Skip to content

Local economic policy making: where’s the evidence? 

arrow down

In this guest blog, Rob Johnson author of L.A. Evidential: improving evidence use in local economic policy making, lays out why all levels of government must make changes over the short and long-term if local government is to have the incentives, resources, and capacity to do evidence-based economic policy. This blog was originally published on the Centre for Cities website.

Basing policy on evidence should be the norm. You’d be hard pressed to find a person at any level of government who wouldn’t agree that policy should, whenever possible, be enacted on clear evidence that it will work (and vice-versa when there is compelling evidence that it won’t).

So it is all the more surprising that, in many cases, this doesn’t happen. This is certainly true for policy aimed at local economic development in the UK – there have been a steady stream of reviews and audit reports saying as much over the past few years.

What explains this gap between intention and implementation? This is what Centre for Cities’ latest report L.A. Evidential: improving evidence use in local economic policy making, investigates. It identifies three ‘pillars’ that support evidence-based policy making – incentives, resources, and capacity – and the barriers they face in the context of economic development within local government.

Without the right incentives, little progress can be made

The core problem with policy making is that the use of evidence isn’t incentivised. The way local government is funded – through grants rather than through keeping increases in taxes from higher growth – means there’s no payback to use evidence. The constant cycle of elections doesn’t facilitate long term thinking. And the way central government behaves in many instances gives the impression it doesn’t care about evidence use.

On the latter, the national government’s design and delivery of levelling up funding pots is a good case in point. There is a lack of coherent national strategy on what funding is actually aiming to achieve. Monitoring and evaluation is poorly defined and enforced. And selection criteria are murky. For example, the second round of Levelling Up Fund eligibility rules were amended after bids had taken place, leaving 55 local authorities having spent significant resources on bids with no chance of receiving funding. Given these conditions, it is perfectly rational for local authorities not to spend time and money collecting evidence.

The resources problem increasingly isn’t a data issue, but a lack of evaluation evidence

Data and evaluation evidence are the resource inputs needed to kickstart the evidence-based policy making process. It’s true there have been great strides in subnational data offerings for local government over the past few years (ONS Local, Spatial Data Unit, etc.), though this is in response to longstanding data shortages. This provision needs to continue, improving on breadth, accessibility, and granularity of current offerings.

Throwing more data at the problem (while welcome) won’t bring about evidence-based policy making on its own – the main barrier in the resources pillar these days is the lack of robust evidence gathered from previous evaluations. Evaluation is often not thought about during the policy design process, compounded by lack of direction from national government. This means availability of evidence from past policy interventions is sparse, and what does exist is often not rigorous – for example What Works Growth work found that only 27 out of 1,450 evaluations assessing the impact of access to finance met minimum robustness standards.

Skill gaps, faulty tools, and local government fragmentation are all capacity constraints

Even with the best incentives and the right resources, evidence-based policy making will not occur if local government economic development teams do not have the capacity to do it.

These capacity constraints are more of a bottleneck than ever: if we use planning budgets as a proxy, local government economic development funding been slashed by over a third since 2010. This erosion of competitiveness with the private sector has caused recruitment issues and skill gaps within teams, which piecemeal training drives cannot fully address. And so the result is consultants being brought in, preventing the development of in-house skills, but also costing a pretty penny – Bolton spent £277,000 on consultants for two levelling up bids, both of which were unsuccessful.

Skill gaps expose flaws in the tools for incorporating evidence into economic development policy. The Green Book should be the main capacity-enhancing tool for local government, but unclear economic case guidance has led to an arms race for model complexity and benefit-cost-ratios at the expense a wide strategic case. Building skills will go some way to solve this issue, but Green Book’s shortcomings at the local level should also be addressed.

All these capacity issues are compounded by the fragmentation of local government. When the top 20 local authorities spend more than eighty times the amount on economic development than the bottom 20, there cannot be a level playing field when it comes to capacity to use evidence.

Building solutions: quick wins and long-term projects

These barriers are not insurmountable. But overcoming them requires targeting the building blocks of each pillar, with actions at all levels of government, to ensure local government’s long-term ability to do evidence-based policy making and support local economic growth. And while no pillar can be neglected as all three are required to support evidence-based policy making, the focus should be on getting incentives right, if resources and capacity are to be put to good use.

Some recommendations to overcome these barriers can be put into practice now, while others are more fundamental, to be pursued over the long-term. Hover over each building block in the diagram below to see the key short-term and long-term goals for each pillar – for more detail, read the report here.