Shared Prosperity Fund – greater productivity and inclusivity for Scottish cities?

new bridge glasgow

There are many questions surrounding the UK’s departure from the European Union, not least on the future of funding.

In Scotland’s regions and cities, EU Structural Funds have provided significant additional funding to support economic development for many years. The current structural funds programme is worth about €10.7 billion to the United Kingdom and up to €872 million to Scotland across the seven-year budget period which ends in 2020. The Funds were originally created to help rebalance regional social and economic disparities. With regional inequality a dominant feature of the current economic landscape, and the potential of Brexit to further exacerbate this inequality, continued investment to address this is vital.

The UK Government has made no commitment to continue with the EU Structural Fund approach following exit from the EU and has instead proposed to introduce a domestic successor arrangement – the Shared Prosperity Fund (SPF). The objective of the SPF is to “tackle inequalities between communities by raising productivity, especially in those parts of our country whose economies are furthest behind.” This objective is widely welcomed. However, as yet there has been no formal consultation on the new Fund and no detail on how it will operate.

Nevertheless, it had been suggested in recent research from the Core Cities Group on Scottish cities that despite the significant contribution from Structural Funds over the years, the proposed SPF could be an opportunity for greater productivity and inclusivity.

Success of EU Structural Funding

The two major EU Structural Funds utilised in Scotland are the European Social Fund (ESF), focusing on skills and jobs, and the European Regional Development Fund (ERDF), which focuses on correcting regional imbalances.

Over £134m per annum is being invested in economic development in Scotland through these funds over the current programming period, which is supported by a significant amount of match funding, largely from the public sector. According to the Scottish Government, the total funding will be around €1.9 billion.

The Scottish Cities – the collaboration of Scotland’s seven cities (Aberdeen, Dundee, Edinburgh, Glasgow, Inverness Perth, and Stirling) – and city regions have already successfully invested in each of the four Scottish Economic Strategy priorities (innovation, investment, inclusive growth and internationalisation) and the UK Industrial Strategy’s five foundations of productivity (ideas, people, infrastructure, business environment and place).

Some examples of projects include:

Research suggests that the ending of such funding poses a risk to organisations and the positive economic impact gained, as illustrated by reductions in funding in other areas of the UK.

Limitations

Despite the successes that have been achieved through the use of Structural Funds, the approach is not without its limitations. As argued by the Core Cities report, the approach to managing, overseeing and using the funding has become more bureaucratic and cumbersome. Particular issues highlighted include:

  • increasing centralisation of funding and decision-making;
  • the requirement to provide match-funding at an individual project level becoming increasingly problematic due to public sector budget cuts;
  • monitoring, compliance and audit requirements have become increasingly onerous;
  • in the current programme period, the role of the Managing Authority has become more transactional, with little engagement at the project development stage;
  • eligibility rules restrict what can be funded, with some important elements of economic development no longer able to be supported e.g. new commercial premises, transport infrastructure, which can limit the benefits from other Structural Fund investment (such as business growth and employment creation on strategic sites);
  • the system does not encourage innovation, with high levels of risk aversion amongst programme managers, and a high degree of risk for project sponsors if project delivery does not proceed as planned – a particular issue for projects working with the most disadvantaged groups and those with complex needs.

The report argues that these factors have had the effect of limiting the achievements of the Funds, such as preventing some organisations from applying for funding, which in turn has made others wary about applying. This has led to projects being designed to meet the funding criteria rather than maximising benefits, resulting in too much time and effort on administrative activities rather than those which will have an impact on the economy.

As such, it is suggested that the introduction of the SPF affords an opportunity to change this.

Opportunity for change

According to the report, there is an opportunity to move away from the limitations of the Structural Fund programme approach to more effective arrangements that will increase productivity and contribute to a more inclusive economy. There is scope to increase the funding available through the SPF, reduce bureaucracy and become more responsive to local need.

