Levelling up: the need for an institutionally coordinated approach to regional and national productivity

ABSTRACT

The paper argues that the UK’s endemic regional–national productivity problems cannot be addressed by the UK’s current institutional and governance set-up. This paper argues that the establishment of an appropriate institution, body or forum is essential in order to fill the current governance vacuum. The appropriate nature, form and logic of such a body can be gleaned by observing various international comparator bodies which undertake different aspects of the types of roles and tasks that a UK body must necessarily undertake. The options for a UK body comprising elements of these comparator institutions are discussed in detail.

KEYWORDS:

• productivity
• regions
• institutions
• coordination

JEL:

• O43
• P11
• R28
• R50

1. INTRODUCTION

In the UK there has recently emerged a widespread awareness of the scale of UK regional productivity imbalances and their role in holding back national productivity performance. Recent official publications, and most importantly the 2022 Levelling Up the United Kingdom White Paper (HM Government, 2022), have spelled out the imperative for Levelling Up, which in economic parlance is about promoting interregional productivity convergence, and these publications have reoriented public debates to focus more deeply on the deep-seated structural problems of the UK’s economic geography. As part of this, the role that the UK’s over-centralised governance system has itself played in these growing inequalities is also nowadays widely discussed (McCann, 2016, 2022, 2023a), and possible solutions are being sought to help rectify these regional productivity disparities. In particular, there are many discussions regarding how the UK can transition to a more balanced and robust economic geography of productivity growth.

This paper argues that one possible solution to this transition problem can be found in the creation of a statutory and independent organisation to address productivity and, more broadly, economic development, similar to commissions operating in other Organisation for Economic Co-operation and Development (OECD) countries.¹ The UK productivity and economic development arena lacks any meaningful institutions which can help to facilitate such transitions, whereas other countries have set up bodies explicitly charged with addressing these types of issues. Each of these commissions has a different history, but the remits, roles and activities of these various bodies offer insights into what might be possible in the UK, and how such a body, institution or forum might respond to the Levelling Up challenge set by the UK government. The contention of this paper is that a UK version of these various bodies, which draws on elements of each of them, could play an important role in the facilitating the Levelling Up transitions by acting as a countervailing measure to the inherent top-down centralising policy-control tendencies, and a catalyst facilitating genuinely multilevel governance and shared management responsibilities essential make Levelling Up work.

In the UK, calls for such a body, institution or forum addressing specific issues have already been made by Bell et al. (2021) with regard to the challenges associated with fiscal devolution and by the Common Futures Network (CFN) (2017) and the UK2070 Commission (2019, 2020) with regard to spatial planning and regional economic development issues.² These papers argue that flexible institutional arrangements which allow for a mix of vertical and horizontal decision-making autonomy, scale and coordination in different arenas are essential for a well-functioning central-sub-central governance system, especially in a highly heterogeneous interregional context. As part of the institutional fabric, the OECD find that well-designed pro-productivity institutions (Pilat, 2023) can generally improve the quality of the policy process and political debate, and can make a significant contribution to evidence-based policymaking, as long as they are properly resourced, genuinely independent, and leveraging expertise focussed on medium and long-term goals (Renda & Dougherty, 2017).

In the UK case, however, the specific Levelling Up challenge relates to promoting productivity enhancing policies and changes which specifically help the economically weaker regions, and doing so in a manner which is in the national productivity interest (McCann, 2022a, 2022b), and not simply in the local interest. As such, the UK challenge relates to many of the challenges evident in other countries, but also has very UK-specific elements which need to be considered. The issues raised in this paper are applicable to all countries facing regional productivity challenges. However, the UK case provides an interesting template for assessing these challenges, because of the UK’s particular combination of high interregional inequalities and a hyper-centralised governance system. In response to the various calls (Bell et al., 2021; CFN, 2017; McCann, 2022b; UK2070 Commission, 2019, 2020), this paper begins to sketch the features of a body or institution aimed at addressing the UK’s regional–national productivity problem (McCann, 2016). This paper examines the nature and objectives which any proposed UK body or institution would need to display in order to consider both the raising of productivity, and in particular, in the UK’s economically weaker regions, broadly defined. It is this combination of addressing both the productivity-enhancing issues and the geographical and regional issues which is both so challenging and essential in the UK case, and with which any such body has to grapple (McCann, 2016).

In order to address these issues, the rest of the paper is organised as follows. The next section sets out the current UK economic and institutional context which is shaping the Levelling Up challenge. The third section then distils the five essential common features of any such commission which must be in place for it to function successfully. This allow us in the fourth section to outline the main design options for the establishment of a UK regional–national productivity forum or institution which is appropriate for addressing the UK’s specific interregional challenges. Finally, some brief conclusions are provided.

2. BACKGROUND TO THE UK LEVELLING-UP AND INSTITUTIONAL PROBLEM

The UK has a deep-seated productivity problem (The Economist, 2022), especially during the last decade. Between 2009 and 2019, the UK was the second slowest growing economy in the G7, after Italy and the latest forecasts give a similar prognosis for the coming years (The Economist, 2022). However, much of this associated productivity growth slowdown was associated with the productivity reversals and flatlining of many of the UK’s regions, together comprising almost half of the population (McCann, 2016; McCann & Yuan, 2022: The Economist, 2022). No country in the OECD, apart from Poland, has such levels of interregional inequality (McCann, 2020; Coyle, 2020). In the UK, poor national productivity and productivity growth is very much a geographical issue, and these national and regional productivity growth issues are therefore closely intertwined.

