5. Reinforcing the governance of regional development and public investment in Wales

Designing and implementing an investment portfolio that advances regional development rests on a number of different capacities. Among these is the ability to invest using an integrated strategy tailored to different places. This means first articulating a strategic vision with clear objectives, defining the policy to support it and then engaging in regional development planning that is cross-sector, “place-tailored”, results-oriented, realistic, forward-looking and coherent with national objectives (OECD, 2013[1]). Implicitly, it demands the ability to bring together and guide diverse policy sectors and interests to identify and implement regional development and investment priorities in a coherent, appropriately sequenced manner that optimises resources. Success can also depend on ensuring that activity takes place at the proper territorial scale (i.e. national, regional or local), and on taking a learning-based approach to building capacity at the national and subnational levels. Behind this is the need for a multi-level governance system that is fit for purpose – able to support all levels of government in making and implementing successful investment decisions for regional development.

The governance structures enabling the Welsh Government to undertake place-based and results-oriented investment planning for regional development post-Brexit are evolving. The NUTS2-level division for European Union (EU) funding and the Welsh European Funding Office (WEFO) have already introduced and generated a place-based approach to regional development and investment in Wales. The Welsh Government is poised to take this to a new level, putting in place public investment and multi-level governance mechanisms to support a stronger place-based approach as a means to better meet its growth plus inclusiveness aims and to generate greater well-being. To make the most of the opportunities associated with place-based regional development, the Welsh Government may need to further consider its strategic and policy frameworks1 for regional development (Box 5.1). It may also need to diversify its policy co-ordination and implementation mechanisms in order to increase policy effectiveness and to build and generate trust-based partnerships. This is potentially one of the largest challenges facing multi-level governance in Wales and can affect the ability to create a governance environment that maximises investment potential.

This chapter focuses on the multi-level governance structures that support regional development and investment in Wales. It begins by highlighting OECD country approaches to establishing strategic frameworks for regional development, as well as the Welsh approach. It then moves to explore the mechanisms necessary to reinforce regional development policy co-ordination and integration in Wales. The chapter further considers national and subnational mechanisms that can help boost policy and investment implementation capacity, emphasising the importance of collaborative governance and arrangements. It also examines the role of outcome-based performance measurement in decision-making as a means to promote policy learning and strengthen accountability to citizens. Finally, the chapter considers the national/subnational disconnect in stakeholder engagement practices, offering insight into bridging this gap. The chapter concludes with recommendations for action to help all levels of government in Wales to reinforce their strategic planning and implementation capacity.

A regional development strategy sets out a vision-based, long-range plan to achieve national, regional or local aims for growth. In doing so, it anchors sector policy interventions for regional development, for example in transport, housing, education, economy, innovation, etc., and facilitates integrated action by helping each sector understand and work towards realising agreed-upon, long-term development objectives. It differs from a regional economic development strategy (or other policy sector strategies) in scope and the breadth of policy levers used. Governments often struggle with the “vision” dimension of strategic frameworks because it requires thinking about a future state beyond immediate government cycles and political concerns. It means identifying what the nation (or region) wants to achieve over time while staying true to the government’s objectives during its mandate (OECD, 2010[5]). The process involves drawing on capacities and capabilities that are often not fully developed or easily implemented in government, for example: distinguishing analysis horizons and acting accordingly (Table 5.1), and eliciting and considering diverse perspectives and sources of input for a long-term strategy, and for medium- and long-term budget planning; well-established evidence bases and a civil service able to provide evidence-based analytical advice; and being comfortable with opening dialogue up to private sector, third sector, civil society and citizen stakeholders (OECD, 2010[5]).

While fundamental, vision setting is challenging and the lack of a long-term vision is not uncommon, many countries (e.g. Brazil, Canada, Chile, Germany, Greece, Ireland, Malaysia, the Netherlands, Portugal, Switzerland, Turkey and the United Kingdom [UK]) have a document outlining a strategic vision for their country. However, these often have a time horizon of one to five years. Thus, “vision” is often synonymous with a political strategy rather than a long-term future perspective. Increasingly, countries are aiming to develop strategies that run 11-20 years (e.g. Costa Rica, the Czech Republic, Finland, Hungary, Israel, Lithuania, Mexico, the Slovak Republic and Slovenia) and a very few (e.g. Japan, Luxembourg and Norway) have documents beyond a 20-year horizon (OECD, 2018[6]). As a subset of this trend, countries are turning their attention to vision setting for regional development concerns and are adopting a variety of approaches to do so. Two common ones are national-level dialogue through extensive consultation and establishing strategy or foresight units within the government (Box 5.2 and Annex 5.A).

Regional development can be approached top-down. In such a case, the national government establishes the development vision and takes a command and control approach to policy design and implementation, identifying growth objectives, development opportunities and investment priorities. It can also be approached bottom-up, where subnational governments or other subnational actors identify local needs, establish plans to meet these needs and do their best to implement them. On their own, neither approach will fully satisfy stakeholders nor is likely to be sustainable in the long run. In many, if not most, OECD countries, top-down approaches are likely to meet strong implementation resistance. At the same time, bottom-up development may generate incoherence, disconnected investments across a territory and may rapidly face financing constraints. The challenge is to strike an appropriate balance. There is evidence indicating that strategies mixing a top-down and bottom-up approach are among the most effective (Crescenzi and Giua, 2016[7]). A regional development strategy relies on an agreement between government, economic and social actors and citizens. Approached in this manner, it helps coalesce stakeholder opinion, supports decision-making, guides priority setting, sets a course of action and provides clarity with respect to the responsibilities and lines of accountability (Cuadrado-Roura and Fernández Güell, 2008[8]). It can also help ensure that the resources and capacities inside and outside of government are aligned with priorities and actions. Additionally, strategic planning can help build social capital by promoting new forms of subnational governance, fostering co-operation and building ties among stakeholders. Finally, it can help establish agreements among the players involved, thereby building trust among diverse parties and interests and reducing risk at the implementation stage (Cuadrado-Roura and Fernández Güell, 2008[8]). A well-articulated, long-term regional development strategy can promote policy coherence among sectors, and across jurisdictions, and enhance the use of scarce resources. In essence, it is the framework for action that enables different actors and interests to take responsibility for implementing the initiatives necessary to realise a society’s long-term development vision (Cuadrado-Roura and Fernández Güell, 2008[8]).

The majority of OECD countries present their long-term regional development strategies within a regional policy framework (Table 5.2), using one or more documents (on average two) to articulate their objectives and plans. In some countries, a legal framework is complemented by a more regularly updated plan (e.g. seven years is common in EU countries to align with the EU policy cycle). This permits maintaining a balance between stability and flexibility to adapt to changing circumstances. Slovenia takes such an approach, for example. In other cases, higher-level strategic planning documents are tightly associated with explicitly articulated investment strategies (this is true in Ireland, for instance). Often, countries will have a strategy for regional development together with an urban development policy and a rural development policy. In many instances, the national-level documents are complemented by regional development plans designed by subnational actors (OECD, 2016[9]; 2019[2]).

Countries implement their regional development strategic frameworks in diverse ways. One is via well-co-ordinated sector policies that advance sectoral aims while contributing to growth and development at a regional level. Another is through a single, national regional development policy that establishes a consistent course of action, identifies priorities and articulates realistic objectives for territorial growth and development, serving as a guide for the regional interventions of sector policies. In both cases, the strategic framework – and the policies supporting it – provide national and subnational actors with a roadmap for designing programmes and projects to advance growth, productivity and well-being in a territory (Box 5.3 and Annex 5.A).

The Welsh regional development agenda prioritises growth, inclusiveness and well-being, taking a place-based approach and aiming to strike a “top-down”/“bottom-up” balance. Implementing this agenda is challenged by two large considerations. First is defining – or better communicating – a strategic vision. Welsh stakeholders have expressed frustration with a lack of strategic vision for regional development by the government (OECD, 2019[12]; 2019[13]). This is understandable as an articulated vision can serve as a beacon not only for policymakers and local authorities but also for the private sector, civil society and citizens. It can also lead to a common understanding among government and non-government actors of what is meant by and expected from regional development in a country, region or local authority. This could be particularly valuable for Wales. Second is managing policy fragmentation and optimising financing streams in order to best delineate and meet regional development aims. Articulating a long-term vision and strategy for Wales’ regional development, combined with a dedicated regional development policy designed in concert with national and subnational stakeholders and supported by a targeted investment approach, could prove advantageous.

The current framework supporting decision-making for regional development in Wales is comprehensive, but fragmented across policy sectors and government departments. This puts policy coherence at risk and renders integrated, cohesive implementation potentially difficult. The framework rests on a legal foundation (as seen in a number of OECD countries) that is complemented by a number of strategy and policy documents, active and proposed. It is further reinforced by sector policies, EU Operational Programmes and financed through department budgets and EU funding, which will change post-Brexit. Moving forward there is value in considering a more integrated, streamlined approach to regional development policy.

The Welsh Well-being of Future Generations Act (WFGA) provides the statutory underpinnings for all policy action in Wales, including regional development. The WFGA sets the framework for accomplishing seven high-level well-being goals that dovetail with Welsh development ambitions (Welsh Government, 2017[14]). The law requires that all government departments consider growth plus well-being in their policies and actions, and expects the same of local authorities through their Well-Being Plans. This statutory foundation is one strength of the Welsh regional development framework and could be considered the platform for developing a vision-based, long-term regional development strategy. In addition to the WFGA, a series of other strategic and policy documents set guidelines for regional development and investment: the Prosperity for All strategy, the Economic Action Plan, the National Development Framework for spatial planning, and the proposed National Framework for Regional Investment (Box 5.4). This latter document represents the intended mechanism to ensure investment financing and management in support of regional development aims, post-Brexit and now post-COVID-19. Ideally, it should serve as an “umbrella”, guiding regional development investment processes among policy sectors and levels of government in the short and long terms. By doing so, it can help advance long-term development aims, as well as current government documents, such as the Prosperity for All strategy and the Economic Action Plan, for example.