It is suggested that there is potential for SPF investment in the Scottish Cities to deliver an economic dividend of up to £9bn as productivity increases, producing higher wages at all levels in the workforce, and contributing to a more inclusive economy overall.

Given that Scotland’s performance on some of the key economic indicators is likely to be taken into account when allocating SPF – GVA per job and per hour worked, employment rate, deprivation levels – the report also contends that there is a case for a greater share of the SPF for Scottish Cities. It argues that significant SPF investment in these areas “…will increase competitiveness and tackle inequality, as set out in Scotland’s Economic Strategy, as well as contributing towards the objectives of the UK’s Industrial Strategy, raising productivity and reducing inequalities between communities”.

The report warns that “Scotland will not make significant progress towards a more inclusive economy and society without addressing the deprivation challenges in the Scottish Cities.”

It is recommended that:

  • the SPF should use a transparent, needs-based allocation system;
  • the SPF budget should not be determined by previous levels of Structural Funds, and should be significantly increased; and
  • the Scottish Cities must be closely involved in the design of the SPF.

Final thoughts

There appears to be wide consensus for providing a replacement for EU Structural funding. Most organisations that have commented on the proposed SPF also agree that the level of funding should at least be maintained at its current level.

The concerns in Scotland, and indeed the other devolved legislatures, is the impact the SPF might have in devolved decision making powers currently exercised under EU Structural Funding.

The Scottish Cities have made clear their views on the proposed SPF and the Scottish Government has also launched its own consultation on how the Fund might work for Scotland.

Only time will tell whether the UK Government will take these comments on board, and indeed whether the opportunity for change will be realised at all.


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Beneath the headlines: record high employment rate, but what’s more important – quantity or quality?

Competition for new jobs

The UK employment rate has hit a joint record high of 76.1%, according to the latest official figures. The unemployment rate was estimated at 3.8%; it has not been lower since 1974. The economic inactivity rate was also close to a record low.

It’s not surprising that such record figures are often highlighted as ‘good news’ headlines. However, there has also been an increasing focus on quality of work over the past decade and the impact this has on people’s lives – reflecting concerns regarding developments in working practices, as highlighted by a recent City-REDI briefing paper. It has therefore been argued that the record employment rates are not necessarily representative of a ‘good news’ story.

Concerns

Concerns over working practices include the rise of the gig economy, unequal gains from flexible working, job insecurity and wage stagnation, to name but a few. The City-REDI paper outlines a number of ongoing concerns related to:

  • weak productivity growth;
  • employment insecurity and precarity;
  • in-work poverty;
  • skills shortages and skills polarisation; and
  • the impact of automation, technological change and the gig economy on the nature and experience of work.

Indeed, analysis has shown that much of the recent rise in employment is due to a ‘surge in low-value work’, which is holding back productivity growth. Many people are stuck in low paid insecure work, all of whom are contributing to the high employment rate.

Recent research from the Joseph Rowntree Foundation has reported that four million workers live in poverty, a rise of over half a million over five years – meaning in-work poverty has been rising even faster than employment. The causes of this increase include poorly paid jobs – particularly under temporary and part-time contracts – and a lack of progression routes for people in low-skilled work.

In addition, the rising gig economy shows no signs of slowing down, more than doubling in size over the past three years and now accounting for 4.7 million workers, according to a new report. An interesting finding of the report is that the majority of gig economy workers use this platform to supplement other forms of income, suggesting that workers are not getting enough of an income from their primary employment.

It has also been shown that advances in technology have pushed some workers into poorer quality jobs than those lost, something which cannot be addressed without some kind of policy intervention.

Health impact

Not only is poor quality work bad for the economy, it is also bad for people’s health.

A recent report which examined the impact on social inequalities of policy initiatives and reforms to extend working lives in five European countries, highlighted that working conditions are also known to influence post-retirement health, and for those with lower socioeconomic status, workplace arrangements may be causing or contributing to poor health.

