. This, however, is to take too simplistic a view. We will argue the changing context implied by devolution has profound implications for the requirement for monitoring information, particularly in the following three areas: namely, finance: the interaction between reserved and devolved services: and in the assessment of need. In this section, we look at how context has changed in these areas. In later sections of the paper we look at each of these areas in more detail, examining what information is currently available, and how this compares with the requirement. The Changing Context for Financial Information 3. One of the major decisions made when devolution was being introduced was that the major part of the funding for the devolved administrations should be provided through block grant from Westminster - and that the same mechanism for determining the size of the block grant, the Barnett formula, should be applied as had been used to calculate the pre-devolution block grants to the relevant countries. The Barnett formula had originally been introduced in 1978 (): Barnett embodied the principle that those services within the control of, say, the Secretary of State for Scotland, should receive the same per capita increase in planned funding each year as the aggregate of corresponding services for England. This approach has the advantages that it meant that the Secretary of State for Scotland did not need to become involved in each of the annual bilateral funding negotiations between the Treasury and individual Whitehall ministers: it also reflected the Secretary of States discretion to allocate funding as he saw fit within his area of responsibility. 4. The operation of the Barnett formula in its early years was marked by a number of features. First of all, the way the formula was applied was largely covert - detailed calculations showing how the Scottish block was calculated each year were not published. Moreover, it emerged in due course that there were a number of get-outs and es arise under devolution between the countries of the UK and Westminster. These wider issues too will have important monitoring implications.,:,:::.,:::: ::: : 13 .A by Jim Cuthbert and Margaret Cuthbert 1 1312 .A: 13snow hasasarethat the key dsimilarlybasically of the same political persuasion need. The UK is, after all, an ldthat - the Barnett formula is appliedDepartmental Expenditure Limit ()ITsamme as being 100% reserved. Ifshould be ce providingsz i  $%,.8TUXy{"#*-.0IJLNOwUuPaAHowever, we suggest that ithen it i likelycan 12 .A 12 3Customs and Excise Regional Trade Statistics: a Noteto appear in Autumn 2003 issue. 12B'  L  LMstu-. deZ![!G#4$%%''1'((D-E-..222244 8 8888===CC9F:FeF#H$HMM#P$PQQRRRRrT.JMNz z 0 !           Y(6DNR]`n8{ˆО w0B   T LMstu-. 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(annual), Public Expenditure Statistical Analysis. Kay, N., (1998), The Scottish Parliament and the Barnett Formula Fraser of Allander Institute Quarterly Economic Commentary, December 1998. Scottish Office, (1999), Scotlands Supply Estimates, 1999-2000 1 .AR.,,,,,,,,., (), 12 Executive Teaowư̰ͰOTUVWuz|ŲƲDzͲβٲ234p³óijų޳=>?UuPabype of CollaborationScotland as % of firms of known locationLarge Enterprise1.3 - foreign owned0.96SMEs8.4 - foreign owned2.3All Enterprises4.5 10 .A, showing the percentage of firms based in Scotland participating in the LINK programme e very low Scottish percentages for certain categories provides 9 5 Conclusion. 5.1 It has been argued in this paper that the changing context implied by devolution requires OOwQxQyRzR{RRETUcYdYD]E]~]?@OPSTUXefjklpqtuvyUVWXY[fhklƷZɼѼּKNVWY[Bǿȿ׿ؿs^uPaVa>?PTUfklquvVXYghXYz z  W W  W W  W W  W W  W W  W W z z z z z z z z z z z z z z l 7 (AAWAW@ǯ@ȯAɯA˯AίAjU@ϯ@Я@WAѯAүAXXAXAAAAYA AA@YAAA\A@ \AA_AA`A,AnaA@AaACAbAXb@YbAE@-cAFAgA@iAG@k@nAAnA@nAH@qAL@wAMAyAXA/yAAy@@AA@A@=@>A?A@@OAP@S@TAUAX@eAf@j@kAl@pAq@t@uAvAy@A@@A@A@@@yAAyAaAo@|AAAAZAA@@Aw@ǁA@AAA@@˒@AAAAAAAAA"AeA#Ay@@AYA[@gAhAkAlAAZAAAAɼAѼAּ@AAAKAAANAV@WAYA[AAAA>ABA*AQAAAAAAAǿAȿA׿AؿAAAAs@A@AAAŰAưAA̰AͰAAJAOAT@U@VA8A޳AADAA\@6@7AWAAtAuAzAA{A|AAAA@@AA@'@AAAAAAAAAAAAA@LAAAAANAAAAAOAwAjAAAA@@8AA9AA:AA;AA@<@AAA@=@ÙA>A?AADAAIAAAљ@P@AęAAAIJAŲAƲADzAͲAβAٲA@@AAAAAAAAAA2A3A4@p@AAQA_A`AAAAAsignificant improvements in the monitoring data available as regards both finance, and the interaction between reserved and devolved services. Specific recommendations are made about what improvements in data are required in these areas. 5.2 It is also argued here that devolution implies that much greater attention will have to be paid in the future to the problems of assessing relative need between different areas: and that the problems arising here go beyond the question of relative social need, (that ishe relevant countries. The Barnett formula had originally been introduced in 1978 (): Barnett embodied the principle that those services within the control of, say, the Secretary of State for Scotland, should receive the same per capita increase in planned funding each year as the aggregate of corresponding services for England. This approach has the advantages that it meant that the Secretary of State for Scotland did not need to become involved in each of the annual bilateral funding negotiations between, need for public services), into the question of assessing relative economic buoyancy. 5.3 Our discussion has been anchored firmly in the context of devolution within the UK, and illustrated mainly by examples relating to Scotland. We suggest, however, that it would be wrong to conclude from this that there are no wider inferences to be drawn from this paper. In particular, as the European Union evolves further, similar issues are likely to arise between the constituent countries of the EU and Brussels, a the Treasury and individual Whitehall ministers: it also reflected the Secretary of States discretion to allocate funding as he saw fit within his area of responsibility. 4. The operation of the Barnett formula in its early years was marked by a number of features. First of all, the way the formula was applied was largely covert - detailed calculations showing how the Scottish block was calculated each year were not published. Moreover, it emerged in due course that there were a number of get-outs and es arise under devolution between the countries of the UK and Westminster. These wider issues too will have important monitoring implications.,:,:::.,:::: ::: : 13 .A by Jim Cuthbert and Margaret Cuthbert 1 1312 .A: 13snow hasasarethat the key dsimilarlybasically of the same political persuasion need. The UK is, after all, an ldthat - the Barnett formula is appliedDepartmental Expenditure Limit ()ITsamme as being 100% reserved. Ifshould be ce providingsz   $%,.8TUXy{"#*-.0IJLNOwUuPaEHowever, we suggest that ithen it i likelycan 12 .A 12 3Customs and Excise Regional Trade Statistics: a Noteto appear in Autumn 2003 issue. 12:, (2003) 11B'  L  LMstu-. deZ![!G#4$%%''1'((D-E-..222244 8 8888===CC9F:FeF#H$HMM#P$PQQRRRRrT.JMNz z 0 !          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