DIVIDING up a cake always has the potential for trouble. Whether it's children eagerly anticipating a tea-time treat or councils getting their share of government funding for the next financial year, arguments are almost guaranteed.
The formula for deciding how much cash each council will be handed from the national cake is "horrendously complicated" – and that's just the civil servants talking.
A whole range of factors, involving thousands of detailed statistics, are taken i
nto account, ranging from the number of pupils having free school meals to the total length of roads in an area to the hectarage of burial grounds.
A lot of weight is understandably given to various indicators which reflect levels of poverty and deprivation.
The way the money is currently shared out leaves Edinburgh at a disadvantage. New figures show within the next three years, the Capital will fall to the bottom of the table, receiving less government funding per head of population than any other council in Scotland.
By 2010, Edinburgh will be receiving £1935 per head – a massive £815 less for every person than top-of-the-table Glasgow.
But now Finance Secretary John Swinney has announced a review of the formula. Instead of the small adjustments made to the calculations from one year to the next, Scottish Government officials will sit down with local authority representatives to look at the whole basis of the funding distribution.
This has raised hopes among city leaders that Edinburgh could end up with a fairer share of the cash on offer.
Edinburgh City Council finance director Donald McGougan says top of his list for reform is the way funding for free personal care is decided.
He says: "Free personal care money is allocated with a strong emphasis on deprivation when, in fact, the demand comes from people who were previously funding themselves so were by definition not suffering deprivation."
That means Edinburgh has higher costs on average than places like Glasgow, but receives less funding.
Care home fees in Edinburgh are also higher than in most other parts of the country, but that is not taken into account in the formula.
Mr McGougan's other priority for change would be on affordable housing, which is an issue of concern not only to Edinburgh but also the surrounding councils like East Lothian, Midlothian and West Lothian.
"The formula for affordable housing focuses on deprivation rather than where there is a shortage of housing – and that affects the whole of the city region."
He wants to see more emphasis on housing need than on overall levels of poverty.
Poverty and deprivation are rightly key factors in determining where government cash is channelled, but the way that deprivation is measured is important. There is poverty in Edinburgh, but because it is often concentrated in small pockets rather than vast estates, it is not always picked up by the formula.
Mr McGougan says: "More and more, deprivation is measured by area rather than by individual. In education, especially, it is important it should be deprivation by individual because each child from a deprived background needs that support."
Independent Lothians MSP Margo MacDonald has already won the promise of a new Capital City Supplement to be included in next year's Scottish Government budget in recognition of Edinburgh's extra responsibilities.
She believes the city's other needs must also be given full weight in the funding formula.
Professor Richard Kerley of Queen Margaret University – who was himself Edinburgh's finance convener for a spell in the 1980s – says reviewing the funding formula will not be an easy task because it is so complex.
"Historically it has even included the composition of the underlying subsoil because some soil types make the road liable to damage by the weather than others," he says.
Prof Kerley identifies some more areas where Edinburgh could look for improvements.
He says: "Edinburgh has a higher proportion of historic and ancient buildings than many places with the extra costs that involves, but that is not recognised in the formula at the moment.
"And it is a leading tourist destination, which is different from being the capital – Washington DC is the US capital, but doesn't have the tourist flow of New York – and that requires a certain level of expenditure."
The Scottish Government says 98 per cent of the formula is based on factors to do with population characteristics – how many old people, how many children, how many homeless people and how many benefit claimants.
One former government finance insider predicts the review is unlikely to come up with any major change.
"Every time we try this it ends in acrimony and either nothing changes or very little changes," he says.
"You have all these competing interests – city authorities and non-city authorities, urban authorities and rural authorities, authorities of different political colours, those with heavy transport demand and those with light transport demand.
"They are all looking to hold on to their slice of the cake, and it becomes impossible to start from a blank sheet of paper and say objectively how much any particular local authority should get.
"There's the old saying that if you had a roomful of monkeys with typewriters they would eventually come up with the works of Shakespeare.
"The Government would be better giving the monkeys some calculators and hoping they produce a sensible funding formula."
The current formula has been in use since 1982, though it is tweaked almost every year.
The Convention of Scottish Local Authorities, which represents all 32 of Scotland's councils, has in the past shied away from calling for a thorough review because it knows that for every winner among its members, there will also be a loser.
Edinburgh clearly hopes for a fairer share of the cake, but there are no guarantees.
The full article contains 965 words and appears in Edinburgh Evening News newspaper.