While it is nowadays generally understood that the UK has some of the widest interregional and interurban productivity inequalities of any industrialised economy (Carrascal-Incera et al., 2020; McCann, 2016, 2020), and that by international standards, these interregional inequalities are evident over very small distances, until very recently this was not the case. There are some common aspects to the productivity shortfalls across many regions (McCann & Yuan, 2022), while there are also likely to be major differences between the sources of poor productivity in different regions and between localities within regions. Mainstream thinking in UK economics had largely ignored these regional and local issues for many years (McCann, 2023a), and this is also reflected in how questions about productivity are traditionally framed in policy discussions. Over more than four decades, the UK has adopted an overwhelmingly space-blind approach to economic policy (McCann et al., 2023), in which regional and spatial considerations have typically played little or no real role. To the extent that these issues were ever addressed by government, they were only ever a very marginal consideration, with total regional economic development expenditure never amounting to no more than 0.1–0.2% of UK gross domestic product (GDP) (Martin et al., 2021; McCann, 2016). However, this situation is now starting to change. The publication of the 2022 Levelling Up the United Kingdom White Paper (HM Government, 2022a) represents a much-needed, expertly constructed and long overdue recognition of the role that the regional productivity growth play in the national productivity growth story. The extensive and detailed analysis therein sets the scene for a wholesale reconsideration and reorientation of how the UK addresses economic development problems.

One of the key challenges facing the whole Levelling Up agenda is that the over-centralised nature of the UK governance systems has itself been a major contributor to the regional productivity imbalances (McCann, 2016) which are at the heart of the deep-seated problems which the Levelling Up agenda is attempting to respond to. There are many complex reasons for this over-centralisation, including economic history (Crafts, 2018), ad hoc political decision-making (McCann et al., 2023) and institutional churn (McCann, 2016), which in the context of the UK have collectively (Coyle, 2020) given rise to the widespread local and regional undermining of the public institutional and governance arenas (Green et al., 2015; Hutton, 2015) which are essential for local and regional markets to work effectively (McCann, 2023b). Yet, while the White Paper was an excellent document on many levels, of itself, it does not pave the way for the requisite governance reforms needed for Levelling Up to take place, in that it contained no legal provisions or specific recommended changes to the institutional make-up of the UK, other than recommending elected mayors at the county level or groups of counties (Institute for Government (IFG), 2022). At the same time, the various stated missions regarding progress on different socio-economic dimensions which were set out in the Levelling Up White Paper do not contain any specific details of how such missions are to be achieved, or what the institutional architecture for doing so looks like. These are all details which are still to be filled in, primarily by central government, and also to a lesser extent given their limited resources and autonomy, by sub-central government.

In order to begin to consider how such issues may be addressed, and what types of institutional changes might help facilitate and foster the Levelling Up agenda, it is first necessary to understand the key institutional features of the UK economic development governance landscape. Against the background of the UK’s economic geography and its interregional productivity problems, from institutional and governance perspective, there are multiple challenges which need to be addressed in order for levelling up to be a reality, of which for our purposes here, three features are especially pertinent.

There are unbalanced power relations between central government and sub-central government in the UK have almost no other parallels amongst OECD economies (McCann, 2022a). In addition, there is currently very limited genuinely devolved economic development capacity in the UK, outside of the three devolved administrations and London and handful of the large city-region combined authorities. Local government autonomy (Ladner et al., 2019) and regional authority (Hooghe & Marks, 2020) in the UK are akin to small Central and Eastern European countries. A direct result of the first two features, is the fragmentated and overlapping jurisdictional landscape of the UK local and regional economic development governance system makes for an institutional environment which ranges from being somewhat unclear to being entirely opaque. The UK governance systems represent a combination of ultra-centralisation at the central government levels, and fragmentation at the local level. Apart from the three devolved administrations, there is, in effect, no meso-level of governance, as is typical in all other large industrialised states. Moreover, the fact that since the late 1990s the three devolved administrations in Scotland, Wales and Northern Ireland have developed ideas regarding issues such as fiscal devolution and productivity largely independent of each other rather than as part of one coordinated system, underlines the UK’s lack of any sub-central horizontal convening or coordinating governance institutions or mechanisms.

The first scale-related problem is that the architecture of the UK governance system is hyper-centralised, top-down and largely sectoral rather than spatial in thinking. This governance system is overwhelmingly pyramidal in nature, and can be depicted as ‘∧’-shaped, that is, an inverted ‘V’-shape governance system, whereby sub-central government is overwhelmingly dependent on central government funding, policy decisions and control systems. The ∧-shaped architecture of the UK governance system has two key features. First, this shape inherently maximises the degrees of separation between citizens and high-level decision-makers; and second, it also generates congestion at the top of the pyramid for influence. Only well-connected businesses, social networks and London-based think-tanks, research institutes and advisory bodies get a hearing (McCann, 2022a, 2023a). The combined effect of this maximising of the degrees of separation along with the congestion at the top mean that the whole governance system inherently disincentivises and militates against any engagement from the bottom to the top (McCann, 2022a, 2023a). As such, a key failure of the UK’s pyramidal ∧-shaped governance system is that the central government fails to learn any new knowledge from local citizens, communities, and local governance activities (McCann, 2022a, 2023a). While expert knowledge flows down the system almost no experiential and locally specific knowledge flows up the system (Coyle & Muhtar, 2021). The result is top-down policymaking which is largely devoid of any context, nuances or engagement with citizens (Slater, 2022), and this represents profound and systemic knowledge failure, not simply a market failure or information problem as economists might typically frame it (McCann, 2022a). Other OECD countries address these knowledge problems by either becoming a small country, by federating or federalising, or by decentralising in the case of unitary states, such that the locus of high-level decision-making becomes heavily devolved to a meso-level of variously states, provinces, länder, cantons, autonomous communities, prefectures or regional levels (McCann, 2022a). Across the OECD, although there is a wide range of sizes, the typical scale of these devolved decision-making institutions is a population of 3–5 million (McCann, 2022a; Pope et al., 2022),³ and particularly in large countries. These sizes of polities are small enough to allow for ongoing mutual contact and knowledge flows between citizens and decision-makers, while also being large enough for the financing and staffing of a proper administration to be undertaken and for a policy to have an effect. Most of the areas to which devolved decision-making is being recommended in the UK are far smaller than this, especially at county and local enterprise partnership areas, and even the largest combined authorities are only at the very lowest scale by OECD standards for similar types of bodies (Pope et al., 2022).