As the Welsh Government’s economic development policy, the Economic Action Plan provides a platform for growth and productivity and adopts a regional approach. Its implementation, however, may fall short of advancing integrated, place-based policy in the future. There are at least two reasons for this. First, it is grounded in a strategy with a lifespan of the present political cycle – i.e. Prosperity for All. While its aims may be longer-term, it is a policy document for the current government period. As such, while it may successfully guide economic decision-making now, its nature as a government policy document can contribute to policy instability and uncertainty, ultimately affecting potential public investment that relies on a longer-term vision and funding capacity. Second, the Economic Action Plan, while innovative, remains a sector policy, developed and implemented by the Department of Economy and Transport. As such, and given a tendency within the Welsh Government to work in silos (as is true in many governments) (OECD, 2019[12]; OECD, 2019[13]; Morgan, 2019[17]; Beecham et al., 2006[18]), engagement with other departments may be limited, in turn limiting a truly cross-sectoral, integrated approach to regional development and investment under this plan. Its success in advancing the country’s growth, productivity, inclusiveness and well-being objectives depends precisely on transcending sectoral boundaries. Currently, there appears to be no formal or institutional incentive for ministers to actively engage with the Economic Action Plan, for example by aligning their sector’s priorities or by ensuring that their policies and programming complement and build on those of the Economic Action Plan (OECD, 2019[12]). At the same time, there is also little intrinsic incentive for those implementing the Economic Action Plan to “join-up” with other sectors. Third, an integrated approach to regional development and investment is ideally introduced at the inception of a strategy and policy. It is very difficult to build it in and ensure it ex post through an individual policy.

Welsh regional development at the national level is also supported by two distinct yet interdependent strands of policies and development programming and financing. The first strand is composed of sector policies and their programming that can contribute to regional development, for example, education, energy, housing, innovation, tourism, transport, etc. These policies have a national and subnational (regional and/or local) implementation logic and are funded by the budgets of the relevant government departments, as well as diverse EU financing mechanisms (e.g. Horizon 2020, COSME).2 Regional-level development planning and programming occur through the various City and Growth Deals implemented at a cross-jurisdiction or “functional” scale in the Cardiff Capital region, Swansea Bay and North Wales.3 At the local level, local authorities are responsible for a variety of plans to support or advance their growth and development, including local transport plans, local housing strategies, Welsh in Education strategic plans and local development plans. Finally, the Well-Being Plans designed by Public Service Boards can also contribute to regional development in their ability to pinpoint where attention needs to be placed to foster a better quality of life for residents in one or more local authorities.

In the second strand are the Welsh EU Operational Programmes (OPs) and their associated initiatives and projects financed through European Structural and Investment Funds (ESIF). These have an implementation logic that is at once broadly regional – focused on the NUTS2 levels of West Wales and the Valleys, and East Wales – and local, since many projects are designed and implemented by local public, private and third sector actors. OP activities and EU funds help Wales realise broad development objectives (e.g. greater competitiveness and productivity) as well as sector policy goals (e.g. in tourism). Table 5.3 provides an indicative list of the Welsh strategy documents, policies and plans contributing to regional development and funded by one of the two main funding strands (i.e. national budget and/or EU financing). It is not an exhaustive list. With the exception of the Regional Economic Frameworks and the Mid Wales Growth Deal, which appear in subsequent discussions of this report and its case study, the table only includes strategies, policies or plans that are currently operational.

One of the most significant challenges confronting Welsh regional development and investment planning is its fragmentation. As indicated in Table 5.3, it is crowded with many discrete national- and subnational-level policies and plans that have an explicit or implicit regional development logic. While such fragmentation is not unique to Wales, it does require high levels of co-ordination to ensure policy coherence and an integrated approach, as well as clearly established investment priorities. This is especially the case in light of the current uncertainty regarding investment financing levels arising from Brexit and the impact of COVID-19, particularly on finances and investment needs. With Brexit, Strand 2 (see Table 5.3) will eventually disappear, presenting an opportunity to streamline and reduce fragmentation. Uniting both strands under the proposed Framework for Regional Investment and better harmonising and co-ordinating public investment financing to meet regional development goals is one step towards generating greater co-ordination. It does not mean, however, that individual departments with their individual policy areas are no longer responsible for or should stop financing regional-level policy interventions or programmes to meet their sector’s objectives.

A standalone, long-term national regional development policy is not a panacea for low regional growth but it can be a step towards promoting a stable, long-term regional development path for Wales. It offers the opportunity to create a truly integrated policy approach and is associated with some distinct advantages (Box 5.5). Significantly, it helps coalesce investment priorities, ideally contributing to synergies and complementarities in investment initiatives rather than engendering competition. Designing and implementing an integrated, national regional development policy supported by a comprehensive public investment policy necessarily requires effective collaboration and co-operation among diverse stakeholders across government. This can help build a stronger sense of ownership for the policy, its objective and outcomes. It can also provide an opportunity for more innovative solutions, and smooth out potential implementation difficulties at the design stage. Introducing such a policy could help Wales address the problem of fragmentation in its policy documents for regional development, contribute to a more “joined-up” approach to policymaking and most importantly serve as an essential roadmap for sector strategies and policies that contribute to the Welsh regional development agenda of growth plus inclusiveness.

The WFGA establishes a legal framework for Welsh development policy overall, and the Economic Action Plan can provide immediate guidance regarding economic investment priorities. Thinking ahead, however, establishing a national regional development strategy that guides growth and investment efforts over the long-term, across electoral cycles, and which has benefitted from the contributions of diverse sectors and stakeholders (including other political parties), would be valuable. Accomplishing this takes time and now may be the moment to begin the vision setting and strategic planning exercises. This could clarify a societal vision of what regional development means and looks like in Wales, as concretely as possible. Consideration should also be given to articulating and implementing a cross-sector national regional development policy designed in collaboration with the departments of relevant policy areas (Figure 5.1) and local authority representatives, well-co-ordinated in its governance and supported by effective implementation mechanisms. Such a document could guide regional development activities and national and subnational actors in their investments – establishing priorities, allocating funds and implementing growth-oriented projects.

Moving forward, a more streamlined approach to regional development and investment in Wales would be valuable. This can entail integrating the two strands by introducing a unique, vision-based development strategy and supporting this with a dedicated, cross-sector policy for regional development, supported by the proposed Framework for Regional Investment. It also means that this revised strategic and policy framework for regional development (as discussed above), combined with the proposed Framework for Regional Investment, be applied more broadly than regional development and investment initiatives undertaken through the proposed EU replacement funds. It should serve as the national strategic policy and investment guidance for regional development throughout Wales and Welsh Government. Significantly, it should not at all limit sector activity at a regional level, nor taking a subnational approach to identifying and realising development priorities in a place-based manner, but rather it should guide a co-ordinated, collaborative effort. In the immediate term, Wales should also maximise what its current regional development framework offers, while also preparing for a post-Brexit future and managing the economic, societal and fiscal impact of the COVID-19 crisis. To accomplish this, the Welsh Government will need to strengthen and diversify its co-ordination mechanisms supporting regional development.

There has been an ongoing trend among OECD governments to reinforce cross-sector co-ordination mechanisms to better co-ordinate public investment strategies for regional development. Placing greater emphasis on strategic planning for regional development investment is the most common approach. This is followed by introducing a cross-sector co-ordination platform, be it ad hoc or permanent (Figure 5.2).

The Welsh Government could take a deeper look at the co-ordination mechanisms and incentive structures it applies to regional development and integrated investment initiatives. Responsibility for advancing the Welsh Government’s regional development agenda is spread throughout the government. It rests with the First Minister’s office and in the hands of its ministers and their departments. There is nothing intrinsically wrong in this. However, effective policy implementation in the Welsh configuration, with its policy fragmentation and a tendency to work in silos, requires strong horizontal and vertical co-ordination among actors, and a high degree of incentive to work together. Finding the right mix among various co-ordination mechanisms is fundamental and is generally considered one of the main challenges to effective subnational public investment, as well as regional development. One objective is to avoid unilateral decision-making (OECD, 2018[24]) and another is to break down silos by building or reinforcing a culture of cross-sector collaboration. The use of formal instruments, such as contracts or agreements, can help build trust between parties, as can mechanisms that bring together diverse national and subnational, public and private stakeholders.

For the Welsh Government, reinforcing and diversifying the co-ordination mechanisms it uses would help optimise the current regional development framework and successfully implement any future regional development strategy and/or policy. At the national level, consultation and consultative bodies are strongly emphasised. There are advantages to this, particularly in terms of trust and relationship building. As it moves to reinforce the governance of regional development and investment, establishing co-ordinating bodies, better targeting the use of consultative bodies, enhancing the role of the centre of government and establishing or identifying a “champion” for regional development would all be useful, particularly at the national level. Meanwhile, at the subnational level, there is room to continue strengthening some of the newly introduced policy co-ordination mechanisms, such as the Regional Economic Frameworks.

National-level co-ordination mechanisms in Wales centre on consultation. There are a number of high-level government bodies, both permanent and ad hoc, that focus on various aspects of regional development but are not necessarily tasked to ensure its co-ordination. These bodies include the First Minister’s cabinet, the Executive Committee/Council and a Senior Leadership Group (Welsh Government, 2019[19]). They are complemented by a series of high-level consultative bodies, such as the Regional Investment for Wales Steering Group, the Council for Economic Development and the Workforce Partnership Council (multi-level dialogue bodies are discussed below). With the exception of the First Minister’s cabinet, none of these bodies is recognised as having a co-ordination role and statutory underpinnings are limited4 (Morgan, 2019[17]).

