Natural England

COUNTRYSIDE AGENCY FUNDING FOR RURAL COMMUNITY COUNCILS 2002/04 (AP01/56)

FOR DECISION

1. On the whole the Agency funds voluntary activity through project or other short term funding. However, it, and its predecessor bodies, have long recognised that local community action needs a local infrastructure to promote, facilitate and support it. Hence the Agency's long term support and funding for the 38 county-based Rural Community Councils (RCCs). 

2. RCCs act as intermediary bodies on behalf of local authorities and local communities in their areas. They provide a wide range of services locally, including information, advice and support for local organisations in their counties, (eg parish councils, village hall committees). They actively promote and assist local voluntary action. 

3. The exact work varies from county to county, but most RCCs;

• work closely with parish councils;
• will assist communities to undertake village appraisals and/or housing needs surveys and work with the local authorities to feed these into the formal planning system and support action flowing from them; 
• all employ fieldworkers who work locally; 
• provide the umbrella for bringing together other voluntary organisations in their area.  

4. Apart from their local action, the main strength of RCCs is that they are a national network and the only such organisations dedicated to working with rural communities across the country. Nationally, they are able to provide a voice for rural community action. They are increasingly doing this at a regional level too. The Agency has a unique relationship with the RCCs, which is beneficial to both, despite occasional tensions. Increasingly, we look to RCCs to work in partnership with us to help deliver our main objectives, including implementation of the Rural White Paper and key programmes, most notably Vital Villages

RCC annual grant

5. Most RCC funding comes from local authroities, the lottery, locally earned money and other sources available to charitable trusts. But for some years the Agency and its predecessor, the Rural Development Commission have made a significant contribution. With the Rural White Paper and our new Strategy in place, we need a new three year funding period and Service Level Agreement (SLA), reflecting the activities we would like RCCs to focus on in future, to take effect from 1 April 2002. 

Service Level Agreement

6. In discussion with RCCs we have developed a new SLA to reflect our aims and RCCs' priorities (Annex 1). The SLA sets out the activities we expect RCCs to carry out in return for our funding. It is based on specific pieces of work we want, (eg an annual report on rural service trends) and more general activities which reflect the work and strengths of RCCs, (eg promotion of good practice). In future, we would see RCCs playing a key role in providing direct support to us and to communities in the delivery of the Vital Villages programme and to a lesser extent in our Market Towns work. We also want to see them giving priority to building the capacity of rural communities and strengthening their own organisations, and developing their representational role.

7. The SLA distinguishes between 5 core tasks and a menu of local priorities. Each RCC would be expected to deliver the 5 core tasks identified in the SLA, which would attract 90% of the Agency's funding. The remaining 10% of grant would be a variable element to reflect local and regional priorities and would be the subject of annual negotiation and agreement with the Agency's regional offices.

RCC annual grant

8. The current budget for RCC funding for core activities amounts to £2.984m. It has been pegged at this level since 1994/95, a reduction of 16% in real money terms. At their meeting in September 2001, the Board attached priority to an increase in the funding for RCCs in this year's Corporate Planning round, if savings could be found. In the event, this was not possible and, therefore, a bid of £400,000 has been included in the Agency's Corporate Plan for next year. Subsequently, this figure would be subsumed in our Spending Review bid of £4.5m over 3 years to strengthen the capacity of the rural voluntary sector. There is no sign that the government will respond positively to their bid in the current public spending climate. And the spending review outcome will not be known until July 2002

Funding formula

9. The present funding formula for RCC grants is severely out of date. Annex 2 sets out the details. It is based on old administrative boundary and population figures and includes a top slice linked to the existence and coverage of rural priority area(s) within the county. Clearly, the latter no longer reflects the Agency's priorities or the focus of our activities. The other figures need updating and we have also found some fundamental flaws in the calculations for the current formula which are hard to explain. We therefore need to adopt a new formula which addresses our priorities and is transparent and easy to understand.

