Excerpt from the official minutes of the Rural Affairs and Environment Committee 21^st. November 2007 ( the bold text in the speeches is our emphasis ) on

The Scottish ministers have consented to those schemes and to funding for them. Collectively, they come to around £40 million.

As the note that we have given the committee says, we have transferred into the local government settlement £126 million for the three-year period.

Ministers are currently considering how the unallocated funds for flooding should be distributed among the various local authorities; indeed, that will be discussed with COSLA next week.

We are well aware of schemes that are in the pipeline, where each of them has reached and the costs that are involved, but a discussion with COSLA and the relevant local authorities is probably required to decide precisely how the allocations will be made.

Funding that has been agreed will go to the seven local authorities that I mentioned.

There will be further discussion with the other authorities so that ministers can reach a view on how the flooding allocations should be made.

I was going to run through each of the local government settlements and then come back to what we have kept, if that would be helpful.

The other amounts that are involved are relatively minor.

The intention is that there will be a normal GAE allocation on a population basis over and above the schemes that have already been agreed, although we have not taken a final decision on that matter.

I suspect that my questions are for John Mason—I recognise that he has inherited the policy on the distribution of cash to local authorities.

I want to get some clarity about the figures and the process that will operate in relation to the schemes.

First, you indicated that, broadly speaking, this year's current baseline is in the order of £42 million.

You also indicated that, in the coming three-year period, the budget that will be allocated to local authorities is £126 million.

I take it that the £126 million over three years is, in effect, a continuation of the £42 million per year for three years.

A proportion of the £42 million that will roll forward will be fixed to certain local authorities—you named those local authorities.

De facto, that funding remains ring fenced, within the settlement to local authorities, for those local authorities.

If the local authority saves money on the scheme that it is implementing, I think that I am right in saying that it would keep that money, whereas under the previous scheme we would have got the money back.

To that extent, it is ring fenced.

As I understand the current process, a local authority that has specific expenditure demands as a result of the effect of climate in their area receives funding.

For example, Perth and Kinross Council, which we will visit next week to discuss flooding, received a large sum of cash for significant work that it required to undertake, because it was recognised that, at that time, its need was greater than that of any other part of Scotland.

That continues to be the position—basically, councils that have a flood protection order make a bid to you for funding and the decision whether to give the cash is at the discretion of a minister.

If what remains of the £42 million in the current year—the money that is not yet allocated—will potentially be allocated to every local authority in Scotland by some distribution mechanism that is yet to be determined, are you likely to make any further decisions in the current year that will lock in that cash to the next three-year period?

Those figures are built into the figures that I gave the committee for forward spend.

The £40 million going forward—which is split into just over £26 million in year 1, about £13.5 million in year 2, and less than £1 million in year 3—takes into account what we expect to have approved this year.

Are you saying that the decision has been taken, or may yet be taken, to protect that balance of £10 million in the current year for general distribution to local authorities, or might that £10 million still be allocated to particular schemes in Scotland?

We also asked them whether, by the end of this financial year, they will be able to start expenditure for either this year or next year. We have a very good feel from local authorities of what is needed.

As you are probably aware, getting approval for any flood prevention scheme is not the quickest process in the world.

There are various stages at local government level, followed by a two-stage approval process with the Scottish ministers: one for the scheme and one to confirm the funding.

A hurry-up approach cannot be taken—the mechanics of the system preclude that.

That is one of the reasons why we will consult on, and introduce proposals for, changes to the legislation on flooding.

We hope that that consultation paper, which will set out our views on how we can streamline and modernise the system, will be out shortly.

That in itself is a bit of a problem, because if we legislate to change the approval scheme and that legislation were to be enacted midway through the spending review period, different systems could be in place for allocating the money and for flood schemes to come through.

That is one of the reasons why the discussion with COSLA has to take place.

However, I need to get this clear in my head, taking into account the present situation and what the local authorities are planning and working on. A figure of £10 million has been unallocated this year.

If the commitment of that into the next three years begins to unwind, the cash that is available for the local authority sector increases up to a maximum of £42 million over that period.

You could base the system on population, but that is probably not the best way of doing it. You could consider a properties-at-risk solution.

The Scottish Environment Protection Agency has recently reviewed all the flood risk maps, and we now have a good idea of how many properties are at risk in each local authority area.

However, after all the schemes that come forward have been considered, the solution may have to take into account what is actually in the pipeline, in terms of allocation.

In other words, it is not part of a general pot that local authorities might have to spend as they see fit.

Our assumptions on how the cash would be allocated would be based on what would be best value and what would deal with the highest risk areas for flooding, in terms of properties and lives.

However, we know from the maps to which you have referred that the needs of some individual local authorities are extraordinarily great.

On Monday, I visited Moray, which has four or five schemes going ahead with a total bill of £150 million, £130 million of which Moray Council would expect to get from the Government, with the council having to find the balance under current arrangements.

I accept that this might not be the final outcome, but if every local authority were to get something out of the £42 million on the basis of the size of its population, Moray Council would get £700,000 a year.

That is one of the reasons why there may have to be a bespoke solution in the allocation of money for flood prevention.

However, the issue needs to be discussed with COSLA and the relevant local authorities, and those discussions have not yet come to any conclusion on what might be the best solution.

I want to be able to bring other members into the discussion. Can you try to move your questioning on a bit faster?

You touched on the extent to which, in the new policy climate, you could guarantee that the £42 million that you are feeding into the local government settlement will end up in flooding measures.

I think you said that you will no longer be able to guarantee that the money will end up in flood prevention measures, as it will be a matter for the discretion of the local authorities.

There will be competition from other priorities such as schools, social work, roads and transport, which will have to be funded out of the same pot into which the flood prevention money will go.

Is that correct?

It could be—I cannot pre-empt what will go into the agreements—that in the authorities in whose areas there is a high risk of flooding, flood prevention measures could be part of the agreement.

Secondly, as with any money that goes into the local government settlement, it is for local authorities to decide how they spend the money.

It is for them to justify the commitment of any resources that they have received.

If, at the end of the day, they do not want to commit the money to flood prevention measures, they will have to explain why they have made that decision, just as they have to explain their use of any other money that we put into the settlement on the basis of the current formulae.

My last point—

Mike Rumbles mentioned one of them, and there is an element of the same pattern in that fund—potentially, some of the expenditure could be locked in.

So, the headline figures that were announced last week as giving new flexibility for local authorities and un-ring fencing are not totally un-ring fenced.

You are responsible for a part of the funding that, it is now clear, will be tied up for certain local authorities.

I am not asking you to comment on my point, but I suggest that the headline figure could be misleading in the sense that it implies that there is complete freedom for local authorities whereas, within the detail, there are constraints on how local authorities will be able to use the money, at least for the first few years.

To that extent, there is an element of pre-emptive spend; however, any local authority at any point can break any contract if it so wishes.

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