A number of studies have highlighted the link between good work and health and wellbeing. As stated by a What Works for Wellbeing briefing paper, “Being in a job is good for wellbeing. Being in a ‘high quality’ job is even better for us.” It has also even been suggested that being in a poor quality job is actually worse for health and wellbeing than remaining unemployed.

Moves towards improving quality

Recent developments in the UK to address such challenges for the future and quality of work include:

  • the establishment of The Work Foundation’s Commission on Good Work in 2016, which aims to better understand the factors shaping change, and the nature and scale of opportunities and risks, so as to promote policies to achieve ‘good work’;
  • The commissioning and publication of the independent Taylor Review of Modern Working Practices in 2017 which called for policy to address the wider issue of creating quality jobs for all; and
  • the Government’s Good Work Plan, published in December 2018, which sets out the reforms planned to help improve quality of work – the first time the UK Government placed equal emphasis on the quality and quantity of work.

In addition, the Chartered Institute of Personnel and Development (CIPD) launched the UK Working Lives survey, the first robust measurement of job quality in the UK. This has since contributed to government thinking and recommendations around ‘good work’ in response to the Taylor Review.

Despite the widespread agreement over the need to adopt ‘good work’ principles, however, there remains no agreed set of indicators of exactly what it encompasses nor metrics for measuring progress towards it.

What is good work?

As the City-REDI briefing paper and other studies indicate, defining good quality work is complex as quality means different things to different people.

A range of factors contribute to different people’s perception of quality and fulfilling work, including pay, flexibility, security, health and wellbeing, nature of work and job design. The CIPD survey highlights seven dimensions of job quality:

  • pay and benefits
  • employment contacts
  • job design and nature of work
  • work-life balance
  • work relationships
  • voice and representation
  • health and wellbeing

Of course, there is no one size fits all solution.

Final thoughts

While productivity and employment rates undoubtedly remain important, they alone are clearly not enough to understand the health of the labour market; the quality of work also needs to be considered.

As shown by the visible shift from quantity to quality of work in recent years and the recent developments from the government and others, ‘good work’ is undeniably on the policy agenda. However, as the City-REDI paper suggests, there should be a focus on promoting ‘good work’ amongst the most disadvantaged groups such as the young, people with disabilities and those working in hotels and restaurants. It is also suggested that there is scope for further research on good practice in promoting ‘good work’ in establishments of different sizes and in different sectors.

As highlighted in the Taylor Review, “All work should be fair and decent with realistic scope for development and fulfilment.


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Designing for positive behaviours

St Paul's Cathedral, London, England

By Heather Cameron

“We shape our buildings; thereafter they shape us” – Winston Churchill, 1943

This much borrowed saying from the former prime minister was made during the 1943 debate over the rebuilding of the House of Commons following its bombing during the Blitz. Although many were in favour of expanding the building to accommodate the greater number of MPs, Churchill insisted he would like it restored to its old form, convenience and dignity. He believed that the shape of the old Chamber was responsible for the two-party system which is the essence of British parliamentary democracy.

Indeed, it has since been widely acknowledged that the built environment has a direct impact on the way we live and work, thus affecting our health, wellbeing and productivity. A new report from the Design Commission, which opens with Churchill’s statement, is described as “a very valuable contribution” to the debate on how the design of the built environment can influence the way people think and behave, “making a healthier, happier and more prosperous and sustainable country”.

Impact of design

The report, which follows a year-long inquiry, is described as providing “solid evidence in difficult areas” on what it is in the built environment that makes people’s lives better. Evidence was gathered on four specific areas believed to be the most important to national policy:

  • health and wellbeing
  • environmental sustainability
  • social cohesion
  • innovation and productivity

It is suggested that design acts at two levels: it can affect individual choices of behaviour, which can then affect health and sustainability; and it can affect the way people are brought together or kept apart, which can then affect communication and creativity, or social cohesion.