Welsh consultative bodies offer expert insight, advice and perspective to the Welsh Government and are very useful dialogue arrangements, the value of which is often overlooked. However, it is important to consider the number and effectiveness of consultative and other dialogue arrangements and the motivation of actors to participate in them. Ignoring this can lead to “consultation fatigue”, particularly in small public administrations and small countries where actors play a number of roles and sit on various such bodies. This is not to say that Welsh consultative bodies should be eliminated, not at all. However, they are what they are called upon to do – consult – not co-ordinate or guide or support policy and investment implementation.

Regional development policy is, by nature, cross-sectoral. As such, it is called upon to foster a sense of ownership among the various relevant sectors (i.e. line ministries/departments) and stakeholders and ensure leadership. Without these, there may be implementation difficulties and accountability can be vague. High-level inter-ministerial bodies can help create a sense of ownership and responsibility for the policy among the relevant line ministries/sectors/departments while crystallising leadership and accountability overall. Over time, they can also strengthen a shared value set at the leadership level and build trust among potentially divergent interests (OECD, 2011[25]).

A high-level, inter-ministerial co-ordinating body for regional development can be an effective mechanism to align interests and priorities across government departments (i.e. line ministries). It can help identify complementarities among sector strategies and programmes, harmonise rules and support joint investment pools across departments or public agencies. It may also serve to establish a clear and transparent priority-setting process that considers the territorial impact of development initiatives and investment projects (OECD, 2019[23]). Ultimately, such a body is valuable for ensuring high-level guidance, co-ordination and discussion of matters related to regional development. In France, for example, an inter-ministerial committee is the lead body for regional development at the national level (OECD, 2016[9]).

Inter-ministerial committees and commissions are one of the simplest systems for horizontal governance, as they are based on already established government structures. Their effectiveness, however, is mixed. Experience from OECD member countries indicates that a horizontal commission chaired by one sectoral ministry may be limited in pursuing multi-sectoral objectives and hinder full involvement of other ministries, rendering the mechanism potentially less appropriate for co-ordinating cross-sector policies, such as regional development. Alternating the chair among participating ministries or introducing meta-ministerial leadership is one way to address this. The higher the leadership within these types of commissions, the stronger the incentive to participate and the greater the engagement of the different actors. In general, the dominant approach to inter-ministerial committees for regional development at the national level has been to endow them with a co-ordination function to streamline policy implementation. Committees that do not meet regularly or lack a permanent structure tend to have significantly less influence in defining relevant policies. Despite these challenges, some inter-ministerial committees and bodies provide a genuine forum to advocate policy reforms at the national level through horizontal co-ordination, such as Australia’s Council of Australian Governments (COAG) (OECD, 2016[9]). Iceland and Poland have effective inter-ministerial co-ordinating bodies for regional development (Box 5.6). In the case of Poland, the high-level body is supported by sub-committees that examine more technical issues. Such technical bodies – sub-committees, working groups or potentially consultative bodies – may be well placed to review policies at an early stage in order to ensure that the impact on different types of regions and localities are adequately considered.

OECD experience shows that countries with well-developed vertical co-ordination arrangements, such as inter-governmental committees and regular formal meetings, have a comparative advantage when introducing and implementing reform (OECD, 2017[27]). These bodies can take different forms, such as a dedicated permanent policy exchange conference or council. Australia’s Council of Australian Governments (COAG), Spain’s Conference of Presidents and Portugal’s permanent Council for Territorial Dialogue are examples. In each case, the body is chaired by the Prime Minister and brings together the presidents or heads of subnational governments (OECD, 2017[27]). Poland has taken a slightly different approach with its Joint Central Government and Local Government Committee. Sweden has established a national multi-level, multi-stakeholder forum to support its regional development agenda, and some Swedish regions, such as Örebro County, create similar opportunities as well (Box 5.7). Multi-level dialogue fora bring together a combination of national and subnational public, private and third sector actors in a regular, formalised manner are frequently used for co-ordinating regional development and investment priorities (OECD, 2018[24]). Such bodies: provide actors with the opportunity to share perspectives and experiences; understand the needs and problems of different levels of government; submit proposals and comments; negotiate with each other; and obtain help in the design, implementation and monitoring of policies or reforms. The Partnership Council for Wales provides a forum for multi-level dialogue. It brings together the Welsh Government and local authorities to discuss and agree upon matters affecting the local level and promote more effective and efficient public service. It is a statutory body chaired by the Minister for Housing and Local Government and could offer a platform for more targeted exchange on regional development (WLGA, n.d.[28]).

Ensuring effective dialogue, one that also advances the implementation of a policy or policy agenda, offers a number of advantages. It can help governments share evidence, gain insight into what works well and what does not work, where to focus implementation and investment efforts, and under what conditions. However, merely establishing dialogue mechanisms does not automatically guarantee the effective co-ordination of objectives and actions, and some conditions can facilitate effective exchange. Transparent rules, the simplicity of the information shared, the credibility of actors and cross-government commitment are important ingredients to encourage all parties to engage in a fruitful dialogue (OECD, 2019[23]). Box 5.8 offers a summary of some points to keep in mind when designing and engaging with co-ordination mechanisms for regional development and investment.

As it advances with its regional development agenda, in order to better support the horizontal, high-level co-ordination of its regional development agenda, the Welsh Government may wish to:

  • Establish an inter-ministerial co-ordinating body for regional development, ideally chaired by the First Minister and on which sit the ministers whose portfolios have a regional development logic.

  • Complement the above inter-ministerial co-ordinating body with a technical body of civil servants representing each ministry to explore specific matters.

  • At a minimum, consider establishing a sub-committee for regional development attached to an appropriate cabinet-level committee, and with a clear co-ordinating mandate coming from above.

Furthermore, introducing a multi-level, multi-stakeholder regional development dialogue forum would be valuable. This should include not only representatives from the Welsh Government responsible for regional development but also the Welsh Local Government Association (WLGA), local authorities and other stakeholders. It should be able to play a strategic role in supporting the realisation of regional development objectives, for example not only identifying regional development needs and priorities, but contributing to possible solutions for regional development challenges. The Partnership Council for Wales could form the basis for such a body. As a subset of a multi-level, multi-stakeholder dialogue forum or as a standalone entity, a national-level dialogue forum for Public Service Board (PSB) representatives could be useful to share knowledge, exchange good practices and further advance the Welsh well-being agenda. There is discussion in Wales to establish such a body. Doing so could help build capacity among PSBs in developing their well-being plans and taking a place-based approach to well-being assessments (Netherwood, Flynn and Lang, 2017[33]).

In Wales, an integrated and co-ordinated effort for regional policy may need to be more strongly reinforced by the centre of government. Among many OECD countries, centres of government are emerging as major actors in articulating overall government priorities and supporting an outcome-oriented approach to achieving them, including through cross-departmental action plans (Box 5.9) (OECD, 2017[34]). They are also becoming more involved in the implementation of horizontal policies, e.g. through delivery units. This evolution does not necessarily imply greater centralisation but rather reinforces a supporting and advisory role, thereby enabling line ministries to contribute to horizontal projects without questioning their autonomy or expertise (OECD, 2017[34]).

The emerging strategic importance of centres of government goes hand in hand with the changing role of government – a key trend in multi-level governance. Among decentralised or decentralising countries, national-level governments are playing a more strategic role, focusing on setting objectives and co-ordinating policy, monitoring performance, and enabling and guiding subnational authorities in meeting their service responsibilities (OECD, 2019[35]). This shift, and the capacity to undertake, becomes all the more relevant in the context of crises and crisis management, as highlighted by COVID-19. Regional and local governments are at the frontline in responding to the immediate emergency and will be at the forefront of implementing exit strategies and recovery policies. At the same time, it will be critical for national governments to fulfil their strategic role, setting the course and steering and guiding the response. Success – or failure – will depend on successful co-ordination among the actors and levels of government, not the degree to which responsibilities have or have not been devolved (OECD, 2020[36]).

A clearly articulated and supported role for the centre of government could help quickly build Welsh Government capacity in assuming this more strategic role. It could also contribute to stronger cross-sector policy co-ordination, integration and coherence, including for regional development policy, in a number of ways. Most critically it can proactively encourage policy co-ordination and co-operation among departments (Box 5.10). This is a centre of government responsibility and not an easy one. It often depends on the incentive to co-operate, which currently seems limited in Wales. Individual or collective performance targets are one mechanism that OECD countries use to promote cross-sector co-operation. Another is having the centre involved in supporting the head of government to prepare and communicate specific mandates to signal priorities to ministers and their departments. Financial incentives, generally funding for cross-cutting projects, are sometimes used, as is financing for the centre to fund task forces and the analysis of cross-cutting issues (OECD, 2018[6]). Promoting outcome-based policy evaluation, as well as fostering consensus building with respect to internal policy debates are two additional ways the centre could support greater co-ordination. Most centres of government play a strong role in facilitating or supporting policy processes, playing an oversight, quality control and co-ordination role (OECD, 2018[6]).

With respect to the current regional development framework in Wales, the centre of government can play a critical role by facilitating its co-ordination, curating good policy processes, reviewing advice to decision-makers and promoting good policy advice. Stakeholder demand for more collaborative strategies to achieve policy goals suggests a role for the centre that is less about being a watchdog or internal auditor and more about providing active facilitation, support and implementation advice to ministries or groups of ministries (OECD, 2018[6]). This is especially the case for meeting cross-cutting or cross-sector policy goals, such as regional development.

Moving forward with regional development, the Welsh centre of government may need to reconsider how it executes its leadership role. In a decentralised context, part of government’s role is to ensure quality relationships – those characterised by mutual trust and respect, credibility and collaboration – which in turn help align objectives and priorities, and clarify roles and responsibilities. A centre of government that effectively promotes policy co-ordination across government, fosters partnerships among diverse actors and encourages cross-sector collaboration can support this process. It also means clear lines of responsibility and accountability among actors and the ability of government to experiment and learn, not only in terms of policy but also in its ability to cope with new functions and give up some of its traditional power bases.

