Local Institutions, Productivity, Sustainability and Inclusivity Trade-offs (LIPSIT)

The aim of the project is to identify institutional and organisational arrangements at the regional level that tend to lead to the 'good' management of policy trade-offs associated with increasing productivity, and to make recommendations based on this.

These trade-offs are between productivity growth, inclusivity and sustainability. They arise because authorities have limited resources and have to prioritise: policies to maximise productivity may not maximise inclusivity or sustainability, policies to maximise inclusivity may not maximise sustainability and so on. Trade-off management is 'good' when it reduces the need for compromise between the three objectives, or to the extent that compromise is necessary, when it helps regional policy makers achieve their priorities.

Recommendations will cover:

1. Changes to the way national and regional policy makers operate within the current system of institutions and organisations
2. Modest changes to that system that policy makers responsible for the design of the system are likely to accept, and
3. More radical changes to that system that could be adopted in the future.

If policy makers act on these recommendations this will lead to strengthened institutions and thus to improved regional and local productivities. Ultimately this should lead to an improvement in the UK's productivity record.

To achieve this the project will answer the following research questions:
1. What kinds of relevant institutional and organisational arrangements exist across the UK regions? How do the regional economies compare?
2. What kinds of trade-offs do these organisations consider important and how do they manage them?
3. What trade-offs between productivity growth, inclusivity and sustainability are actually achieved?
4. Which regional institutional and organisational arrangements, now or in the past, have tended to produce 'good' management of these trade-offs? Are there better practices in mainland Europe?

To answer these involves a five stage process:

Stage 1 (scoping): we will capture the state of the art on what explains differentials in productivity, interview and hold two workshops for key stakeholders to refine the research agenda, engage with a wider stakeholder group, and develop a typology of UK regions based on their economies, their institutional and organisational arrangements, and the outcomes over time. We will use this to identify eight regions for in depth comparison.

Stage 2 (secondary data analysis): we will profile all UK regions using measures of productivity, jobs and other economic, social, and environmental targets and examine influences on productivity growth. We will also analyse local industrial and economic strategies, including performance targets.

Stages 3 and 4 involve the collection and analysis of quantitative and qualitative data. The quantitative analysis - of all UK regions - will focus on the impact of governance structures, mechanisms and practices on variables associated with the three outcomes, using approaches that allow for so called "treatment" effects, and to distinguish correlation from causation. The qualitative analysis - of the 8 regions - will include formal analysis of strategic statements, networks, and the functions carried out within these networks, as well as interviews. We will identify what trade-offs are actually achieved and use formal analysis to tease out how institutional arrangements have affected these and the strategic choices - and what might make a difference in the future. We will supplement this with insights from an analysis of overseas regions and historical cases.

Stage 5 involves drawing together the findings of the previous stages, discussing this with key stakeholders, developing a set of recommendations with them, and communicating with a wider stakeholder group.

The project's impact consists in helping regional and local policy makers responsible for industrial strategy to make good trade-offs between productivity growth, inclusivity and sustainability. In order to achieve this, it will help national policy makers improve the design of the institutional and organisational systems through which these strategies are created and implemented.

Regional level policy makers include local authorities, including combined authorities, and LEPS. National level policy makers include: BEIS, MHCLG, HM Treasury, and Cabinet Office/No 10, the Welsh Government, and opposition politicians. Others involved include chambers of commerce, universities, further education colleges, Sector Skills Councils, NHS Trusts, trade associations and trade unions.

Our 'Pathways to Impact' describes in more detail who we will influence and the processes we will use. The rest of this section describes the nature of the impact.

1. Changes within the current system

Regional and national policy makers will gain increased understanding of the nature of the trade-offs they face between increasing productivity, inclusivity and sustainability, and the opportunity costs of pursuing this or that growth scenario, and of local and regional productivities. This will allow them to make more informed choices about priorities.

They will also gain increased awareness of how their decisions and practices affect the decisions and practices of others (at regional, national and firm level) upon whom successful outcomes depend. This will allow them to modify their own behaviour to help them to achieve their priorities.

Decisions by policy makers are about the content of local industrial strategies, the narratives these include or imply, and implementation. Practices affect how implementation is carried out and hence the trade-offs made in practice. They are also a matter of whom policy makers have contact with, how they coordinate the efforts of other actors, how they source and use evidence, how they are organised internally, and how they build a consensus and with whom.

2. Modest changes to the system

Policy makers in a position either to change the current system (e.g. in BEIS), or to encourage others to change the system (e.g. operating at regional level), will gain awareness of what tends to work well and what doesn't in specific contexts. This will be based on the decisions and behaviours described above, and the observed effects of governance and structure on those decisions and behaviours, and in turn on outcomes.

3. More radical changes to the system

Policy makers who are either in a position to change the current system (e.g. in BEIS), or may be in the future (e.g. the opposition front bench), will become aware of any serious defects in that system that require major policy changes. Based on an analysis of current governance, structures and identified gaps, they will become aware of policy options, informed by examples of current and past good practice in the UK and overseas. They will then be in a position to develop longer term policies to provide better outcomes.

We will co-produce the recommendations with policy makers, so there is a high chance that they will accept the recommendations. The end result of the project, if policy makers accept our recommendations, will be stronger and potentially new institutions that work for productivity.These strengthened or new institutions will facilitate improved management of the trade-offs described here and thus improved regional and local productivities. Ultimately this should lead to an improvement in the UK's productivity record, and thus wider benefits, particularly in those regions which have been less successful in the past. It will therefore also help shape the thinking around the development of entities such as Northern Powerhouse and Midlands Engine as they develop post-Brexit.