The inquiry therefore looked into how people’s behaviour, health and wellbeing are affected by their surroundings; the role design can play in encouraging environmentally sustainable behaviours; the role design can play in social cohesion through its effects on creating or inhibiting co-presence in space; and how the design of work environments can drive innovation and improve efficiency, therefore tackling the current ‘productivity crisis’.

The evidence

The evidence highlights the built environment as “a major contributing factor to public health”. A range of public health issues, including air pollution and obesity, were suggested to be directly linked to factors within the built environment. Other recent research has similarly highlighted this link between health and urban design.

Evidence of the potential for design to positively influence sustainability behaviours, such as greater cycling and walking activity, was also highlighted, with New York cited as a good practice example.

Providing evidence on social cohesion, a senior university lecturer stated that “to divorce the physical from the social environment is inappropriate”. Other submissions referred to the “alienating effects” of various aspects of modern corporate life on civic participation, including estate management, crime and safety, the perceived negative impacts of poorly-conceived urban planning and poor or no maintenance.

Well-designed places, on the other hand, are suggested to improve access and facilitate social cohesion. Nevertheless, the evidence also noted that regardless of how well designed a place may be, “neglecting its aftercare will lead to antisocial behaviour and environmental damage.”

The relationship between the built environment and productive behaviours is supported by substantial evidence, according to the report. In the context of the UK, a lack of access to daylight and fresh air is cited as a reason for offices failing to get the best out of their workers. One study cited, indicated an increase in levels of both wellbeing and productivity in office environments with so-called ‘natural elements’.

Policy – “muddled and fragmented”

While there is evidence of good practice throughout the UK, a principal argument from the report is that more needs to be done.

Policy making for the built environment has traditionally been “muddled and fragmented”, according to the report. It suggests that there is a lack of understanding of the significance of the influence of the built environment on behaviour among policy makers at all levels and therefore makes recommendations for central government, local government and the private sector.

It argues that the relationship between government and local authorities requires reconsideration, calling for greater power at local government level.

Despite encouraging steps with regard to devolution in positively impacting behaviour and quality outcomes, such as in London, it is suggested that more can be done in terms of better collaboration between all stakeholders.

It is also noted that as national policy will be now be conducted in the context of Brexit, adaptation of the regulatory regime will be required.

Final thoughts

The key message from the Design Commission’s inquiry is evidently that the design of the built environment is particularly important in the context of current challenging times for the UK:

 “The way we design our built environment could be one of our greatest strengths in navigating the course ahead… If we get this right, we can build a Britain that is healthier, happier and more productive.”


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The UK digital economy: how can the government support digital businesses?

By Steven McGinty

Last month, the House of Commons Business, Innovation and Skills (BIS) Committee launched an inquiry into the UK’s digital economy. Iain Wright MP, the Chair of the Committee, explained that:

Digital technology is rapidly changing the economic landscape in which firms operate. Nothing short of a digital and tech revolution is taking place, with new entrepreneurs and business models emerging and existing businesses having to adapt quickly to keep pace.”

The inquiry will focus on three areas:

  • Government actions affecting businesses in the digital economy;
  • how to maximise the opportunities and overcome challenges in the sector;
  • how the sector can contribute to improving national productivity.

The BIS Committee is asking for submissions from those involved in the digital economy, including digital businesses and companies hoping to benefit from technology.

 Why should the government support the digital economy?

Innovate UK expect that, by 2015, the UK digital economy will account for 10% of GDP. Tech City UK report that the sector employs 1.5 million people (about 7.5% of the total workforce); although this is expected to increase by 5.4% by 2020. In 2013-2014, 15% of all the companies formed were digital businesses. Most were based outside of London (74%) and nearly all were SMEs (98%). The majority (90%) of digital companies expect revenues to grow within the next year.

Technology clusters

Technology clusters play an important role in the UK’s digital economy. There are 21 clusters across the UK, with expertise ranging from software development to marketing and advertising. The majority of digital businesses consider themselves part of a cluster (65%). Bournemouth has the fastest growing digital cluster, with a 212% increase in the number of companies formed since 2010. Its specialism is digital marketing and advertising.