In the current Welsh framework for regional development, responsibility and leadership are dispersed. This is consistent with its fragmentation and the regional development logic in Welsh sector policies. The framework is rooted in advancing sector aims at a regional level. It is not necessarily rooted in advancing regional development aims through sector interventions. The result is that there is no single, national-level “champion” for regional development. Everyone is a champion, based on their own agendas. This can reinforce silos when designing, financing and implementing regional development initiatives. Ultimately, it is contrary to the government’s objective of a more integrated policy approach and can “lock out” or isolate integrated regional development initiatives and investment opportunities, limiting implementation success. This can be particularly true when there is no incentive (voluntary or required, financial or non-financial) for departments to co-ordinate their regional- or local-level interventions, or to join forces in their design.

Because of the cross-sectoral nature of regional development, and a need to break down silos, Welsh regional development policy could use its own “champion”. By this is meant a technical-level entity with full cabinet (political) support and a formally recognised mandate, ideally with statutory underpinnings, to:

  • Co-ordinate regional development policy aims and the full regional development policy cycle (i.e. from problem identification and objective setting to monitoring, evaluation and adjustment).

  • Ensure vertical and horizontal co-ordination of stakeholders and initiatives.

  • Promote policy implementation.

This champion should be “sector-neutral” – i.e. not associated with a specific policy domain, sit within an existing government department, or be its own ministry/department. As such, it may be better able to promote an integrated and place-based approach, as it would not be associated with a specific policy area, department agenda or political interest. This by no means implies that departments relinquish their role or mandate to consider and act on the regional development implications of their policies or initiatives. It does, however, mean that there would be a stronger co-ordination mechanism to support departments in realising their objectives, promoting coherence and collaboration at the Welsh Government level, and, ideally, with local authorities.

There are two immediately evident, broad options for such a “champion”. One is to establish a Department for Regional Development within government, with a cabinet minister. Doing so, however, would put at risk its ability to remain sector-neutral and work effectively across government – particularly in an environment where there is a strongly siloed approach to policymaking and implementation. It could engender competition and territorialism with other ministries or departments, possibly be associated with a specific political agenda and potentially carry resource implications.

A more preferable option in the Welsh governance context is to introduce an office for regional development under the office of the First Minister, with a positioning similar to that of the Welsh European Funding Office (WEFO). Doing so effectively puts responsibility for overseeing the co-ordination of regional development at the centre of government, makes the body sector-neutral and better positions it to work across Welsh Government departments. It could also be well-positioned to co-ordinate work vertically, with the local authorities. Finally, a regional development office could partner with WEFO’s post-Brexit incarnation to ensure that regional development priorities and public investment capacity align.

This model could also be reinforced by combining such an office with one responsible for financing regional development (i.e. the post Brexit incarnation of WEFO) under the office of the First Minister. This would effectively combine responsibility for co-ordinating the strategic aspects of regional development with the investment financing dimensions. Doing so could add value in a number of ways. First, WEFO’s experience in managing public investment for regional development could remain intact, and continue to support institutional learning through knowledge transfer. Second, as part of the First Minister’s office, such an office would remain independent of sector policy departments. This independence may be one factor facilitating WEFO’s ability to promote and support investment across sectors and build effective relationships with Welsh Government departments, local authorities, other EU fund beneficiaries and public and private investment stakeholders more generally. Third, WEFO has honed its capacity to support the design, implementation and monitoring of a wide range of territorial development projects in terms of scope and financial value. As regional development structures/institutions/actors settle post-Brexit, maintaining and fully tapping into this expertise will be essential to maximise the effectiveness of EU replacement fund investment.

A combined office for regional development and investment would unite the strategic planning and the investment planning dimensions of regional development into one entity, consolidating the responsibility for regional development vision and strategy setting, policy co-ordination and investment management. As stated earlier, it does not mean that other sectors (e.g. economy, education, energy, housing, tourism, transport, etc.) relinquish responsibility for ensuring their sector policies support regional development or for ensuring that regional development goals in their sector are established and met. Figure 5.4 provides a schematic representation of how this combined option fits within a general multi-level governance system for regional development in Wales.

Ensuring statutory underpinnings to co-ordinate regional development is crucial. Without such support, a new office is subject to potential instability or uncertainty with shifts in government. This could negatively affect the ability to meet regional development goals, attract investment opportunities and make the best use of limited investment resources.

What this structure implies is establishing an office within that of the First Minister, responsible for leading and co-ordinating the strategic work associated with regional development and investment in Wales. This placement should permit it to remain independent from specific policy sector considerations, retain neutrality vis-à-vis government departments and facilitate the ability to work across departments and build dialogue among them. This should also permit it to more easily work with subnational levels of government and relevant bodies. To support the co-ordination of national and subnational regional development objectives, priorities and plans, as well as to support regional development initiatives in specific regions, it could be reasonable, with ministerial agreement, to fold the Chief Regional Officers (CROs) and their teams into this office as well. It would expand their role beyond the economy sector into broader regional development policy. Whether such a shift occurs, however, should not affect the establishment of an office for regional development and investment. By working both horizontally, with different government policy sectors, and vertically, with subnational governments and actors, such an office could better advance the strategic planning and implementation of an integrated and place-based approach to regional development and the investment that supports it. Sector neutrality and independence from a specific department are fundamental to the success of this office. It must be able to effectively co-ordinate and calibrate the objectives and priorities of various actors and levels of government, and not be perceived as a competitor. This will require clearly establishing roles and responsibilities, as well as ensuring that interactions and relationships underlying these structures and interactions are grounded in trust and mutual respect.

A national policy for regional development is important. Just as important is to complement it with place-specific development plans, designed and implemented at the relevant scale, for example at the regional, metropolitan or local levels. Such plans help maximise the growth potential of each region by reflecting subnational needs and capacities. When well designed and implemented, they should also contribute to meeting national-level development objectives. Ideally, they support better-targeted investment by clearly articulating subnational priorities and identifying opportunities to build investment scale and scope through complementarities among proposed initiatives. While these types of plans could be designed by the national level, such a tactic is likely to be insufficiently sensitive to place, resulting in significant problems of ownership and limiting successful policy delivery. A more effective approach includes the participation of subnational actors throughout the process and can be led by subnational actors at the relevant scale. This is particularly true in cases such as Wales, where national/subnational collaboration in policy endeavours is prized, though reportedly difficult to realise (OECD, 2019[12]; 2019[13]).

The Economic Action Plan calls for designing and implementing economic plans – Regional Economic Frameworks – at a regional level.5 Regional Economic Frameworks would help ensure that subnational economic development and investment activities align with the broader economic and growth goals outlined by the Welsh Government. This is consistent with good practice. However, the Welsh Government may need to refine and streamline its approach here, too, as the fragmentation in the regional development framework seen at the national level appears to be replicated at the subnational level.

There is an extensive amount of regional-scale planning already occurring in Wales (OECD, 2019[12]; 2019[13]) together with a large number of existing local-level planning requirements. Many local authorities undertake some form of development planning with an incidence on economic growth. This is particularly true of the ten local authorities involved in the Cardiff Capital Region (CCR) City Deal, the four local authorities contributing to the Swansea Bay City Deal and the six that are active in the North Wales Growth Deal. A Mid Wales Growth Deal, with two local authorities, is also being developed. It could be argued that the implementation of these deals has not advanced as quickly as expected (OECD, 2019[13]), however, they are in place, have financing and are supported by their own governance structures. In addition, there is the CCR Industrial and Economic Plan and its Investment Plan, and the Swansea Bay City Region Economic Regeneration Strategy 2013-2030. Meanwhile, all local authorities are responsible for developing strategies and plans with some sort of development logic. These include local transport plans, local housing strategies, Welsh in Education strategic plans, Well-Being Plans, and local development plans (as featured in Table 5.3).

There are a number of risks arising from so many planning requirements at a subnational level, including policy incoherence and implementation overlap, planning fatigue and opaque accountability. It can also dilute investment resources and stretch thin the planning and implementation capacities of subnational authorities. A mechanism that can ensure these existing regionally-driven, locally-developed and growth-oriented plans are co-ordinated would be valuable but appears to be lacking. The Regional Economic Frameworks may be intended to play such a role but they currently do not appear structured to do so. First, they focus necessarily on economy and productivity, including the foundational economy, but may fall short of supporting an integrated development planning approach, which would bring together multiple sectors. Second, it is reported by some local authorities that Regional Economic Frameworks do not fully consider existing regional-level plans, such as the City and Growth Deals, and questions arise as to their necessity (OECD, 2019[12]; 2019[13]).

The CCR City Deal, the Swansea Bay City Deal, the North Wales Growth Deal all focus on regional, place-based economic development and, while they may take a different approach than the Regional Economic Frameworks, there appears to be at least some overlap in purpose and territorial coverage. First, in the case of the City Deals, these are joint growth agreements among the relevant local authorities, the UK government and the Welsh Government, and are primarily funded by the same parties. Second, if they do not cover the same territory as the intended Regional Economic Frameworks, their footprints are similar. Failing to take them into consideration could lead to overlapping plans, a lack of clarity regarding planning responsibilities, conflicting initiatives and additional density in the already crowded geographic footprint created by Welsh subnational policy and service activities. It can also affect transparency and accountability.

In the short term, first, it would be valuable if the Welsh Government clearly articulated to stakeholders why Regional Economic Frameworks together with the various planning documents are needed, and how they can be complementary and not competitive with respect to financial resources. Second, it must find a way for the existing City and Growth Deals to sit comfortably with the Regional Economic Frameworks. This could mean that City and Growth Deals form part of the Regional Economic Frameworks in the relevant regions, and potentially take the lead in supporting initiatives that fall within their sphere of operation (e.g. transport in the case of the CCR City Deal). Third, it should ensure that Regional Economic Frameworks do not simply add new planning requirements to existing ones, compounding strategy and planning fragmentation. This would also contribute to planning proliferation, obscure priorities and limit policy coherence and investment effectiveness.