10. We have looked at a very wide range of options. We have narrowed these down to a shortlist of 5 which is set out in Annex 2. They range from the least change option (Option 1 - omitting only the RPA and redistributing the funds) to a more radical formula (Option 3) which would base funding on 3 elements;

• the number of settlements below 3,000 (reflecting the work we want RCCs to do in connection with Vital Villages);
• the Index of Multiple Deprivation (as a measure of needy areas); and 
• a sparsity factor (reflecting the difficulties and extra costs of working in remoter, less populated areas).  

11. We have also looked at the case for giving each RCC a minimum core grant, recognising that each RCC has a basic minimum requirement in terms of staffing and office costs, and then applying the Option 3 formula on top (Options 4 & 5). 

12. We believe that, given our own review of priorities, culminating in our new strategy and the RWP, we should not simply tinker with the formula again, but go for a new formula. This would focus funding more on the areas of greater need whilst still supporting a national movement and recognising that even the more affluent areas are in need of support. For this reason, our preferred option would be Option 4,  which takes account of need, where we want RCCs to focus their attentions and also recognises that there is a minimum level of core activity necessary to support an organisation.

13. The results of applying the formula will be tabled at the meeting. On the basis of the existing funds available there would be major changes in the grants to individual RCCs across all the options. It would be difficult to implement any radical changes to the funding formula or justify a redistribution of funds on the scale envisaged without some increase in the overall budget. We have, therefore, looked at the same options assuming an increase in the budget of £350,000 of the £400,000 bid (the remaining £50,000 would be held back to help with transitional funding and possibly some support for the new national association of RCCs). Although there are still some major changes and some RCCs would lose significant amounts of funding, we believe these would be more defensible in the context of an overall realignment of priorities and an increasing budget. (£400,000 would represent an increase of 13% on the existing budget.) 

14. There is a very strong case for increasing the budget for RCC funding. We are expecting them to play a key part in helping to deliver our priorities and achieve our objectives for rural communities. We need their goodwill and energy to help us. However, an increase of this magnitude has not been included in the Corporate Plan and would have to be found from within the existing Agency budget. We have looked at the scope for doing this. The most obvious source would be the Vital Villages budget (which increases by some £ 9.5m next year, including the Rural Transport Partnership). However, there would be some presentational difficulties in being seen to reduce the size of this programme, which was announced at the time of the Rural White Paper by the Government (even though it would still be helping to achieve its overall objectives). 

15. We have considered other options within the Rural Services budget, but the scope for changes of this scale is limited. Apart from the RCC budget and the funds for community development workers (a RWP commitment), the programme budget amounts to £1.45m which covers all our work on rural services and social exclusion, both of which are priority tasks. A transfer of £400,000 to the RCC budget would mean that we would have to withdraw from work on one of these. 

16. On balance, therefore, we propose to transfer £400,000 from the Vital Villages budget to Rural Services for RCC funding. If the Board agree, we would recommend the opportunity is taken for a radical change to the formula for funding RCCs as proposed in Option 4.  There would be major concerns in those counties which stand to lose significant amounts of funding and, because of the scale of the changes, the new grants would need to be phased in (over the full three year period in some cases). We would need to discuss with RCCs how this should be done, but would recommend that in the first year that no individual RCC should lose more than 5% of grant over the current year's figures.

17. We would also need to discuss our proposals with DEFRA, since, in effect, we are proposing significant changes to next year's Corporate Plan. They might also be lobbied about our decision. We will also need to consider how we present the changes in a positive light, emphasising our commitment to the RCCs as demonstrated by our decision to increase the funding pot.

Financial and manpower consequences

18. It is proposed that additional funding for RCCs will be found from within the Agency's existing budget. Any further increase in the budget from 2003/04 onwards will depend on the outcome of the spending review, but there is a risk of it being an opportunity cost in other programmes.

Risks of failure and the main ways of guarding against them

19. Otherwise the most significant risk is that we will fail to complete the negotiations on the RCC SLA and funding formula in time for them to be fully implemented from April 2002. To do so, requires a high degree of staff input, particularly at principal manager level, and the team is heavily loaded already. (It is also responsible for taking forward work on the voluntary sector, rural service standards and social exclusion - see separate papers on the agenda.) We will devote as much resource to settling the RCC grants as possible but, if the date for implementing the RCC new funding regime is not achievable, we may need to defer it by 6 or 12 months. This will attract criticism from the RCCs who have been subject to a long period of uncertainty, but it is important to get the process right. 