This growth suggests specific focus should be given to technology clusters. Tech City UK found that a third of digital companies highlighted access to funding as a challenge, particularly outside of London and the South East.  One suggestion offered by Tech City UK is that businesses need to take advantage of European funding where possible.

Other forms of support could include: providing fast and accessible broadband; access to a pool of skilled employees; suitable workspace, particularly in the South East; and business and mentoring advice.

Digital Economy Strategy 2015-2018

At the beginning of the year, Innovate UK set out a strategy to support UK businesses in getting the most out of digital technology. It sets out five main objectives:

  • Encouraging digital innovators
  • Focusing on the user
  • Equipping the digital innovator
  • Growing infrastructure, platforms and ecosystems
  • Ensuring sustainability.

Within the strategy, actions are put forward for how these goals will be achieved. For instance, to ensure sustainability, Innovate UK would work closely with UK research councils to encourage cross-disciplinary academic collaboration and help connect it to real-world business needs. If even some progress is made with each of these objectives it would be hugely beneficial for the UK digital economy.

Innovation centres – the Digital Catapult

The Digital Catapult is a national centre that aims to accelerate the UK’s best digital ideas to the marketplace, in order to create new products, services and jobs. It was established in 2014 by Innovate UK and is based in the Knowledge Quarter in Kings Cross. There are also three local centres in the North East and Tees Valley (NETV), Brighton, and Yorkshire.

The Digital Catapult centres focus on the challenges associated with: closed organisational data; personal data; creative content; and the internet of things (IoT). The centres are involved in a number of projects, including IoTUK, which has been launched as part of a £40 million government investment in the internet of things (the use of networks to allow the exchange and collection of data from everyday objects, such as fridges). The programme aims to increase the adoption of high quality IoT technologies and services throughout business and the public sector.

Regina Moran, CEO at Fujitsu UK&I, notes that:

The IoT has the potential to turn ideas in a hyper-connected world into fully realised digital services but it has challenges ahead and it’s encouraging to see the Government investing in its development.”

 Regulation

The Prime Minister, David Cameron, has managed to convince the European Commission (EC) to review the VAT regime for tech start-ups, arguing that it punished British entrepreneurs. The regime, which was implemented in January, forced companies to pay tax in every country they traded in rather than their headquarters. It also eliminated a £81,000 threshold for which companies have to register for VAT duty.

However, the Commission has recognised that this was adversely affecting small businesses. Therefore, measures such as the reintroduction of the VAT threshold and a single registration scheme for cross-border taxes, will be included in the Commission’s consultation.

The UK government’s approach shows a commitment to providing a competitive business environment and a single European market in digital services. It’s likely that most digital businesses would support the government’s approach.

Concluding remarks

The upcoming BIS Committee inquiry will provide an opportunity to reflect on the government’s approach so far. Although evidence confirms that the digital economy has been growing, there may be areas that the UK is failing to capitalise on. In a highly competitive globalised economy, it’s important that the UK exploits any strategic advantage, ensuring that innovative ideas are brought to the market quickly.

The inquiry will also provide an opportunity for a dialogue between the government and the private sector. This increased collaboration can only be good news for the UK’s digital businesses.

Here at Idox, we take an active interest in the future of the digital economy and eagerly await the Committee’s findings.


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IDOX Plc announced on 8 October 2015 that it had acquired the UK trading arm of Reading Room Ltd. Reading Room, founded in 1996, is a digital consultancy business with a focus on delivering websites and digital services that enable its customers to make critical shifts into digital business and client engagement. It has an international reputation for its award winning and innovative approaches to strategic consultancy, design, and technical delivery.

Happiness and productivity, and how our Ask A Researcher enquiry service can help to increase at least one of these things…

Smiley face

Image created by Sergio Barros from the Noun Project

by Laura Dobie

It’s the International Day of Happiness today. To mark the occasion on the blog, we’re going to take a closer look at a recent literature search that we did on happiness and productivity, and how the service can help our members to be more productive in their work.