In the medium term, one way to address this fragmentation would be to rationalise many of the existing plans, including Regional Economic Frameworks, into comprehensive, cross-sector regional-level development plans. Just like a cross-sector national regional development policy, the subnational plan should reflect subnational (regional) development priorities and needs across policy sectors (e.g. economy, education, energy, environment, housing, innovation and skills, tourism, transport, etc.), with an eye on integrated investment planning. It should also contribute to meeting the aims articulated in the national regional development policy mentioned earlier. This could harmonise subnational planning – including with the City and Growth Deals – and help identify synergies across sectors, and potentially across jurisdictions, in order to better optimise resources and investment financing. Responsibility for ensuring national/subnational coherence and coordination should rest with the sector-neutral proposed office for regional development and investment (if introduced), spearheaded for example by the Chief Regional Officer (CRO) teams, assuming they move to an office for regional development and investment. Ideally, they should be developed at the subnational level, for example by corporate joint committees (CJCs) in collaboration with the relevant local authorities, and could be refined in a dialogue process with the national government. This approach reflects what is currently being considered for the Regional Economic Frameworks.

In the longer term, effort should be made to streamline the planning requirements at the local authority level. This does not mean reducing or eliminating their development responsibilities or planning functions. It means consolidating the effort, for example through consolidated plans, or inter-municipal co-operation for larger-scale development planning tasks. Consideration needs to be given to local-level capacity. Local authorities not only have many planning requirements but they are also expected to put all of these plans into action and, in many cases, their capacity in terms of available human and financial resources is already strained (Morgan, 2019[17]; OECD, 2019[12]; 2019[13]). Achieving an integrated approach to regional development not only requires diverse government sectors (policy areas) to work together in a joined-up manner at a national level, it also requires that this be mirrored by an integrated approach at a subnational level.

The effective design of a regional development and investment framework is half of the equation. The other half is its successful implementation. A significant amount of time and resources are dedicated to developing Welsh strategies and frameworks. However, policy implementation or delivery is reported to be more challenging (Welsh Government, 2019[19]; Morgan, 2019[17]; Guilford, 2019[40]). One factor behind this difficulty is a degree of policy instability that arises with changes in government (Morgan, 2019[17]; Guilford, 2019[40]). This can be particularly detrimental to investment for regional development and to the regional development process itself, as both need stability over time. Such stability creates a safe environment for investment, especially for private sector financing and larger-scale borrowing, and gives sufficient time to generate results. An additional factor contributing to this gap is reportedly a disjointed policy delivery process, wherein policy actors work on their own rather than proactively working together in a collaborative or “joined-up approach” (Morgan, 2019[17]; Guilford, 2019[40]).

This disconnect in capacity between policy design and policy implementation is also present at the subnational level. Without strong commitment on the part of the Welsh Government and local authorities to build capacity, the disconnect risks becoming more acute as local authorities gain responsibilities for regional development and managing investment funds. To avoid this, strengthening the relationships among actors, building trust and working in tandem to design policies and identify implementation responsibilities will be fundamental. The current regional development framework calls on Welsh local authorities to collaborate more than ever with the Welsh Government and with each other, for example in designing their Well-being Plans (Morgan, 2019[17]), in structuring and administering City and Growth Deals (Morgan, 2019[17]), and in planning Regional Economic Frameworks. Trust-based institutional relationships are the basis for a genuine national/subnational partnership for governance, facilitating agile and impactful public investment and regional policy delivery. Further developing quality multi-level governance mechanisms that can foster such relationships will better support policy implementation and strengthen the returns on Welsh public investment.

There is no doubt that the Welsh government is aware of the importance of collaborative governance. Yet there appears to be a gap between intention and execution. This is evidenced by a clearly expressed apprehension among key Welsh regional development partners (e.g. local authorities, City and Growth Deal Boards, and the Welsh Local Government Association) that institutional processes in regional development planning are centrally driven and top-down (OECD, 2019[12]; 2019[13]). Behind this could be governance culture, a wariness of intention among national and subnational actors, a lack of appropriate tools, or a combination of these and other factors. While this may not be what the Welsh Government intends (or itself perceives), it should not be ignored. Success moving forward will rest on building capacity for playing new roles: a more strategic and less “implementation-oriented” role for the Welsh government as explored above, and a more empowered role for local authorities. This can imply introducing new structures, new mechanisms and new ways of working, as explored below.

In 2017, the Department of Economy and Transport introduced Chief Regional Officers (CRO) for South East Wales, Mid and South West Wales, and North Wales. They, together with their offices, are responsible for co-ordinating the design and implementation of the Regional Economic Frameworks with local authorities, and for ensuring a co-ordinated approach to regional economic development as well as alignment with national goals. The idea is for each CRO and their offices to work with the local authorities in their region to identify common economic development needs and priorities and then collaboratively develop the region’s Regional Economic Framework to realise these.

CROs, and their offices, could play a strong role in co-ordinating national and subnational-level economic interests and priorities, for example as brokers between the Welsh Government and local authorities. Ideally, they are able to combine a national-level perspective of economic development and its associated objectives with an understanding of a region’s economic development needs, priorities and capacities. The intention is that they work closely with local authorities as well as other stakeholders in their regions to identify these needs and build consensus around investment priorities. As the CRO offices continue evolving, they could also further support policy and plan implementation by working with local stakeholders, including small- and medium-sized enterprises (SMEs) and the third sector, to identify investment and financing opportunities. This potential for uniting an understanding of national economic development objectives with clear insight and understanding in the specificities of their regions places CRO and their offices in a good position to serve as a national/subnational bridge for economic development efforts. To do so most effectively, however, some of the early difficulties confronting CROs and their offices will need to be fully addressed. Not only are they relatively new, but the general, two-way mistrust that characterises national/local relations in Wales (OECD, 2019[41]) (Morgan, 2019[42]) can also create obstacles to an effective CRO/local authority working relationship (OECD, 2019[12]; 2019[13]).

Ensuring that CROs and their offices successfully engage local authorities in the design and implementation of their region’s Regional Economic Framework is fundamental for building ownership, responsibility and accountability for results. While this seems to be fully recognised, establishing this degree of partnership appears challenging. This may be due to an inherent contradiction in the role CROs are expected to play – on the one hand as regulators and assurance officers for the Welsh Government, and on the other as economic development partners for local authorities. The result may be that while local authorities would be receptive to CROs as genuine partners, this is less possible or will require more effort, given their other roles, a government culture that is more accustom to a centralised, top-down approach and the aforementioned mistrust. It can be compounded by a misalignment of definitions and expectations, as well. While the intention is to build a collaborative working relationship, one that supports co-produced plans, there seems to be some discrepancy in what this means practically for the CRO as well as for the local authorities, what to do to ensure it occurs and when. It may be valuable for CROs and local authorities to: discuss and agree upon clear definitions of and parameters around what collaboration and co-production mean; clarify the roles, responsibilities and deliverables of each party; and determine an appropriate form of collaboration for each stage of the policy cycle.

As they grow into their roles, CROs and their teams could become strong allies for local and regional actors, advocating for the subnational position from within the Welsh Government. They could also potentially offer support and guidance to regional/local, public and private actors in designing projects eligible for support through public investment funding mechanisms. Yet, they may need to build and support partnership capacity when working with subnational actors – be they local authorities, regional-level bodies, the third sector, the private sector or other local organisations – throughout the policy and investment cycles.

If an office for regional development and investment is institutionalised, that might become the logical home of CROs and their teams. Such placement could facilitate their role as brokers of subnational interest within the Welsh Government, by placing them in a “department-neutral” context, expanding their scope beyond the economy sector into broader regional development policy. Another place where their practical knowledge and support for local authorities may be highly effective is within a regional development agency (explored below). Both possibilities could make it easier for CROs and CRO offices to work with multiple stakeholders, support local authorities or other subnational bodies in designing and implementing regional development initiatives, and effectively become the locus of a top-down and bottom-up approach to advancing regional development priorities. Barring this, they could still effectively play their roles as currently defined – supporting national economic objectives and helping advance economic development goals at a regional level.

With a move towards stronger place-based regional development and investment, the Welsh Government is calling upon local authorities to assume more responsibility in cross-jurisdiction development and investment planning. This calls for a “rescaling” of activity by local authorities (Morgan, 2019[17]) and accentuates a need to build implementation capacity. For many local authorities, overcoming capacity constraints will be critical to their success in regional development planning and investment. Municipal size does not automatically dictate the degree of local capacity but it can play a role. When this is the case, formal inter-municipal co-operation arrangements offer a flexible way to generate capacity, efficiency gains and costs savings (Figure 5.5) (OECD, 2019[35]). OECD countries and regions approach such co-operation in a variety of ways (Annex 5.B) and generally associate specific incentives with such arrangements (OECD, 2019[23]). At a municipal level, these arrangements can range from “soft” formats to strongly integrated ones. On the “soft” side are single or multi-purpose co-operative agreements or contracts, including shared services arrangements or shared programmes (e.g. used in Australia, England (UK), Ireland and New Zealand). Among the more strongly integrated formats are supra-municipal authorities with delegated functions. For example, in France, Portugal and Spain, associated municipalities have the status of supra-municipal authorities with delegated functions. Inter-municipal co-operation covers a range of areas, from technical and service delivery needs to strategic co-operation for economic and social development (OECD, 2017[27]; 2019[35]). In Saxony-Anhalt, Germany, there are three forms of inter-municipal co-operation: working groups (Arbeitsgemeinschaft), purpose agreements (Zweckvereinbarung) and full associations (Zweckverand) formed to deliver on a specific task. Co-operation is voluntary between municipalities, depending on the task at hand and regional characteristics (Pötzsch, 2019[43]).