20. Implementing the decisions will need careful handling to ensure that they are seen as a positive endorsement of RCCs and rural voluntary action.

Annex 1

SERVICE LEVEL AGREEMENT WITH RURAL COMMUNITY COUNCILS FOR THREE YEARS FROM APRIL 2002

Background

16. The Agency's new strategy and the publication of the Rural White Paper (Nov. 2000) make it necessary to review the Agency's Service Level Agreement with Rural Community Councils. Meetings have been held with a representative group of RCC Directors to discuss the proposed new arrangements. 

17. We have looked at 4 areas that will require change or addition. These are: 

• work to be included within the SLA and an updated text of the contractual document to reflect this;
• funding formula
• Compact; 
• annual rural trends report.  

Service Level Agreement

18. We propose a model based on a core work element which all RCCs will be expected to deliver, together with a menu of other tasks which the RCCs will negotiate annually with their regional office to match local priorities. 

Core Tasks

• Rural trends report   

19. RCCs will continue to be required to produce this annual report, but see below for further details on the proposed changes to the report.

• Developing funding bids and capacity building for rural communities  

20. This section will cover raising awareness of and providing initial advice to enable local communities to access all relevant Agency programmes such as Vital Villages, Local Hertiage Initiatives, Market Towns and Doorstep Greens. It will also cover developing the capacity of communities and helping to strengthen parish councils; support to village halls; and helping communities to develop funding bids. It is proposed that 50% of the grant should be allocated to this work.

• Promotion of good practice  

21. In order to encourage community development an RCC should promote good practice within their own area and also share this with partners throughout the county and within the network. The current SLA requires all RCCs to include an example of good practice in the end of year report. (See also Trends Report for good practice). It is estimated that 10% of the grant will be allocated to this work.

• Representing Rural Communities at county, regional and national level.  

22. This will cover the work that the RCCs perform within their local area as the co-ordinating body for the rural voluntary sector and recognises the need to operate at a regional and national level. Specific areas will be highlighted in this section.  It is proposed that 10% of the grant should be allocated to this work.

• Developing the capacity of the organisation  

23. In order to deliver the external focusing work with communities RCCs themselves need to be adequately resourced with staff with appropriate current skills. For most Agency funding is only a minor proportion of their income. They rely increasingly on partnership and project funding for example from lottery boards, SRB or European funding. The organisation needs the capacity to take advantage of these opportunities which in themselves also deliver the Agency's objectives. It is proposed that 10% of the grant should be allocated to this work.

• Director's time  

24. In the current SLA this allocation was intended to recognise the time Directors, and other senior RCC staff, give to advise and work with the Agency on tasks which may not have been specified at the beginning of the year. RCCs felt that this was an artificial concept which was interpreted differently between regions. As a result it has been agreed that this section will be removed and the principle of good working relations and sharing of information would be better addressed through the Compact.

Local Priorities

25. This will be the variable element of the work programme. It is proposed that 10% of the grant should be allocated for this work. 

26. The following are examples of some of the tasks which could be agreed locally between the RCC and the Agency's regional office in the light of the local priorities and the capacity of the RCC to deliver the work. RCCs would not be expected to undertake all of these tasks but to agree priorities and specific outputs with their Regional Office:

• providing information and advice on Local Strategic Partnerships or other networks and representing the interests of rural communities
• in addition to the core work which we would expect all RCCs to fulfil, to work with communities to develop a specific number of eligible applications for Agency grants e.g. Community Service Grants, Parish Plans, Parish Transport schemes, LHI, Doorstep Greens
• in addition to the core work on market towns - to promote the Agency's Market Towns Health check in areas which are not included in the core programme.
• promoting the Agency's Eat the View programme
• other regional priorities particularly related to the regional influencing plan.  

27. We have indicated a level of grant for each of these areas but suggest that a flexibility of +/- 2.5% for each area, other than regional priorities, would be useful.