The second scale-related problem is that across the OECD, sub-central governments have four basic functions, three of which naturally lend themselves to local accountability via local voting, and one of which does not (Clark et al., 2010; McCann, 2022a). In the UK, the over-centralised governance systems leads to widespread confusion between these different roles, and the spatial implication of them. The first three roles of sub-central government are what are known as ‘citizen facing’ roles (Clark et al., 2010) and these are, namely: the representation of citizens in the actions of the elected officials; the provision and delivery of household, personal and amenity-related activities and services; and the regulation of activities associated with the provision and enforcement of guidelines necessary for maintaining social order and community well-being (Clark et al., 2010; McCann, 2022a). These three ‘citizen-facing’ roles are the issues which dominate local politics and local voting, and they can typically be carried out effectively in terms of local government areas or even at smaller scales. This is not the case for the fourth role of sub-central government, namely, the ‘market facing’ role of stimulating and coordinating wider investment and economic development processes (Clark et al., 2010; McCann, 2022a), issues which tend to rarely influence local politics or local voting.

The ‘market facing’ role of sub-central government is aimed at enhancing investment and economic development and this can rarely be justified at the very local level. Such activities typically are better undertaken at either a city-region scale or even at a wider regional level (Industrial Strategy Council (ISC), 2021; One Powerhouse Consortium (OPC), 2020; UK2070 Commission, 2020), as the case in other large federal or highly devolved unitary countries. As mentioned above, in these other cases, many areas of economic policy such as foreign direct investment, supply chain development, skills training, innovation and research and development (R&D) promotion are typically carried out at spatial levels of between 3 million and 5 million, because these economic development and investment activities operate in the context of wider and diverse market areas, geographies, timeframes, financing, partners and stakeholders, tools and audiences, well beyond very local areas (Clark et al., 2010; McCann, 2022a). Outside of the UK, in other large economies, many of these issues are rarely, if ever, addressed at a central national level, but instead are responded to primarily at the meso-level of governance. As a result, these more complex and varied ‘market facing’ activities often require different structures and organisational arrangements from the other three much more localised ‘citizen facing’ roles of sub-central governance (Clark et al., 2010). Enhancing the market-facing role of sub-central government is fundamental to Levelling Up, but the current devolution arrangements being advocated by the Levelling Up White Paper are largely silent on these issues.

In the case of the UK, and especially given the particular economic and institutional challenges facing the Levelling Up agenda, there is a case for the establishment of (a) new external actor(s) whose design and remit is explicitly aimed at facilitating this spatial and economic transformation agenda over the long-run. In particular, such a body, institution or forum would need to be able to undertake and facilitate roles which are currently not undertaken in the UK, and which international experience suggests are essential for promoting enhanced economic development. Given the specifics of the UK Levelling Up challenges, such a body would need: to be able to undertake and offer independent expert analysis on economic development to institutions in need of this; to galvanise evidence-based and policy learning from across the OECD in this arena; to facilitate the engagement of diverse stakeholders in order to bring multiple perspectives and insights to a specific regional or national productivity-related issue; to foster shared management in local and regional policy-design and delivery processes across different levels of government in order to correct for the pre-existing governance imbalances; to help in the coordination of long-term policy thinking and spatial planning, and; to encourage the brokering of long-term policy agreements between different stakeholders and jurisdictions. In particular, such a body or forum would need to be able to undertake each if these roles without being constrained either by the top-down institutional siloes inherent in central government or by the widespread institutional fragmentation evident at the local and regional scales.

3. THE ESSENTIAL FEATURES OF A REGIONAL–NATIONAL PRODUCTIVITY INSTITUTION

The establishment of a UK regional–national productivity institution, body, forum or commission, faces many common challenges which are inherent for the establishment of such a body in any country. As Banks (2015) explains, designing and implementing pro-productivity policies is always difficult because of both the technical and political obstacles involved. Complex areas of policy rarely can be addressed by adopting ‘off-the-shelf’ policy frameworks and instead require careful ex ante design involving public consultation and ex post monitoring and evaluation (p. 6). At the same time, political opposition will always arise from institutions or interest groups who feel threatened by proposed policy or governance changes aimed at overcoming impediments to productivity improvements where these are of benefit to them. This includes major actors from the private sector and also central government actors who fear that their monopoly or monopsony positions may be jeopardised. In recent decades, the UK has been characterised by rapid policy and institutional churn (Cook et al., 2020; IFG, 2017), with agencies and policy schema being established and then demolished, so the proposed body would need to be best insulated from fluctuating policy cycles.