Currently, it is generally agreed that many Welsh local authorities face difficulty delivering on their responsibilities, especially the larger, more costly ones. Welsh local authorities are responsible for providing statutory services, such as social care, environmental health inspection and planning. Discretionary services, for example economic development, libraries, leisure and art centres, are provided based on choice and capacity (Morgan, 2019[17]; Welsh Government, 2019[19]). Although the services provided by local authorities are subject to laws, strategies and targets set and monitored mainly by the Welsh Government, they can choose how they meet their responsibilities and provide services: directly, in partnership with other authorities or organisations (e.g. third sector) or by commissioning the provision to a third party. Yet, many local authorities have downsized because of austerity, resulting in a hollowing-out of offices and generating capacity constraints (OECD, 2019[12]; 2019[13]). Fiscal and financial capacity is one challenge, as explored in Chapter 4. Human resources are a second challenge. “Soft” capacity6 constraints are a third. These include leadership, strategic thinking and planning, specialised expertise (e.g. procurement, project management, and human resource management) and “soft skill” sets (e.g. communication, relationship management) (Beecham et al., 2006[18]; Simpson, 2011[44]).

Local authorities in Wales that are struggling to deliver their core responsibilities will also face difficulty delivering on regional development and investment responsibilities. These challenges may become even more accentuated in light of the COVID-19 pandemic, its impact on subnational fiscal and financial health, and the role that subnational authorities are expected to play in medium- and long-term recovery packages, including for public investment. Taken together – i.e. the capacity challenges existing pre-COVID-19, combined with any strain arising from the immediate emergency, as well as from demands generated by implementing exit and recovery strategies – this can create or exacerbate inter- and intra-regional disparities and limit investment attractiveness. In extreme cases, a local authority’s ability to partner effectively with peers and the Welsh Government in realising national and local development aims will be affected. Using inter-municipal co-operative arrangements to build territorial scale can help local authorities mitigate these capacity constraints. First, they enlarge the area of intervention, permitting investment resources to be used across several local authorities or throughout a region. This maximises the use of limited resources, ensuring that more citizens are reached while also reducing cost. Second, by pooling their needs and resources, local authorities can share the cost of hiring necessary expertise for administrative and management functions associated with investment planning and implementation (e.g. for project design, evaluation, administration, co-financing, etc.) if necessary. At the same time, it is also important to set parameters for co-operative arrangements. Ad hoc partnerships or proliferation of partnerships can be costly (Williams, 2014[45]), strain resources by increasing workload (Williams, 2014[45]) and spreading staff too thin, create confusion and compound fragmentation, and limit transparency and accountability to citizens.

Recognising the capacity challenges local authorities face, the Welsh Government is putting forward two options to build territorial scale and cross-jurisdictional collaborative working. The first is by establishing guidelines for the voluntary merger of local authorities. The second is by institutionalising cross-jurisdiction co-operation through corporate joint committees (CJCs) (Box 5.11) (National Assembly for Wales, 2019[46]).

CJCs could contribute to the multi-level governance of regional development and investment in Wales in a number of ways, depending on the final legislation. First, by bringing together local authorities within a specific area, CJCs facilitate intervention at a regional level, generating scale. This could help local authorities more effectively deliver on specific policy and investment priorities and project decisions, particularly if the CJCs are attributed human and financial resources (drawn from the resources of constituent councils) and are given responsibility for managing these within their remit. Second, the degree of flexibility in how (voluntary versus requested) and why CJCs are established can permit tailoring their responsibilities or activities to the needs and capacities of local authorities in a specific territory (Regional Investment for Wales Steering Group, 2019[48]; WLGA Council, 2019[47]). An asymmetric approach to devolving policy and service responsibilities (Box 5.12), particularly those associated with regional development, can be valuable in Wales, and permit it to be more place-sensitive in its regional development approach. Local authorities may find that CJCs become useful tools for regional development planning as well as large-scale service delivery and investment projects. Finally, because CJCs are composed of local authority officials and act on behalf of their constituent local authorities, they should be able to operate on a larger scale while still reflecting local needs and decisions, and being accountable to these. Doing so, however, will mean that local authorities must work with each other to make decisions that benefit a wider area than their administrative boundaries and to act collectively in their implementation. They will also need to explain this level of action to citizens and other stakeholders through active and ongoing dialogue and engagement.

Welsh local authorities, while generally recognising the value of joint working and collaboration at the local level, have voiced concern about democratic accountability and higher-level bodies (e.g. CJCs) executing policy and service tasks (WLGA Council, 2019[51]; OECD, 2019[12]). Such concerns are not uncommon. One reason why governments ascribe tasks to local levels of government is their proximity to citizens, an advantage of which is the democratic accountably of local politics. There are arguments that inter-municipal co-operation jeopardises – or at a minimum confuses – accountability, particularly when there are many co-operative arrangements in the same territory. However, this should also be balanced by the ability of such arrangements to mitigate capacity problems due to size (Teles and Swianiewicz, 2018[52]). If structured with accountability in mind, cross-jurisdiction arrangements and the bodies that support them, should be able to incorporate a strong accountability function while still permitting municipalities to maintain autonomy and benefit from greater scale where necessary. In the current legislation, the local authorities are responsible for establishing the accountability (scrutiny) mechanisms governing their CJC. This should help ensure a level of accountability with which they are comfortable. Ultimately, local authorities are responsible for their CJC and the local officials composing them.

Joint action across jurisdictions also enables actors to implement complementary measures and take advantage of policy synergies that can contribute to making the most of investment returns. This is frequently the case for physical infrastructure investment, where the most efficient scale often exceeds the administrative boundaries of individual localities or regions. It can be easier, however, to encourage co-ordination around investment in basic infrastructure and services (e.g. water, sewage, waste management) and more difficult around “strategic” investments where subnational governments find themselves competing to secure public facilities, attract public and/or private financing, and hire qualified expertise for investment implementation. Achieving an efficient scale can also make an investment opportunity more attractive for private sector involvement, for example through public-private partnerships, which can help support investment financing (OECD, 2019[23]).

Overall, CJCs align with current multi-level governance trends in managing territorial or administrative fragmentation, “up-scaling”, and ensuring policy and service delivery capacity through formalised inter-municipal arrangements. They could offer a consistent but flexible structure for working at a higher territorial (regional) level. Furthermore, the CJC format could represent a space for local authorities to jointly identify and agree on development and investment priorities at a regional scale, especially for those initiatives that may be too costly for individual or small groups of local authorities to undertake on their own. By also acting as platform for local authorities to discuss development needs and identify investment priorities, CJCs could support the design and implementation of Regional Economic Frameworks. Furthermore, they could delineate a more formal, regional level to which public investment funds for development projects may be distributed – be they funds that originate with the Welsh Government or through the intended UK mechanism to replace EU funds. In the long run, CJCs may also become a tool to rationalise the geographic footprint of service delivery at the Welsh subnational level.

There should be some caution with respect to the institutional (statutory or otherwise) foundations of CJCs, however. Weak or unclear underpinnings could result in CJCs becoming yet another policy and service delivery partnership. This could exacerbate the existing problem of an already extensive number of municipal co-operative bodies in Wales and the multiple geographic footprints already generated by such entities across the Welsh territory. For example, some attention will need to be paid to clarifying and harmonising the roles, responsibilities and activities of CJCs and City and Growth Deal Executive Boards, should CJCs be introduced in the same geographic areas. CJCs could also contribute to greater inequality in service access and quality, inter- and intra-regionally. Avoiding this may require the Welsh Government to take a clearer and possibly firmer stance on the what, when and how of CJCs. It may also mean streamlining or rationalising some of the existing bodies. Any action towards such streamlining will be difficult and takes time. It should also be undertaken with clear leadership as well as the input of local authorities and the government and/or third sector organisations that would be affected.

If fully supported by the Welsh Government and local authorities, CJCs have significant potential to build regional development and public investment capacity among local authorities and evolve into an effective regional-level partner for local authorities and the Welsh Government. To accomplish this, their composition, structure, competency attribution, resource levels and actual role as policy and investment actors will need to be clear.

The decentralisation of responsibilities, including for regional development, often confronts governments with a “chicken and egg” dilemma: a desire to decentralise responsibilities to subnational entities and a fear that there is insufficient subnational capacity to undertake them. Governments can be reluctant to attribute new tasks to subnational governments that may lack the experience and capacity (resources, knowhow, skills) to undertake new responsibilities. The result can be an attribution of responsibilities that is partial, under-funded or limited by very tight control mechanisms. At the same time, subnational authorities may never have the opportunity to build the capacity necessary unless the responsibilities are in fact attributed, and they are granted sufficient space to build capacity by actively delivering on them. Often, they can only build capacity if given the opportunity to try. This does not mean that national governments relinquish oversight capacity or their ability to set parameters for action. What it does mean is that national actors must trust their subnational counterparts to deliver on their responsibilities (and vice versa), and that subnational authorities will actively build their task-implementation capacity. It is ultimately a “learning by doing” process that can be framed by formal partnership agreements and further supported by “pilots”. This could be particularly important in Wales where devolution is still evolving and not as strongly as it could be.

Formal partnership agreements between levels of government can help generate trust-based relationships, regardless of the size of the government. They can clarify “grey areas” where responsibility for action or outcomes has not been concretely established. This can be a particular problem in devolved contexts where there is an overlap of responsibility among levels of government. Memoranda of understanding, terms of reference and contracts are all examples of formal agreements. Over time, these agreements can help foster comfort and trust in the capacity of each party to meet their obligations, while also helping manage joint responsibilities for public investment planning, including for regional development. Contracts between the French central government and its regions (Contrats de plan État-Région, CPER) serve as a key planning, governance and co-ordination instrument in regional development policy. Iceland also makes extensive use of contracts between the national government and its regions. This has led to building greater trust, capacity and advancing decentralisation (Box 5.13).