Rural Trends report

28. At present 5% of the SLA is allocated to production of an annual trends report on services and housing. These reports offer the Agency valuable information on present trends, expectations and examples of innovation and good practice. The aim of this report is not to offer hard data, but to give us a pen picture of county, regional, and national trends. With the Agency's State of the Countryside report and our new grant programmes, it is a good opportunity to make the trends report more valuable and timely to both the Agency and RCCs.

29. We propose to make the link with the Rural Services Survey information to provide GIS figures for some of the key services, as well as incorporating information on two new key services: ICT and policing/community safety. The timetable for production of the county and national reports will be adjusted so that the information can be fed into the annual State of the Countryside report In order to promote the national summary report within and outside the Agency we will be considering the possibility of holding regional seminars. 

30. We will hold a briefing seminar for relevant RCC staff early in the new year to explain the new procedure for completing the report. We propose to introduce these changes in 2002 and will, therefore, need to discuss transitional arrangements with RCCs. To enable this task to be done effectively and to the quality we would require to include the outcomes in the State of the Countryside report, we propose to allocate 10% of the funding to this work.

Rural Housing Enablers and Community Development Workers 

31. Separate funding arrangements are in place for these posts, but it is proposed to include them within the contractual framework of the Service Level Agreement.

Funding Formula

32. This is the formula by which the overall grant fund is allocated to individual RCCs. The current formula is based on the population of individual counties, the number of small settlements within the county and with some additional resources allocated to those counties which have a rural priority area (previously Rural Development Area). The formula needs to be reviewed to reflect more current population data, changes to administrative boundaries and the fact that rural priority areas are not priority areas for the Agency.

33. Annex 2 sets out the options for the basis of a new funding formula which will reflect better the Agency's needs and priorities. 

Compact

34. The Board has already agreed the principle of a memorandum of understanding with RCCs based on the Home Office voluntary sector Compact. The compact will stand alongside and complement the SLA.

35. In the spirit of partnership, some of the RCC Directors offered to produce a draft Compact, based on earlier work by the Agency. We have received the draft document for comment and recommend that the Board delegates responsibility for agreeing the final text to the Executive. We plan to have the Compact in place by 1 April 2002.

Annex 2

RCC FUNDING FORMULA

Background

36. The current funding formula for RCC grants is based on the following:

• an allocation of 9% of the total budget of £2.984m is top sliced and each RCC with a Rural Priority Area (RPA) in their area receives a flat rate grant of £3,500 and the balance is allocated on the basis of population in the RPA.
• 70% of the balance is allocated according to the natural logarithm of the population in the county
• 30% of the balance is allocated according to the number of settlements between 1 and 3,000 population.  

Models

37. The options we have considered are:

Status quo

38. This would be the least desirable outcome. RPAs do not reflect the Agency's priorities; they are out of date and the RDAs are themselves moving away from using them to target resources towards rural areas. The other data are out of date and the basis of the formula is flawed and difficult to justify. 

Option 1: least change

39. This would simply take out the RPA element and redistribute the funds on the basis of the other two (updated) elements of population and settlements. However, this gives no recognition of need and favours counties with higher populations.

Option 2: introduce an element of need

40. It could be argued that the RPA element to some extent reflects concentrations of need and that the funding formula should take account of areas of relative disadvantage. This option uses the IMD average rank of ward scores as an indicator of need (on the basis of 9% of the grant fund as previously).

Option 3: introducing a sparsity factor

41. By including population figures, we inevitably skew resources towards the more heavily populated counties. We have argued consistently to government and others that resource allocation formulae should take account of the additional cost and difficulty of serving sparsely populated areas. It would be consistent therefore to include a sparsity factor in our own funding formula, alongside settlements (reflecting Vital Villages priorities and need (IMD).

Options 4 and 5: core element

42. These options recognise that there is a basic level of core costs required in any organisation that needs to be provided across the board. We have set these at two level - £25,000 (roughly 1 person plus some office costs) or £35, 000 (1 to 2 people plus costs). We have then allocated the remaining funds on the same basis as in Option 3.  The Home Office Compact recommends recognising the core costs of any organisation in allocating funds. However, it could be argued that as we do not allocate funds to cover core costs but to buy outputs under the areas of work specified in the SLA that we are already contributing to core costs and that this might be considered double-counting

43. Our recommendation is that Option 4 should be adopted.