As such, in order for these technical and political difficulties to be overcome, institutional arrangements need to be put in place which communicate to as many stakeholders as possible the wider benefits of any proposed reforms and to consider the distributional effects of any proposed changes (Banks, 2015, pp. 6–7). In order to ensure that these capabilities are in place, institutions fostering productivity would need: (1) the capacity to generate such knowledge and information, and (2) to be embedded into policymaking processes which influence productive performance, or at least to be in a position to influence decision-making in those areas. Banks (2015) also argues that there are three further features that would also seem to constitute ‘de minimus’ requirements of any productivity commissions, and these are: (3) a mandate to focus on the economy-wide impacts of relevant policies and to identify changes that would generate gains for the community as a whole; (4) the body must have sufficient independence to ensure that research, findings and recommendations are not susceptible to undue influence by special interests, and (5) the body’s operating procedures and outputs that are open to public consultation and scrutiny (pp. 6–7). The institutional challenges involved in establishing and designing a body promoting pro-productivity policies are already significant, so the OECD (2022) has set out clear guidelines as to how pro-productivity bodies should be established and set up. Since 2016, some 17 EU countries have set up national productivity boards,⁴ which now also meet regularly to share experiences and evidence.⁵ In some cases, these boards are housed within existing bodies such as the Centraal Planbureau (CPB) in the Netherlands, or the National Competitiveness and Productivity Council in Ireland, while there are also examples where countries have established new bodies, such as France’s Productivity Council based at France Strategie.⁶

In addition, in the UK the complex interaction between the regional productivity problems and the over-centralised governance system places additional challenges on the design of an appropriate UK body. The design of such an institution or institutions relevant for the UK regional–national productivity challenges might appear to be a tall order, yet there are already institutions in other OECD countries playing such roles, and therefore understanding the nature and roles of these bodies provides explicit pointers as to what such a UK body, institution or forum might look like. There are both national bodies and also regional and local bodies operating in different OECD countries whose different remits, roles and activities offer insights into what type of body, institution or forum could be set up in the UK specifically to foster Levelling Up. In particular, the national commissions such as the Australian Productivity Commission, The New Zealand Productivity Commission and the Netherlands Socio-Economic Council, along with the regionally based commissions such as the New South Wales Productivity Commissioner model, the North of the Netherlands Socio-Economic Council and the New York Regional Plan Association (NYRPA), all provide insights into what might be possible in the UK context. The details of these individual commission are outlined in the supplemental data online.

The five key common features of each of the six national and regional commissions in Australia, the Netherlands, New Zealand and the United States are independence, legitimacy, expertise, transparency and longevity. These five key features are essential in order to persuade different stakeholders and all interested parties to engage with the commission’s work in a constructive, substantive and detailed manner.

3.1. Independence

In the case of the Australian, Dutch and New Zealand models, independence is enshrined in an Act of Parliament which set up these bodies as independent Crown entities, which ensures that the activities of the commissions are not subject to any external political pressures. Although much of the work of the national bodies is publicly funded either by different arms of government or national stakeholders, it is not subject to the political whims of those in power. In the case of the sub-national state commissions in Australia and the Netherlands, these are funded at the state level and province levels, respectively, and as such, are to some extent subject to the political whims of local politicians and governments. In the case of the NYRPA (2019), its independence is ensured by the fact that the forum is funded by a diversified mixture of philanthropic, corporate and public endowments and donations, which is independent of any particular political party or of any business or industrial interest groups, and with no dominant funding stream from any particular donor. However, the notion of independence also extends beyond funding, in that it is also about ensuring the credibility and authority of all the actions and activities of the commissions. Independence is absolutely critical in situations where the data are simply not available and evidence has to be derived from different sources, formats and experiences (Banks, 2011). In this sense, moral suasion rather than formal powers is an essential feature of the commissions’ activities, and the essential independence of the commission is also ensured by the other four key features of the commissions, as listed below. Finally, independence also requires that the original terms of reference for any enquiry requested by government should not try to specify the answers being sought.

3.2. Legitimacy

The legitimacy of these commissions is driven by the fact that their remit from central or sub-central government is explicitly to talk to all potential stakeholders, and in particular, to those constituencies who typically feel marginalised from such discussions. Giving voice to all parties is a key feature of legitimacy, precisely because all stakeholders engaging with the commissions feel that their views have legitimacy, and that this legitimacy is itself explicitly acknowledge by the commission. The aim of the commission is to help to find solutions or ways of making progress on an issue or set of issues which are in the mutual wider benefit of all those affected by the issue. The objective is to ensure that progress which is ultimately beneficial to all parties can be achieved. Most important reforms may involve some losers, as noted above, but a key benefit of these processes is the ability to clarify these distributional implications and to consider the scope for ameliorations such as adjustment support or compensation schemes. As such, optimal solutions as textbook economists might understand them are rarely, if ever, on the agenda, with practicability, actionable suggestions and ease of implementation being high priorities. Recommendation are explicitly intended to avoid both rental capture by any particular parties, and not to entrench or enhance any pre-existing monopoly or monopsony-type interests.

The fact that the commissions do not represent any particular interest group or power structure is essential in order to encourage participation with the commission’s activities, and over time the legitimacy of the commissions increases as citizens, businesses and governments and all see the outcomes of their work and their ability to shift public debates and perspectives, based on evidence and engagement.

3.3. Expertise

The commissions all reply heavily on expertise, and there are three aspects to this. First, the national commissions build up dedicated internal analytical teams comprising primarily economists, but also other areas of expertise including variously sociologists, geographers, psychologists, environmental scientists, public policy scholars, legal experts and data scientists, amongst others. This is essential in order to ensure the development of internal capabilities, such that the commissions are not overly reliant on external expertise. External experts are regularly brought in for fixed periods on particular enquiries or assignments, but external experts are also likely to be working for other bodies and priorities, so having the internal capabilities is essential to ensure both legitimacy and independence. The NYRPA has a dedicated internal team of planners and associated skills with high levels of technical expertise.