Not only does successful management of a devolution process entail building delivery capacity among the subnational level, but it also means that the national level must be willing and able to shed the policy and service implementation role it has traditionally played in order to step into the role of a more strategic actor. The ability to make such a shift by the Welsh Government could improve the national/subnational relationship and contribute to advancing devolution in Wales. The Welsh Government will need to build its capacity to co-ordinate and guide, and grow comfortable in a new role, particularly with respect to regional development and investment. At the same time, it will need to creatively build capacity among local authorities so that they can assume new and more complex responsibilities. For example, the Welsh Government could work with local authorities to identify which responsibilities could be proactively devolved, trust that new tasks can be successfully undertaken, and guide them to do so. This can include mentoring, consulting, providing technical assistance or encouraging learning exchanges between peers or between national- and subnational-level government officials, for example. It can also mean ensuring sufficient resources so that local authorities can “rebuild” their planning capacity, which is reported by many communities to have diminished due to austerity (OECD, 2019[12]; 2019[13]).

Furthermore, the Welsh Government and local authorities could work together more effectively to pilot initiatives as a means to build capacity. This would permit parties to “test” new or different approaches, new structures, executing new responsibilities and then to identify what works, what does not and recalibrate the approach if necessary. A decision could then be made to determine whether or not the initiative should be rolled out more extensively or not. As a gradual, step-by-step approach to introducing a governance mechanism or reform, including the devolution of responsibilities, pilots offer national and local actors “time to learn” and “time to adjust”. An asymmetric approach to the devolution of future responsibilities, including for regional development, can facilitate pilots in specific tasks or targeted regions in order to test new approaches for policy implementation and service delivery (OECD, 2019[35]), thereby creating the space to learn and supporting capacity building in the devolution process.

Using more formalised partnership agreements that clearly establish expectations and also incentives, and piloting initiatives with certain local authorities, before introducing them more broadly, could be effective mechanisms to support devolving regional development and investment responsibilities. By doing so, the Welsh Government might build its own trust in the ability of local authorities to deliver on their competencies and it may help increase the sense of partnership between the two parties. Meanwhile, local authorities must recognise capacity limitations and take the steps necessary to overcome these, including by working at a larger scale, actively monitoring and evaluating performance, and being clear in what they can accomplish in the short versus medium and long terms.

Regional development agencies are one governance tool used to generate proactive, “on the ground” implementation of a regional development and investment agenda. Among OECD countries, there is an upward trend in their use as contributors to the design and implementation of national development programmes and in better co-ordinating public investment for regional development (OECD, 2019[23]). One advantage of regional development agencies is their ability to foster greater understanding and stronger working relationships between national and subnational actors. They can also support generating international ties and expanding markets for businesses of all sizes. Regional development agencies can take a number of forms and serve diverse functions (Annex 5.C) (OECD, 2016[9]), including:

  • As a network to organise national interventions for regional development within a decentralised context (e.g. Canada).

  • To help national and subnational actors capitalise on complementary actions across policy sectors in a given region (e.g. Finland).

  • To support entrepreneurs and SMEs promote innovation and cluster development, and attract investment, acting also as a one-stop-shop for firms to obtain information on programmes and support in accessing funding for projects (e.g. Ireland and Scotland).

  • To ensure that policymakers have the evidence necessary to make informed decisions on a wide variety of topics that influence regional development and investment, and to work with regional partners to advance development objectives (e.g. France).

Wales has mixed experience with regional development agencies. The Welsh Development Agency (WDA) was established in 19767 and was dissolved in 2006, with its functions merged into the Welsh Department of Economy and Transport. During its years of activity, it encouraged local and international business development, inward and foreign direct investment, and the clearing of derelict land (UK Government, n.d.[53]). It was well recognised for its contribution to business competitiveness but associated with significant controversy over irregularities in its management practices. Despite this, national and subnational actors, including in the private sector, continue to identify it as a model that worked well for stakeholders (OECD, 2019[13]). The WDA had a clear economic brief permitting it to focus on its tasks and (theoretically) it was a step removed from political constraints. While institutionally it was part of the Welsh Government, it had offices at a regional level. This permitted officers to build relationships with regional and local economic actors, generating a sense of partnership for an area’s development and fostering a strong sense of trust between the parties. These officers were able to identify what firms in their region needed, as well as the most suitable or appropriate type of help available to meet these needs. They also offered stakeholders a “local” Welsh Government contact that understood their region, the opportunities it offered and the regional business profile, effectively supporting business growth (OECD, 2019[13]). Currently, many basic business support services are housed in Business Wales, which helps businesses to start up and grow, offering support for business development, financing, skills and training, innovation, marketing and information technology (IT) (Welsh Government, 2020[54]).

Reintroducing a regional development agency that is strategically oriented to support implementing regional development and investment policy (including internationally) could help build capacity in both the public and private sectors. By creating a horizontal agency, potentially housed within the proposed office for regional development and investment but not responsible to any individual line minister or department, it can operate across sectors and across silos. Doing so could advance regional-level policy implementation by building and managing relationships that contribute to productivity and investment, as well as to well-being and regional attractiveness. The overall objective of such an entity would be to support national and subnational regional development actors implement policy and investment initiatives, complementing the strategy and co-ordination role of the office for regional development and investment. On the policy side, this can range from identifying realistic development priorities for the region to providing data that supports performance measurement and policy evaluation, for example. On the investment side, it could serve as a one-stop-shop, advising local authorities, entrepreneurs, SMEs, the third sector and other interested stakeholders on the design and eligibility of projects for public funds and navigating the public financing channels that would support these. Most importantly in the Welsh context, such an entity could contribute to building trust among stakeholders.

Such an entity must be able to work effectively across Welsh Government departments. Structurally, it could have a head office located at the national level, for example within the proposed office for regional development and investment. It could – and should – be complemented by regional “arms”. Ideally located in each region (South East Wales, North Wales, and Mid and South West Wales, or Mid Wales and South West Wales), these offices could be active at the regional and local levels, working with the region’s CJC, local authorities, private and third sectors representatives, and other regional development stakeholders. If CROs and their teams become part of an office for regional development and investment, they could transform into the regional “arms” of a regional development agency, working with regional development actors in the public, private and third sectors in implementing regional development interventions (Figure 5.6).

It is essential that such an agency is properly resourced and has decision-making power within defined parameters. Funding could come from across the Welsh Government particularly if the body is working to support departments in meeting objectives with a regional logic. It would also be important that it is sufficiently institutionalised to withstand election cycles. This reinforces the need to create a body independent of a single cabinet department. The above described institutional set up may best position it to advance implementing cross-sector policy objectives and investment opportunities, while also establishing clear lines of accountability.

The Welsh Government should take into account that two important elements are already in place with respect to such a body. First, is previous institutional experience. However, it would be fundamental to apply learning from the past. Second, is previous practical experience. There are experienced people within the Welsh Government who have worked both within the WDA and with government offices, and appear to maintain the contacts and good relationships established during the WDA era (OECD, 2019[13]).

Well-developed, outcome-oriented performance measurement systems contribute to the success of regional development policies and investment by measuring and monitoring the effectiveness of policy and spending, be it by national- or subnational-level authorities (Mizell, 2008[55]; Phillips, 2018[56]). Performance measurement systems combine monitoring and evaluation mechanisms with indicator sets and can help governments determine if their actions are yielding the results desired or if an adjustment is necessary (Annex 5.B, Annex 5.D). An effectively designed indicator system – one that relies on the appropriate type of indicator for the objective at hand (Box 5.14) – offers regional policy actors information to enhance decision-making throughout the policy and investment cycles, from resource allocation to policy or programme adjustments. When developed collaboratively with subnational actors for their design, implementation and use, and carefully coupled with specific incentive mechanisms and realistic targets, indicators can also promote capacity development and good management practices, encourage performance improvements and improve transparency and accountability at all levels of government (OECD, 2009[57]; Mizell, 2008[55]; Phillips, 2018[56]).

A more robust practice of performance measurement would permit Welsh public authorities at all levels to better understand the impact of their policies, programmes and investments on regional development. It could also offer insight into the factors contributing to or detracting from local and regional attractiveness, and potentially improve policy continuity. If a government cannot determine whether a policy or investment is performing over time, then it is easier for a successive government to replace it. To operate effectively, however, performance measurement systems, and particularly indicator systems, require financial and human resource capacity and capability, time to develop and test, and an ability to be self-critical. This all depends on political will and an openness to scrutiny, as well as on institutional, national and subnational actors that are interested in understanding performance. Wales could better seize the opportunities offered by performance measurement systems, including indicators, to promote learning and build accountability for regional development and investment. To do so will require overcoming a tendency to perceive performance measurement for regional development and investment as a control or compliance tool – a characteristic frequently associated with EU performance measurement requirements (Morgan, 2019[17]) – and to use it more proactively as a learning tool.

Wales’s performance measurement experience for regional development and investment is linked at least in part to its experience in managing and using EU funds. Yet, while EU funds have robust evaluation mechanisms, these focus on measuring project and investment outputs. They emphasise capturing what activities or investments produce with respect to specific, agreed-upon funding objectives and commitments. They are not generally designed to capture the outcome, i.e. the expected or desired change arising from the investment or policy intervention. This limits their ability to offers insight into an action’s broader success and may not help policy and decision-makers identify where to invest more or better.

Working with departments and other public bodies to identify a short set of relevant targets and indicators for desired regional development and investment outcomes could contribute to necessary policy and investment evidence bases, give greater insight into where policy and investment attention needs to be placed and support ex ante and ex post investment evaluation, including the Better Business Case approach used by the Welsh Government. This same principle applies subnationally to the Regional Economic Frameworks. Developing such plans without clear measures for success will provide limited insight into whether the Welsh Government’s place-based approach to regional development and investment is working, and to the impact of regional-level investment activities. It will also limit the ability to identify whether the capacity of regional-level bodies and local authorities to manage regional development and investment is increasing.