Ask A Researcher

The Idox Information Service offers an Ask A Researcher enquiry service, which is very popular with our members who need to source and synthesise evidence and policy documents to meet tight deadlines. We’re often told that our searches save our members a day’s work or more, were they to conduct the searches and synthesise the research themselves, and they free up our members to work on other areas and achieve more with their day.

They can ask us to search for information on their behalf, and our team of research officers will conduct complex searches of our in-house database (over 200,000 references across a broad range of subjects in relation to economic and social policy), and other sources, where appropriate, to compile lists of relevant references to send back to the enquirer.

We don’t just send on a list of references for you to sift through: our research officers will also produce a research summary to accompany the results, which provides an analysis of the references that we have retrieved. This highlights:

  • Trends;
  • Key findings;
  • Implications for policy and practice; and
  • Significant research reports and articles, which are particularly relevant to the enquirer’s needs.

If the enquirer has asked a specific question, we will do our best to find an answer in the documents that we have sourced and present this in the summary.

Literature search on happiness and productivity

We recently carried out a search on our database for research which examined the link between levels of happiness in organisations and productivity and organisational performance. You can view this sample search here.

This search provides an ideal example of what we’re trying to do with the Ask A Researcher service: rather than simply compiling references, we have specifically highlighted resources in the results (and key words in the abstracts) which help to answer the research question.

The results describe the search terms and date limits which were used, and provide an overview of the content of the resources which were retrieved.

The summary highlights key documents within the results which are particularly pertinent to the research question, including:

  • MacLeod and Clarke’s concept of employee engagement: an analysis based on the Workplace Employment Relations Study, which explores employee engagement and organisational performance. It found that high levels of employee engagement were strongly associated with both financial performance and labour productivity.
  • Healthy staff equal healthy profits, IN Management Today, Jul/Aug 2013, pp56-57, which observes that organisations which look after the wellbeing of their employees see a return in greater commitment and higher productivity. It stressed the importance of effective communication of employee benefits, which can have a significant impact on productivity.
  • A government literature review, which has investigated the business benefits of adopting work-life balance practices, highlighting the positive association between flexible working and productivity and reduced absences, and between family friendly policies and retention and reduced absences. It observes that “A large body of evidence demonstrates that effective outcomes at the level of the individual, including job commitment, ‘happiness’, satisfaction, engagement and, in turn, discretionary effort, are all associated with business benefits such as reduced leaving intentions, fewer absences, less tardiness and improvements to performance and productivity.” (p.viii)

In addition to the results sourced from our own database, we also highlighted research from the University of Warwick, retrieved online, which also demonstrates the link between happiness and productivity.

Hopefully this article has provided some useful insights into the links between happiness and productivity, and demonstrated how our Ask A Researcher service can help our members to source and synthesise research in a short space of time and be more productive at work.

If you’d like to find out more about our Ask A Researcher service, or any other aspect of the Idox Information Service, you can contact us.

A story with a happy ending? The UK labour market and the future of skills

Skills, Knowledge, Abilities

by Laura Dobie

Last week the UK Commission for Employment and Skills published The Labour Market Story, a series of reports exploring how the UK labour market is working following recession. In this article, we take a closer look at the results and key findings.

The reports reviewed research from the UKCES, other UK organisations and international sources to investigate:

The research revealed that while the UK economy is returning to sustained recovery, this has taken longer than before. There has been sustained growth in self-employment, and a rise in precarious forms of work, such as casual and short term work, and zero hours contracts. Youth unemployment is four times the rate for those aged 24 to 64.

There has been a long term reduction in administrative and secretarial work in many industries, typical middle level jobs, which has led to increasing polarisation in the labour market. Those with higher skills and qualifications are more likely to remain in employment and have considerably greater earnings prospects, highlighting the importance of skills in individuals’ labour market outcomes.

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