With the general election now concluded, City-REDI reflects on our research to see what ideas we can draw out for the Labour government.
Competitive funding is bad for places
Back in 2022, we looked at levelling up in an edition of REDI-Updates. In drawing together all the lessons we learnt from understanding and measuring levelling up, one of the key lessons that came out was about competitive funding.
Generally, competition is bad for places. It stifles partnership working and encourages piecemeal bidding and a lack of long-term investment. Small competitive pots are no replacement for long-term investment in place to address structural inequalities and the general reduction in local budgets. Specific national objectives may not fit local areas or address key local needs. Place partnerships need to be trusted to deliver to the needs of the area, people and businesses they represent.
Investing in regional inequality
The UK is deeply divided between prosperous places and lagging regions. The UK economy is extremely unbalanced, in the sense that the UK is now one of the world’s most inter-regionally unequal countries.
Research undertaken in partnership with the Chartered Institute of Public Finance and Accountancy (CIPFA) looked at international cities around the world that have innovated to successfully overcome significant social and economic inequality. Its findings compliment our work on levelling up, in that it emphasises the need for long-term investment in regions, as opposed to small pots of funding with prescribed uses. The work also highlighted a number of other key points that hinder the UK from improving its regions, including:
- A failure to monitor and evaluate investment programmes at the local level.
- Investment that is specific and proportionate to a region’s needs.
- A clear vision and well-defined strategy for what the place should look like and how it should feel to live in are essential for successfully reducing inequality.
- Political will, commitment and support across geographical scales are vital in making change happen.
- Public sector institutions and finance professionals have a key role to play in measuring outcomes, ensuring value for money and building effective relationships with other national organisations.
The need for cultural recovery
Art and culture contribute £10.6 billion to the UK economy as well as helping to tackle social injustice and bring communities together.
We took an in-depth look at cultural recovery for the first report produced by our latest UKRI funding project – the Local Policy Innovation Partnership (LPIP) Hub.
The report highlighted key factors impacting cultural recovery in the UK:
- The UK’s centralised economy disproportionately impacts those areas with weaker cultural infrastructure. Coordination of funding for arts and culture between local and national governments remains disjointed and uneven.
- The need for cultural recovery has been intensified and accelerated by the impact of the COVID-19 pandemic impact, but there were long-standing tensions before that, dating back to the turn of the century.
- The most effective cultural interventions are predicated on the involvement of local actors with intimate contextual knowledge and then giving them the autonomy and agency to design those interventions in a bespoke way.
Support Higher Education Institutions in the quest to become civic universities
City-REDI is part of both the Civic University Network and the National Civic Impact Accelerator (NCIA) which helps to support universities to develop their civic leadership, maximising their local social and economic impact and helping to address national and global challenges. Universities play a key role in a region’s economy. In 2016, London Economics produced a report for the University of Birmingham which highlighted the importance of the University to the West Midlands:
- It generates £3.5bn every year for the economy.
- It supports 15,545 jobs in the West Midlands region, with almost one in 50 jobs in Birmingham depending upon the University.
- It has a research and knowledge transfer activity that is worth £885 million. Every £1 million invested by UK Research Councils generates an additional £12 million for the economy.
A recent report by City-REDI for the NCIA highlighted the importance of PhD study. The study, A review of the economic and social value produced through funding PhD students, explores the extensive impacts of PhD study, from enhancing university operations to spillover benefits for society, industry, and personal development. It emphasises the civic role of universities, particularly in relation to place-based strategies and industry relationships. With over £3bn funded into PhD study in 2022/23 by UK Research and Innovation, the report highlights the significant returns for individuals, the Exchequer, and university-industry collaborations.
Universities have a powerful role to play in the regions in which they are based, and this role could be further enhanced with continued support.
Business needs more support, not less
Just before Christmas 2023, we released a report evaluating the impact of the Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP). Our report found that the GBSLEP helped to increase turnover for businesses that received support from them, provided tailored skills support for the region and for every £1 the GBLSEP spent, £3 was generated.
The impact of LEPs varied across the country in their effectiveness. In a podcast in mid-2023, Juliane Schwarz spoke to Mark Hart, Professor of Small Business and Entrepreneurship at Aston Business School about small business support. In the podcast, Mark highlighted some of the weaknesses of the LEPs, including:
- There were too many of them around the country, they lacked muscle and were underfunded.
- They had overly complicated funding models, and it was not clear who was their master.
- They didn’t necessarily fit well into regional governance structures which caused local authority disputes.
- Despite these issues, there were successes around the country.
- We are now potentially moving into an even more complicated and granular situation. We need big government decisions to sort this out.
Moving forward, we need to build an ecosystem of support which gives resources to a range of support mechanisms and the organisations involved in administering them. Business support should be joined up in its approach and bring continuity across the whole business support pipeline. Longevity, consistency, and resources are all important.
Reduce the HM Treasury discount rate
At City-REDI, we do a lot of work with the HM Treasury around the Green Book and developing Business Cases. Rebecca Riley is the Chair of the Green Book User Network Steering Group and we’ve run several events in conjunction with HM Treasury to help people engage with the Green Book and allay misconceptions about its use. In fact, we’ve got one coming up in September, debunking the myths of the Green Book.
Recently, Calvin Jones, Professor of Economics at Cardiff Business School was kind enough to write a blog for City-REDI looking at HM Treasury’s discount rate. One of the practical steps Calvin outlined in his blog to help improve long-term investment was to reduce the current discount rate used to assess the value of investments in the future. The Treasury business case model – adopted across the UK, currently uses a discount rate of 3.5% – the amount at which we depreciate future benefits for every year that passes. A figure which significantly outstrips the actual growth in the UK. Calvin also suggested that business cases should also reflect that the Green Book should also have a stronger emphasis on the environment.
Disclaimer:
The views expressed in this analysis post are those of the author and not necessarily those of City-REDI or the University of Birmingham.