Types of Public Funding

Summary: Criteria and interests of public authorities for distributing funding to neighbourhoods often differ from the interests of the other stakeholders. Better effectiveness of public investment and support for neighbourhood regeneration can be greatly facilitated by public authorities and local stakeholders working together.

The public authorities, local and national, normally provide two kinds of funding to the neighbourhoods and their communities:

• Ordinary funding, as management, maintenance and investment of physical infrastructure (e.g. streets) and social infrastructure (e.g. education or unemployment benefits) infrastructure, and
   
• Extraordinary funding, that is allocated to alleviate recognised severe problems.

The objective for a public authority, in theory, is to provide equal quality of service to all parts of its territory and level social conditions for all social groups layered across its territory. In practice, this universal obligation is never implemented completely, partly because of heterogeneity of society and freedom to choose, partly because of administrative deficiencies. If this could be achieved in normal distribution of services the extraordinary funding would not be necessary at all. Hence the authorities try to level the differences by adjusting ordinary funding; consequently, at a given time different neighbourhoods and groups receive ordinary funding at levels above standard or below standard. Where the differences are severe, extraordinary programmes are introduced.

• In deprived neighbourhoods maintenance costs are usually higher due to vandalism and indifference of the users, they consume more social subsidy due to higher non-employment rate. Therefore their absolute share may turn out higher than in well-to-do neighbourhoods. The public is reluctant to invest in new installations that depreciate faster in these deprived neighbourhoods rather improving things where it is cheaper to maintain them. That creates effects both of resignation and of a vicious circle. Initiative, awareness and share of public funding are often directly interrelated. Resignation and lack of initiative common to the deprived neighbourhoods often results in their not receiving the proportional share of public investment. Hence building capacity to accommodate the change can substantially influence ability of the neighbourhood and its social and interest groups to get a fair share of public investment and subsidy of both types.
   
• Funds for public extraordinary funding are limited, the problems are many and they occur in many places. As the extraordinary funding has to be used with maximum political benefit, it tends to be allocated for time as short as possible, measures as effective as possible. Therefore authorities tend to prioritise "pump-priming" above total subsidy as this is supposed to help building the momentum that is carried on by the market and voluntary forces. On the other hand, the nature of representative democracy often leads to placing the immediate resolution of recognised problems higher than fundamental changes. Together, these two constraints make it difficult to get funding for long-term fundamental change that is required to reverse negative development trends in deprived neighbourhoods.

The interests of separate stakeholders and the neighbourhood community as a whole may be quite different from the objectives of the public authorities. Individuals are oriented to improving their own quality of life with least of effort. It creates competition between different neighbourhoods and interest groups for increase of ordinary and allocation of extraordinary funding. The contradiction of public interests, individual interests and real nature of problems can best be resolved by awareness, mutual confidence and working together on the problems.

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