Islands Programme capital fund 2021/22 to 2024/25: grant awards - evaluation

Executive summary

1. The Scottish Government’s Islands Programme is a £25.8m capital grant scheme dedicated to supporting the delivery of the National Islands Plan. The programme was established in 2021/22 and provides funding for infrastructure projects to Scotland’s six island local authorities – Argyll and Bute, Eilean Siar, Highland, North Ayrshire, Orkney Islands and Shetland Islands. The Scottish Futures Trust (SFT) has been funded to support the management of the Islands Programme since its inception.

2. In its first year (2021/22), Islands Programme funding was delivered as a direct allocation to island local authorities. The allocations were based on (i) the size of the island-based populations in each local authority and (ii) total island road length. This method of disbursement was intended to expedite payments to local authorities to help island communities recover from the impacts of the Covid pandemic and related lockdowns.

3. In the following three years (2022/23 to 2024/25), funding was disbursed using a competitive bid process in which local authorities submit applications for projects in their area. An independent Investment Panel assesses the applications and makes recommendations to Scottish Ministers about which projects should be funded. The competitive bid process has remained largely the same over the years it has operated, although some limited changes were made in response to recommendations made by the Scottish Parliament’s Rural and Island Affairs Committee after its first year of operation.

4. There have been a range of views expressed on the best (most efficient and effective) way to disburse capital funding to Scotland’s islands to achieve the greatest possible positive impact. The Scottish Government is now developing a new National Islands Plan and, as part of that process, commissioned an independent evaluation of the process used to deliver Islands Programme funding to island communities in the four years from 2021/22 to 2024/25.

5. The purpose of the evaluation was to gather evidence to inform the process that could be used to distribute potential funding in the future. The evaluation comprised a review of documentary evidence and interviews with key stakeholder groups. These included local authority representatives, representatives of island community organisations, members of the Investment Panel, and staff from SFT.

Overview of the Islands Programme

6. In its first four years, the islands Programme supported 70 projects on 51 islands with grant amounts ranging from £17k to £1.68m, and a total value of £15.2m. Comparing the programme in Year 1 (direct allocation) to Years 2 to 4 (competitive bidding) shows the following:

• The number of projects receiving funding was markedly higher in Year 1 than in Years 2 to 4. In Year 1, 37 projects received funding, compared to 33 in total across Years 2 to 4. However, the average sum received by projects was substantially larger (around 3 to 4 times higher) in each of the competitive funding rounds.
• In Year 1, the allocation formula resulted in a large variation in the share of funding received by each local authority, ranging from 5.2% (North Ayrshire Council) to 27.6% (Comhairle nan Eilean Siar). Under competitive bidding (Years 2 to 4 combined), there was a more equal distribution of funds, ranging from 13.3% (Argyll and Bute Council) to 21.7% (Orkney Islands Council).
• Across all four years, more than half of the projects (42 out of 70) are being delivered by community organisations.
• Across all four years, the Islands Programme provided around 40% of the estimated total costs of the projects funded.

To what extent have communities been meaningfully involved?

7. Representatives of community organisations that took part in the evaluation largely reported positive collaboration with their local authorities in relation to the development of funding applications. Some said this collaboration had provided an impetus for ongoing communication and helpful working relationships between them and their local authorities.

8. However, not all community organisations reported positive experiences of working with their local authority. A small number felt they had not been fully involved in the application process or had been unhappy with the application submitted for funding.

9. Local authorities had different approaches for learning about the priorities of their local communities. From the perspectives of the community representatives, these differing approaches appeared to work reasonably well, with just the occasional dissenting voice.

Effectiveness of the process for assessing applications and awarding grants

10. The evaluation found the process for assessing applications and awarding grants under competitive bidding to be thorough, robust and fair. The composition of the panel is seen as appropriate – most members now have direct experience of working in island communities. The participation of young people from the Young Islanders Network has been welcomed.

11. Panel members identified a number of issues and areas for improvement in relation to the assessment process. One concern raised by panel members related to the discussions that sometimes take place in panel meetings about whether certain projects are eligible for funding. Further clarification may be needed on this point – both for local authorities and panel members – if the current competitive bid process continues. There was also a concern that the information provided in applications is not always sufficient to allow the panel to make an accurate assessment of project viability.

12. It is important to note that the number of applications to the Islands Programme has increased each year. In addition, the quality of applications has increased, with all applications in the most recent round (2024/25) reaching the quality threshold for funding. Should this trend continue, and the funding pot remain relatively stable, there will be an increased risk of local authorities (and community organisations) spending time developing applications that are unable to be funded. If the competitive bidding process continues, it would be important to consider ways of reducing this risk. This could be done, for example, by introducing a maximum amount that can be applied for, by developing a mechanism for ensuring that funding in each year is spread across all island authorities, and / or by directing funding to certain types of projects (for example, community projects).

Effectiveness of programme management and monitoring arrangements

13. The evaluation found that the Scottish Futures Trust (SFT) plays an important and valued role in the management and monitoring of the Islands Programme. There was evidence that the SFT programme manager closely follows the progress of projects funded by the Islands Programme and is aware of the challenges they are facing at every step.

14. SFT also provides much needed capacity and capability to island local authorities. Local authority interviewees often highlighted the helpful input and support they have received from the programme manager and others at SFT to keep their projects moving forward.

15. In whatever choices the Scottish Government may make regarding future funding mechanisms for the Islands Programme, it will be important to retain this role in supporting the programme.

Funding landscape

16. A dominant theme in the discussions with local authorities and community organisations – as well as other stakeholders – was the challenge of having to piece together a comprehensive funding package for a capital project from a wide range of disparate sources. This issue was raised repeatedly by community representatives. Stakeholders pointed out that every fund has its own aims and objectives, criteria, application processes, and deadlines. They described this as a ‘cluttered’ funding landscape.