Second, both the Dutch and the Australian national commissions have Crown-appointed commissioners, internationally recognised experts in their own domains, who are directly appointed by the Crown, and therefore independent on the commissions’ own functions or history. These appointees are politically independent, based on longstanding track record of international excellence in their own fields, and these appointments are typically of a three- to five-year cycle period, after which they can be reappointed for additional terms. Most commissioners’ maximum remits are typically for eight to 10 years. In the Dutch Sociaal-Economische Raad (SER), the independent Crown appointed expert commissioners are typically in regular ongoing contact with the staff members of the bureau, and they also have their own meetings independent of either the employer or employee organisations. The Dutch regional socio-economic councils also have independently appointed experts, typically from universities and research centres.

Third, the topics for any enquiry should be the sorts of issues where the commission has something distinct to bring to the analysis, in terms of the breadth of the issue which commissions can address or the systemic perspective which the commissions can deploy. Moreover, as already mentioned, the topics should be tractable in some sense.

3.4. Transparency

The transparency of the enquiry processes and the different aspects of the work of the commission is essential for building public confidence. This is ensured via three main aspects. First, the enquiry processes proceed in a well-publicised manner with a call for evidence and the details and accessibility of a consultation process, followed by the publication of a draft interim report, a follow-up consultation on the draft report, and the publication of a final report. Second, all the documents produced by the commissions at each interim and final stage of the process are made publicly available and posted on the official websites of the commissions. All stakeholders involved in the discussion and deliberation processes are also listed. Third, in the case of the Dutch, Australian and New Zealand national commissions, the reports and recommendations produced by the commissions have to be tabled and addressed in a debate in parliament, and the government has to respond publicly to each of the recommendations, including and especially in the cases where they decide not to implement such recommendations. In terms of the involvement of the media as part of ensuring transparency, in the case of the Australian and New Zealand productivity commissions journalists are encouraged to challenge and question the draft initial or interim reports, as well as the final report. In the case of the Dutch commissions, journalists are able to question members of the commissions, but not until the final reports have been produced, ensuring that the deliberative and negotiation-related activities of the commission are not affected by media or political pressures. Either way, engagement with the media is a crucial part of the transparency dimension.

At the same time, the processes of deliberation and advocacy initiated by these commissions also involve high degrees of discretion, and this is the case for both national and regional commissions. Addressing complex societal issues requires trust-building between people and institutions in order to facilitate cooperative behaviour and the development of a shared common purpose and goals. Such delicate deliberation processes demand discretion as they are being undertaken, and this discretion is not in conflict with the principle of transparency. Of essence, deliberative processes must take place ‘behind the scenes’ and behind ‘closed doors’, precisely in order for people and institutions to be able to come to agreements which are to be made transparent.

3.5. Longevity

Having longevity is essential for the commission’s credibility for two reasons. First, longevity is required in order for the commission to follow through on the monitoring of its recommendations and to assess the extent to which the issues it has advised on are in reality being adopted in the medium and long-run. Second, this longevity is also essential in order to ensure that all stakeholders engaging in the commission’s activities and processes themselves take long-term views on issues, rather than being driven primarily by short-term considerations. Third, longevity is essential if the private sector and civil society sectors are going to take the commission’s recommendations sufficiently seriously as a platform for action. Fourth, some of the issues and recommendations do not immediately translate into policy due to changes in circumstances, changes in ministers or changes in governments, and it can sometimes take several years for commissions’ recommendations to be realised in public policy. Longevity is therefore essential to allow for such timelines, and also to facilitate monitoring of the progress of the implementation of recommendations.

While these five features are common for each of these six bodies, where the regional and national commissions do differ slightly is in terms of their scope and engagement. The regional commissions are somewhat closer to the citizens and communities than the national commissions, in that they have a more particular geographical focus and as such, are able to engage in more detail with particular localities. Much of their work is taken up with finding very specific and actionable to solutions to local problems which can be readily implemented in the local context. In contrast, the national commissions have a wider remit, and are able to address issues on a wider scale, aiming to reconcile competing interests, and searching for solutions which tend not to be specific to a locality or region. Their recommendations tend to be on a somewhat higher, broader and less-specific level than those of the regional commissions, which tend to be more specific in both focus and context. As such, while the national and regional commissions share many common features, they also differ in terms of their remits and focus.

4. THE UK REGIONAL–NATIONAL PRODUCTIVITY INSTITUTIONAL DESIGN PROBLEM: OPTIONS

The design and remits of the various different productivity, socio-economic and regional planning commissions investigated here each offer various insights into the nature, and possible solutions to, the UK-specific regional–national institutional design problem. As already mentioned right at the outset, the institutional challenges involved establishing and designing a body, institution or forum promoting pro-productivity policies and which also explicitly address the Levelling Up challenge shares many of the challenges evident in other countries, but also has additional and very UK-specific elements which need to be considered. In particular, the body or institution must have sufficient authority to influence decision-making both centrally and regionally, while also providing a non-partisan platform for facilitating horizontal and vertical cooperation between levels and jurisdictions of governance. Following parallel debates in the United States, the UK body, institution or forum needs to be a thought-leader, a capacity-builder and a coordinator, as well as possibly a resource provided, although the latter is a topic for further debate, whereas the former three features are essential (Liu et al., 2022). On the basis of the OECD’s (2022) guidelines, the experience of the six international comparators examples discussed here, and also explicitly considering the specific issues associated with the Levelling Up regional–national productivity challenges (McCann, 2016), at this stage there are various key features which any such institution(s) should exhibit.

