05What needs to change?

Improvements are needed in all three pillars for evidence use to be supported in local economic policy making. Figure 2 sets out these pillars again, this time with the building blocks that make them up, as discussed in sections above.

In order to increase the use of evidence in policy making and break down barriers that exist within them, local and national government and other governmental bodies should consider interventions that target each of these building blocks. These interventions should happen at similar times, as all pillars are interrelated. But there should be particular focus on getting the incentives – the rules of the game – right for local government if resources and capacity are to be put to good use. This is because incentives ultimately influence the choices and behaviour needed to address some of the resource and capacity constraints in local government policy making.

Incentives

To increase clarity and certainty in the policy making process, national government should do the following:

• Set a national policy goal for local economic development and put a long-term strategy in place for achieving it. It is at this strategic stage, when objectives are set, that the decision about where to direct public investment should be made. The Levelling Up White Paper has created a strategy, but the Government has not credibly committed to it since. The next government should either do this or set out an alternative with a plan to deliver it.

This clarity will make it easier to build business cases for investments and meet the requirement for evidence to build these cases. It would also create greater certainty by reducing: i) short-termism; ii) policy churn; and iii) the moving of goalposts.

• Form a single pot of funding for economic development. The awarding of this funding should be defined by the goals of the national strategy, and national government should be clear on quality of evidence required and assessment criteria. This will promote effective evidence use by allowing joined-up investment strategies in local government and prevent dilution of its impact through project ‘siloing’ or a focus on shovel-ready projects.
• Take a ‘carrot and stick’ approach to funding decisions. National strategy and pot funding should combine to reward local authorities that demonstrate clear and effective use of evidence in their proposals, while not advancing those where it is lacking. This should be explicit criteria in the application process.
  • Signal to local government the importance of designing and delivering projects that work through a credible commitment to monitoring and evaluation. DLUHC should implement its proposal to run more centrally-led impact evaluations and streamline the required monitoring data to improve the understanding of effective policy at all levels of government. To both enforce adherence to this guidance and keep local government actively involved in this process, generating appropriate monitoring indicators should be a key condition for receiving funding.
  • Reform local government finance (in the longer term) to create a stronger link between budgets and the performance of the economy, reducing the reliance on grant funding. This would financially reward authorities implementing evidence-based policy that achieves local economic growth, sharpening incentives to incorporate evidence into the policy making process.
  • End elections by thirds in local authorities. Elections happen every four years in London boroughs, Birmingham and Liverpool, for example. The same should be implemented elsewhere to remove barriers to formulating evidence-based local government strategies, by freeing up bandwidth that would otherwise be consumed by campaigning.

Resources

To increase effective data and evidence use in local economic policy making, national government should do the following:

• Continue developing the provision of subnational data. There have been good steps in this direction, and the work of Oflog, ONS Local, and DLUHC Spatial Data Unit should continue and expand on their provision of data and analysis. This should include increasing the breadth of data available, as well as improving the quality and timeliness of existing datasets.
• Central government should take a coordinating role for policy evaluation. As well as sharpening incentives for evidence use, this would help the sharing of evaluation evidence across local government. This should be implemented alongside the upcoming Evaluation Registry, a much-needed central repository for previous evaluations.
• Set Oflog’s core responsibilities to encourage evidence use. Oflog should: i) set guidance for local government on the structures required to use evidence in policy; ii) co-conduct impact evaluations to understand more broadly how policy is successfully implemented; and iii) identify strategic policy areas with evidence gaps that are important for growth.

Capacity

To build capacity in local government to carry out effective policy, the following steps should be taken:

• Training should be targeted to close identified skill gaps, rather than the piecemeal provision that currently exists. Central government should work with local government to understand where training is needed with the aim to close gaps at every stage of the policy making process.
• National government should provide capacity funding for local authority hiring and retention of economic or analytical specialists. This would help local authorities be more competitive when hiring in skills needed for policy making. This funding should not be connected to specific projects or funding rounds. Where capacity support is project-specific, it should be open to all prospective local authorities and occur well before submission deadlines.
• Local authorities should internally review objectives and the skills needed to implement policies for economic development. Increasingly available subnational data means required skillsets for economic development staff are rapidly changing. A recruitment restructuring with clearer responsibilities and career paths would also help attract the right staff. Learnings could also be made through dialogue with other councils, or engagement with other bodies (such as CEDOS and LGA).
• Green Book should ‘mandate’ rather than ‘encourage’ evidence use. This should be accompanied by a clarification and simplification of the five-case model, backed up by national government strategy.⁸⁴ A refined Green Book as a tool for evidence-based policy making can improve local government processes. A mandate for evidence use will have the added bonus of sharpening incentives.
• National government should make reporting requirements proportionate to local authority capacity during monitoring and evaluation of policy. This will free up capacity particularly in smaller local authorities that are most constrained by the current ‘one-size-fits-all’ approach. There is a balance to strike here – sharing the burden more effectively between national and local government, without compromising quality and oversight on local government.
• Even better, local authority boundaries should be redrawn to better match economic geography.⁸⁵ Such a realignment would better equip local government to use evidence strategically in policy making due to the better fit to their local economies. This would also involve a consolidation in many places, reducing the ‘natural’ variation in local authority capacity to use evidence, enabling evidence-based policy making more consistently across the country.