Advantages and disadvantages of different funding mechanisms

17. Stakeholders discussed the advantages and disadvantages of different funding mechanisms for the Islands Programme including (i) direct allocation, (ii) competitive bidding by local authorities, and (iii) competitive bidding by community organisations.

18. Stakeholders saw the main advantages of a competitive bid process as: (i) ensuring alignment between the objectives of the National Islands Plan and the projects selected for funding, (ii) providing an independent, external assessment of what the ‘best’ projects are, (iii) providing the potential for local authorities to access substantial funding, regardless of their geography or size, and (iv) facilitating partnerships between local authorities and their local communities. The disadvantages of a competitive bidding process were seen to be that (i) it is not consistent with the Scottish Government aspiration to devolve decision making to a local level, (ii) it is not consistent with the collaborative ethos of the National Islands Plan, (iii) it is a very resource intensive approach, given the limited capacity available within local authorities and community organisations, (iv) the timetable for annual bidding rounds does not align well with the timescales for progressing projects, (v) it can result in funding being given to the best bids, rather than the best projects and it prioritises ‘shovel ready’ projects over potentially more impactful projects, and (vi) it does not match the standards of scrutiny that would apply at a local level.

19. Stakeholders described the main advantages of a direct allocation process as follows: (i) it offers a more efficient use of local authority resources and capacity, (ii) better decisions would be made if the process of choosing projects was devolved to a local level, (iii) it is consistent with the collaborative ethos of the National Islands Plan, and (iv) it would enable local authorities to use their allocations to leverage funding from other sources. However, stakeholders did not necessarily think that the allocation formula used in Year 1 of the Islands Programme (based on island population and road length) was the best one to use. The disadvantages of a direct allocation process were seen to be that: (i) it would provide less certainty that expenditure is fully aligned with National Islands Plan strategic objectives, (ii) there could be less scrutiny of funding decisions made at a local level, (iii) direct allocation may not foster meaningful community involvement or collaboration in the process of choosing projects and (iv) there would be less scope to fund large-scale projects as local authorities would be limited by their allocation in any one year.

20. There was limited appetite for changing the Islands Programme into a fund that involves competitive bidding by community organisations – including among the community organisations that participated in this evaluation. Stakeholders noted that: (i) there is already a range of funds available to community organisations, (ii) community organisations that are run entirely by volunteers would be disadvantaged in such a process, (iii) island community organisations would have to compete with each other for funding, which was not thought to be helpful, (iv) this type of approach would raise expectations among community organisations, and also levels of disappointment when applications are unsuccessful, and (v) it would attract large numbers of applications of varying quality, and require a large administrative resource to manage.

21. Some stakeholders also suggested other models which, in their view, would address the disadvantages of a direct allocation or competitive bid mechanism. These included (i) hybrid approaches (comprising aspects of both direct allocation and competitive bidding), (ii) an integrated fund for all capital projects on the islands (intended to help address the problem of the ‘cluttered’ funding landscape), and (iii) outsourcing the management of Islands Programme funding to a third-party organisation (which would provide scope to move away from the pressures of annual funding rounds).

22. Stakeholders also suggested a range of improvements that could be made to the current competitive bid process. Key among these was a more consistent timetable that maximises the time available to local authorities for developing applications and committing expenditure. Others related, for example, to rationalising the scheme objectives and assessment criteria, making the application guidance and forms more user-friendly for the community partners who are often involved in preparing applications, and providing fuller feedback on unsuccessful applications.

Features of an optimal Islands Programme funding mechanism

23. The evaluation found little evidence to suggest that one method for disbursing funds is inherently better than another. All methods have their advantages and disadvantages. Instead, stakeholders said that it is often what happens before and after the funding is given that enables a capital programme to achieve its intended positive impact.

24. Stakeholders emphasised the importance of not only providing funding for capital infrastructure projects, but also of ensuring the availability of the necessary human capacity (knowledge, expertise, etc.) to develop, manage and deliver those projects.

25. In relation to the Islands Programme, the process of disbursing funding would ideally sit within a wider system in which:

• Each island area has a prioritised plan for infrastructure development that is based on engagement with local communities and aligned to national policy objectives
• There is multi-year funding which local areas can bid for when projects are ready
• Local authorities have a pipeline of projects, and have a process for moving (other) projects forward where delays occur in those at the top of the queue
• There is sufficient capacity and capability – both within local authorities and community organisations – to develop and deliver projects
• There is coordination across funding streams that may provide co-funding
• There are sufficient contractors available for planning, design and construction
• There is flexibility in how the funding may be spent – both in terms of what it is spent on, and in terms of the timetable within which it should be spent
• There is a robust management and monitoring framework in place.

Conclusions

26. Overall, stakeholders thought the current competitive bidding process was working reasonably well. At the same time, local authorities and community representatives see the process as less than ideal. These stakeholders described the process as demanding, resource intensive and risky (in terms of the amount of time invested for potentially little benefit).

27. Stakeholders suggested a range of relatively small improvements that could be made to the current competitive bidding process. However, the more fundamental changes which local authorities and community organisations wished to see would require a broader review of how the Islands Programme operates – not solely limited to the disbursement mechanism. Indeed, one of the main messages from the evaluation was that the disbursement mechanism is not a key determinant in relation to the overall impact of the Islands Programme.

28. Any wider review of the operation of the Islands Programme should be informed by the findings of this evaluation and would seek to address (i) the need for a consistent and predictable timetable for the announcement of funding opportunities and awards, (ii) underlying issues in relation to capacity and capability, and (iii) the extent to which the Islands Programme can be re-engineered to allow greater flexibility and coordination across the array of funding streams which currently exist to support capital infrastructure projects.