First, any UK regional–national institution for productivity must be genuinely independent in order to ensure both objectivity and longevity. This independence must also extend to resourcing and staffing questions. At present, almost all local and regional economic development-related advice in the UK is generated via the private sector consultancy arena, but the types of systemic issues being considered here go well beyond anything that an individual consultancy can provide. At the same time, the UK experience is one of constant instability and changes in the institutional and policy landscape (Cook et al., 2020; IFG, 2017), as new government and ministers aim to change the governance system to suit their own preferences. In Australia, a lack of any statutory or legal basis has weakened or even undermined the state-level productivity commissions in Victoria,⁷ Queensland⁸ and South Australia,⁹ all of which at various stages have either been reabsorbed into other institutions, or their remits have shifted somewhat between a productivity focus to something closer to a competition and regulatory focus. In the Netherlands, the regional commission for the province of Zeeland is also currently on the verge of being wound up, but in two other provinces there are currently plans to establish a regional SER. Given the UK history of institutional instability a statutory basis of independence would appear to be essential, but the ongoing personal engagement of appointed commissioners along the lines of the NSW commissioner model would appear to be advantageous. Moreover, the lack of any major philanthropic tradition in the UK probably rules out this type of funding model as the major source of independence. In other words, a body or forum whose primary funding comes vertically from central government, but which has statutory independence and longevity, is one obvious option, but this faces the risk of central government undermining the body via cutbacks in funding. Another alternative approach would be for sub-central government bodies throughout the country to agree to provide annual funding along the lines of the German Ministerpräsidentenkonferenz, a regular grouping of the leaders of the Länder with no statutory role but huge power and influence both amongst the Länder and with central government. This nationwide and horizontal binding-in of sub-central government would then guarantee the financial independence of the body or forum from central government. In either the vertically or horizontally funded arrangement, if additional philanthropic funding could also be guaranteed, then that would further bolster the independence and capabilities of the institution. Indeed, even a combination of vertical, horizontal and philanthropic funding might be a workable solution, thereby binding in all elements and forms of governance into a common endeavour.

In the UK there are already major precedents for such a body and the statutory basis of this type of independence, given that this is already enshrined in the establishment of both the Monetary Policy Committee of the Bank of England and the UK National Infrastructure Commission, both of which have large secretariats working for them, albeit smaller than some of the international examples referred to here and discussed in detail in the accompanying online supplementary material. Other much smaller independent bodies are also evident, such as the UK Low Pay Commission, the UK Social Mobility Commission, and the UK National Geospatial Commission, so there are various precedents on which to build. The members or commissioners for a UK regional–national productivity and economic development body, institution or forum should be appointed for fixed but renewable terms, and in order to ensure genuine nationwide participation, some commissioners should be nominated by each of the regions, with some members or commissioners also appointed by the Crown, that is, central government, independent of any particular region. In terms of the commissioners’ own independence, it is possible for some commissioners to be already working in the arena, as is the case with the commissioners in both the UK National Infrastructure Commission and the Monetary Policy Committee. Each of these features will help to ensure both independence alongside engagement of the new body. The experience of the other countries suggests that in the UK, a statutory legal basis of intellectual and analytical independence, alongside co-financing of the body from both central and sub-central government, and a commitment to a parliamentary tabling and debating of the body’s recommendations, would provide the level of independence and legitimacy required, while also protecting it from the institutional instability currently so characteristics of the UK.

Second, the new body needs to establish its own internal expertise with a highly experienced bureau in the policy and policy-learning arena, including a strong technical secretariat with expertise in economic modelling and analysis, amongst other fields. This requires central government funding in order to be to scaled up, with further funding from the bodies initiating enquiries or requesting assistance. The Netherlands, New York and Australian secretariats have some 70, 80 and 150 staff, respectively, and these numbers indicate the complexity of the issues being addressed and the institutional capacity required to address these issues. Given the sheer scale of the UK’s Levelling Up challenge and its critical role in the UK’s long-term productivity growth future, the internal capabilities of any UK institutions should be of similar orders of magnitude as these Dutch, New York or Australian cases. Moreover, for legitimacy reasons, the new body, institution or forum should have capabilities at least equal to any other research institution or consultancy operating in this arena, as well as the ability to bring outside expertise into its activities on a case-by-case basis. Legitimacy is fundamentally a social and political process, but expertise, resources capability and legal and operational independence are all essential features for building legitimacy. One possibility to bolster this is the creation of an independent oversight board which would include representatives of the international bodies surveyed here to provide experience-based and expertise-based feedback and insights into the activities and workings of the new UK body.

Third, the choice of topic or theme on which the UK organisation’s work centres should be able to come from either central or sub-central government bodies, within the gauntlet of challenges thrown down by the Levelling Up White Paper providing the framework in which requests should be made. One of the key features of each of the six commissions surveyed here is that the nature of the topics investigated, deliberated and recommended on, go much further than a very narrow definition of productivity which focuses primarily efficiency criteria. These broader and more nuanced interpretations of productivity-related issues are very different to what many observers might expect be the issues which economists consider. Issues of resilience, safety and security, well-being and quality of life, as well as distributional and inclusion impacts are all explicitly considered, given that they heavily shape societal responses. In the UK context, this implies that both the economic dimension of Levelling Up as well as the social dimensions of Levelling Up are central features which the commission should address. This mix of thematic areas for investigation, deliberation and negotiation links short-term to medium and long-term agendas, and does so explicitly from a cross-silo and cross-sectoral perspective. These types of commissions are uniquely placed to address these complex issues in a multi-thematic and multi-method manner which allows for engagement across multiple stakeholders and constituencies. Indeed, the genuine combining of analytical, empirical and experiential knowledge is something which is central to the work of these commissions, and underpins the participatory legitimacy of their activities, not least when making recommendations.

In the six international cases surveyed here, the enquiry topic requests typically come from government. In the case of the national commissions in Australia, New Zealand and the Netherlands, national government typically choose topics for enquiries and agree terms of reference with the commission. In the case of the state-level bodies in Australia, states can also request or commission enquiries, and requests for the NYRPA come from local municipalities or counties, as is the case for the province-based regional commission in the Netherlands. There are also some specific cases where requests to the national commissions are partly a shared venture between local and national governments. As such, in the UK case, requests for enquiries or assistance should be able to come from both local and regional bodies, either individually or collectively, as well as from central government. This also rules out any top-down imposed mission-oriented approach to prioritisation, and this is essential to foster both bottom-up learning as well as top-down consideration. In addition, the enquiries and research of the body can also dovetail with those arising from other bodies. In Australia, the work of the Australian Productivity Commission and also the state-level productivity commissions interact from time to time with the work of Infrastructure Australia,¹⁰ the Australian equivalent of the UK’s National Infrastructure Commission, as does the work of the New Zealand Productivity Commission with the New Zealand Infrastructure Commission,¹¹ while the work of the Dutch socio-economic councils often interact with the work of the CPB Netherlands Bureau for Economic Policy Analysis and the Planbureau voor de Leefomgeving (PBL) Netherlands Environmental Assessment Agency. Indeed, the Crown-appointed members of the SER-NL include representatives of the Dutch Central Bank and the CPB Netherlands Bureau for Economic Policy Analysis. Having specific remits for these institutions does not in any way preclude working on issues which build on and complement the work of other institutions and agencies. In the UK there are various other such bodies producing research which can be incorporated into the work of the proposed institution either via literature reviews or bespoke work programmes.

Fourth, the new body’s or forum’s work practices must build trust with potential partners and stakeholders. Independence is not simply a legal or statutory matter, but also a question of ethics. Moral suasion plays an important role in the increasing the impact of the work of all the institutions surveyed here, and building of trust-based interpersonal relationships across the UK’s economic development landscape must be a clear priority. Having a wide range of members drawn from different walks of life helps with this process, as long as their role is explicitly understood as not advocating for, or defending, their own particular sector or interest group. This is critical, because in all the commissions surveyed here, a work style which is intentionally and explicitly collaborative is essential. A key focus of these bodies is to foster engagement and discussion and this deliberative approach itself, allied with the research capabilities and expertise of the bodies, is what helps to draw out the evidence, insights and ideas on which recommendations for action will be based. Indeed, in case of the Dutch national council, pre-commitment is essential, ensuring a willingness to find solutions and to foster collective responsibility and agreement. This principle of horizontal pre-commitment to an agreement is essential for the group of stakeholders to address the compromises which are always evident in trade-offs, in the hope thereby that complementarities can be constructed. In particular, in the case of the three regional commissions in NSW, NYRPA and SER-NN (where NN stands for North of the Netherlands), the regional convening and brokering functions are critical, and this is also true for the national commission in the Netherlands (SER-NL). As such, a UK body, institution or forum needs to display a convening and deliberative dimension which also develops a culture of the seeking of agreement and commitment on the part of all stakeholders engaging with the new entity.

Fifth, another design problem concerns the relationship between national and regional representation and activities. The remit of the new institution would be explicitly to foster Levelling Up, so the regional and local focus would need to be built into its core roles. At the same time, the experience both the Australian and Dutch sub-central bodies, and especially in the light of the constant top-down orchestrated institutional instability in the UK, suggests that a national–regional body, in which the overall legal independence of the national body also covers its regional arms, would be essential. At the same time, the overall forum or institution would still need regional representatives as part of its governing body and this representation must be nationwide. The US Federal Reserve and the German Fraunhofer Institutions both have this kind of national–regional organisation, in which the regional bodies play a central role in the operations and activities of the national forum as well as in their own regions. An alternative model of separate bodies is also possible in the UK, and again there is already a precent for this. In the UK the three devolved administrations¹² have their own independent national infrastructure commissions, whose remits are functionally and legally independent from each other and also from the UK-wide National Infrastructure Commission (NIC), in part reflecting the fact that different forms of infrastructure have different patterns of UK-wide or devolved responsibilities (NIC, 2018). In the case of an organisation or group of organisations addressing national–regional productivity and productivity-related issues, it would be possible for the devolved administrations to have their own entirely independent bodies in a manner similar to the Australian states, whereas this would be unrealistic in the case of England, given the need for an independent legal base.

The final design problem concerns the topical remit of the body or forum. The core economic problem facing many of the regions of the UK is their underlying poor productivity performance, which itself underpins the low prosperity and broader socio-economic weaknesses of these regions. The specific economic and governance features of the UK’s regional–national economic problem (McCann, 2016), means that the remit and focus of the new body, institution or forum has to be squarely on the core issues of productivity and regional economic development. The body must avoid becoming too widely dispersed in its areas of enquiry and deliberation, and it must only address other broader topics in the specific sense that they have direct or indirect implications for the productivity and economic development agenda. Otherwise, the focus of the commission or forum will tend to be pulled in too many different directions and its remit and mission will consequently tend to drift away from the core issues which mark the UK out as an outlier amongst rich countries. Currently, some of the issues raised in this paper are being examined and discussed on different dimensions variously by the Levelling Up Advisory Council (LUAC),¹³ the National Infrastructure Commission, and as one component of the work of a parliamentary select committee,¹⁴ although none of these bodies have institutional power, legal basis, research capacity and convening authority of the international examples discussed here. The UK has already recently established an Office for Place,¹⁵ as recommended in the 2022 Levelling Up White Paper, but this is focussed on good architectural urban and neighbourhood design of buildings and spaces, which although an important set of issues, is not systematically related to the UK’s regional productivity challenges. The body or institution proposed here would play a very different role, with a different function and with a different focus. The remit of the body would be twofold, namely to foster both pro-productivity activities and policies in general, while also prioritising the productivity challenges facing the UK’s weaker regions. The most important economic challenge facing the UK economy, and which shapes almost every other societal issue, is that of poor productivity and in particular the poor productivity of almost half of the UK population (The Economist, 2020). This is the key challenge which needs to be addressed. In most cases, these two goals will not be inconsistent, because the overwhelming evidence suggests that the productivity performance of the UK’s economically weak regions is a major part of the UK’s national economic challenges. Addressing national productivity weaknesses without addressing the weaker half of the UK’s regions will not be possible, and similarly, trying to help the UK’s weaker regions without addressing their productivity challenges is not feasible. In situations where trade-offs between these two goals do exist, in the end the government will have to decide its priorities on the basis of the commission’s recommendations alongside other political considerations. However, any of the commission’s recommendations will explicitly set in the context of the UK’s regional–national productivity problem (McCann, 2016), a setting which would be entirely new in terms of the current UK institutional set-up.

5. CONCLUSIONS

The contention of this paper is that an independent and statutory organisation for productivity and economic development could be very important in the UK in order to ensure that the Levelling Up transition processes are both meaningful and effective. While the arguments for Levelling Up were expertly made in the 2022 Levelling Up White Paper, the current institutional and governance set-up is still ill-suited and ill-equipped to bring about the intended transitions. While setting out missions is important from the perspective of driving goal-oriented policies, such mission-oriented approaches inherently lean towards further top-down and centralised policy orchestration, something which is fundamentally at odds with Levelling Up. Similarly, simply asking localities to draw up and develop economic development plans which are then assessed by central government for funding readiness simply perpetuates the status quo. In contrast, the type of body, institution or forum being proposed here would explicitly adopt a different perspective, whereby the role of central government and of any ostensibly ‘national’ policies in these processes are open to questions just as much as that of sub-central government. The new organisation could be expanded from, and built upon, the experiences from the current UK Productivity Commission, which was established by The Productivity Institute and the National Institute of Economic and Social Research in 2021.¹⁶ This commission has no statutory affiliation with government and is a body which is primarily focused on pro-productivity policy recommendations at the national level. The scope of the work of the newly proposed institution would be much wider, and would also include deep engagement at the regional level, but this body provides a potential template for how to move forward. Importantly, if well-designed, such an institution would be uniquely equipped to address both vertical and horizontal governance relationships as well as spanning public, private and civil society arenas in the search for a common purpose underlying all national and regional actions. Some of the comparator cases examined in detail (see the supplemental data online) include commissions operating in both common-law and Westminster-style parliamentary systems, in unitary states, and in institutionally fragmented sub-central government systems, so there is no inherent reasons why such a body may not be constructed in the UK context.

ACKNOWLEDGEMENTS

This paper is based on the arguments first put forward by McCann (2022c).

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author.

Notes

1. In 2021, The Productivity Institute and the National Institute of Economic and Social Research launched a productivity commission. This commission, which is completely separate from government, consists of independent (mainly academic) experts who collect evidence and provide policy recommendation on pro-productivity policies (https://www.niesr.ac.uk/partner/productivity-commission).

2. See http://commonfuturesnetwork.org/mdocuments-library#

3. Although they can range in size between a few tens of thousands (some Swiss cantons) to some 40 million, as in the case of California.

4. See https://ec.europa.eu/info/business-economy-euro/economic-and-fiscal-policy-coordination/national-productivity-boards_en; https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32016H0924%2801%29

5. See https://www.strategie.gouv.fr/debats/conference-productivite-competitivite-zone-euro-un-environnement-incertain

6. See https://www.strategie.gouv.fr/english-articles/productivity-and-competitiveness-post-covid-cyclical-and-structural-analyses-third

7. See https://www.dtf.vic.gov.au/victorian-competition-and-efficiency-commission

8. See https://www.treasury.qld.gov.au/queenslands-economy/office-of-productivity-and-red-tape-reduction/; https://www.treasury.qld.gov.au/queenslands-economy/office-of-productivity-and-red-tape-reduction/former-queensland-productivity-commission/

9. See https://www.sapc.sa.gov.au/

10. See https://www.infrastructureaustralia.gov.au/

11. See https://www.tewaihanga.govt.nz/

12. See https://infrastructurecommission.scot/; https://gov.wales/national-infrastructure-commission-wales; https://www.gihub.org/articles/infrastructure-commission-northern-ireland/

13. See https://www.gov.uk/government/groups/levelling-up-advisory-council

14. See https://committees.parliament.uk/committee/17/levelling-up-housing-and-communities-committee

15. See https://www.gov.uk/guidance/office-for-place-our-vision-and-principles#our-vision

16. See https://www.niesr.ac.uk/partner/productivity-commission; https://www.niesr.ac.uk/wp-content/uploads/2022/06/Productivity-in-the-UK-Evidence-Review.pdf