The Welsh Government also has the opportunity to better use performance measurement, and particularly indicators, as an accountability mechanism. At the national level, this can be accomplished by establishing a performance framework that can be easily tracked by citizens and stakeholders. This could help the government and citizens understand if regional development spending is meeting the government’s objectives of growth, greater inclusiveness and higher levels of well-being. The WFGA and its indicators could be used as a basis to pilot such an initiative. This would permit the government to highlight its performance and the effectiveness of policies and investment that support growth, inclusiveness, service delivery, the foundational economy and citizen well-being, and to what result. It will require publicly communicating objectives, targets, indicators and results, in clear, easy to understand language and in an accessible manner – for example via a dedicated public website. Scotland has undertaken this exercise since 2007, and today its National Performance Framework is used by policy and decision-makers to shape policy and as a beacon for policy choices (Annex 5.D) (Johnstone, 2019[58]). With its annual Report on Government Services, Australia reviews government service provision in order to compare the performance of government services and to share service reforms already implemented or under consideration. In addition, the report outlines agreed-upon national performance standards for government services and analyses service provision reform. Among the services covered in the review for 2019 were: childcare, education and training; justice; emergency management; health; community services; and housing and homelessness (Australian Government, 2020[59]). The reports are publicly available, with detailed content that can be valuable to policy and decision-makers.

Opening itself and its performance to public scrutiny would effectively permit the Welsh Government to lead by example and support efforts to increase performance measurement, including the use of performance indicators, at the subnational level. The Cardiff Capital Region (CCR) and Swansea Bay City Region City Deals are both required to develop a monitoring and evaluation plan establishing how they will deliver and evaluate the impact of their investments (UK Government, n.d.[60]; n.d.[61]). They both monitor and evaluate the impact of the investment fund through diverse bodies. This is undertaken by the Economic Growth Partnership and the Skills and Employment Board, as well as by the CCR, the Welsh Government and the UK government for the CCR City Deal (UK Government, n.d.[60]). For the Swansea Bay City Region City Deal, it is undertaken by the Economic Strategy Board, an Operational Delivery Unit and a City Deal Delivery Team under a joint committee (UK Government, n.d.[61]). There are a number of oversight bodies for each City Deal, fragmenting the exercise and potentially obscuring the basis for oversight and who is responsible for overseeing what. While this may be evident to the internal City Deal stakeholders, it may be valuable to communicate to external stakeholders, including citizens, what they can expect from City Deal investments, based on a clear and systematic way to measure and communicate outputs and outcomes. This could improve transparency and accountability. Additionally, if properly managed it could garner additional support for projects and also stimulate a more dynamic investment process. Similar consideration should be given to the Regional Economic Frameworks being developed. These too would gain from an effective indicator system to support the monitoring and evaluation of development projects and their financing, with publicly shared results. This would help the Welsh Government and local authorities understand the impact of their frameworks. It would also show citizens where changes are occurring thanks to a new, more targeted approach to regional development investment. Furthermore, it can permit citizens to hold national and local government accountable for growth, development and well-being in their region.

To successfully use indicators systems as an accountability mechanism requires clarity with respect to objectives, lines of responsibility, openness and transparency, a systematic approach and political will. It also requires selecting indicators that are relevant to citizens. For example, indicators that feature administrative reforms to the public sector or composite economic performance (e.g. gross value added [GVA]) are too abstract and have little significance for citizens as there is no direct link with daily life and citizen well-being. A system that focuses on indicators with more observable results for citizens (e.g. to improve the capacity to solve waste management problems, to offer sufficient care for children and the elderly, to improve the level of education of young students, to address a housing shortage, etc.) is more likely to be effective as an accountability mechanism. Furthermore, media coverage and commitment by policymakers to hold themselves accountable to results is required if indicator systems are to be effective public accountability and transparency levers (OECD, 2009[57]). Citizen input into government performance is a dynamic way to use performance measurement as an accountability mechanism. In the city of Córdoba, Argentina, citizens participate in defining municipal objectives and holding local government accountable for achieving them (Annex 5.B) (OECD, 2016[62]). The advantage is that when well designed, such systems can contribute to increasing citizen – and stakeholder – confidence in government activities, spending and performance. Not only can this contribute to strengthening accountability (OECD, 2009[57]) and transparency, it can further promote trust in government.

Successful policy and investment processes rely on effective stakeholder engagement. Public, private and civil society actors (including the third sector) have a stake in establishing and realising a vision and strategy for the development of where they live and work (OECD, 2019[23]). This is especially true as they are also among those most affected by subnational public investment, as funds are frequently used for a variety of infrastructure projects, often large, costly and with significant social impact. Involving a broad range of stakeholders – from local authorities and public boards, to private enterprises, academia, civil society organisations, etc. – at the right time, for the right reasons and in the right ways, can improve the quality of investment projects and policy outcomes. Yet, stakeholders are seldom engaged early enough in the policy or investment cycle. This can be due to inertia, to engagement that is a “box-ticking” exercise or to consultation processes and mechanisms that are inappropriate to the objective at hand, for example. While many governments require stakeholder consultation when developing laws, policies, infrastructure projects, etc., the engagement process is often not undertaken in a strategic manner.

The Welsh Government frequently uses consultation bodies, working groups, sub-groups, reflection exercises, etc., to support the policy design process. These consultative mechanisms bring together diverse stakeholders, relevant to a specific topic, such as investment for regional development. They offer a channel for the Welsh Government to consult with experts and other stakeholders and then further refine its thinking. It is a useful practice. There are also limitations to it, however. As a small nation, many of the key players and experts called upon to participate in these bodies are the same. The advantage is that everyone knows each other and this can generate the levels of trust necessary to openly discuss complex or sensitive policy issues. The risk is discussion of challenges that is self-reinforcing across consultative bodies and limited innovation in potential solutions. In addition, because people may participate in multiple bodies, an additional risk is consultation fatigue and drawing down on already limited human resources. Beyond internal-to-government consultation processes, the Welsh Government undertakes public consultation exercises prior to introducing a new policy. However, public consultation may be coming too late, particularly if the policy has already been informed (by the consultative bodies) and designed (by the government). While valuable, these mechanisms can be static. They are concentrated on the left end of the stakeholder engagement spectrum (i.e. inform and consult) (Annex 5.E) and may have limited strategic impact.

At the local level, officials seem to expect engagement that is active involvement in the design and delivery of policies and investments. This places them to the right on the stakeholder engagement spectrum (i.e. collaborate and empowerment). Both the Welsh Government and local authority representatives consistently refer to “co-production”8 and its importance. Yet, there is a gap between the parties in what co-production means and how it is realised. This dynamic is evidenced at least in part by the reported tensions between Chief Regional Officers (CROs) and local authorities in managing the engagement process for identifying development problems, needs and priorities for the Regional Economic Frameworks. Some local authorities feel that the dialogue is being launched too late in the design process and results in less space for their input (OECD, 2019[12]). The approach seems at odds with a stated desire to bring the Welsh Government and local authorities to work together on identifying development priorities and relevant investment programming. There is a risk that top-down processes are reinforced, whether intentionally or not, further eroding trust between the national and subnational levels of government. Unless bridged, this gap could significantly weaken the Welsh Government’s ability to invest effectively in place-based, and place-driven regional development.

There also seems to be room to improve engagement practices between the Welsh Government and non-government stakeholders, including the private sector, higher education institutes and the third sector. It is reported that the relationship between the Welsh Government and the business sector, for example, is not sufficiently open and a free flow of communication and information exchange is challenging (Morgan, 2019[17]). This can limit the ability of policymakers to understand the needs, opportunities and capacity constraints experienced by the private sector, which in turn will affect the sector’s ability to contribute to development. It is also reported that more effective and strategic engagement could be undertaken with higher and further education communities. The strong relationship among governments, businesses and research centres can advance productivity and competitiveness, better-developing innovation opportunities (Morgan, 2019[17]; Reid, 2018[63]) and boost the well-being levels in individual regions. Welsh third sector organisations are critical partners for the delivery of public services in Wales. In addition to being service providers, they can bring first-hand insight into the services citizens need and want now and, in the future, identify problems in service delivery or quality, as well as contribute innovative solutions. In many respects, realising the Welsh well-being agenda rests in great part with them. Ensuring they are actively engaged in regional development and investment processes will increase their capacity to deliver accessible and quality services. It can also contribute to their sense of ownership in societal outcomes, for example in social care, affordable housing, food provision and health – all of which advance the Welsh inclusiveness, well-being and foundational economy agendas (Morgan, 2019[17]). Finally, these stakeholders are valuable accountability mechanisms (Morgan, 2019[17]) and can call governments to task for falling short on their responsibilities.

The Welsh Government and local authorities agree that active engagement – with each other and with stakeholders and citizens – and a partnership-based approach to regional development and investment are essential. However, they appear misaligned in what this means, which creates conflict and contributes to misunderstanding and distrust. The Welsh Government and local authorities may need to embark on a more strategic and clearer path for engagement, while also building the engagement capacity of the “engager” and “engagee”. Actively managing the expectations surrounding engagement is necessary – i.e. why the consultation and what there is to gain by participating in a constructive manner. It is the government’s responsibility to communicate how – and, ideally, when – these expectations will be met and why they cannot be met if such is the case. There are a number of ways to bridge gaps that arise from mismatched expectations, highlighted by different government experiences (Annex 5.E).

Stakeholder engagement strategies are one mechanism. These are generally an overarching document on citizen or stakeholder participation in policymaking, developed by a national or subnational government, a government ministry/department, or another type of public body. Stakeholder engagement strategies not only contribute to building engagement capacity among civil servants they can support such capacity among non-government stakeholders, as well. They can help align conceptual understanding and definitions (OECD, 2017[34]), clarify expectations, identify necessary resources and provide guidance to using and communicating the results from an engagement process. These strategies can be complemented by manuals or guidelines and often are part of a country’s open government initiative. For example, the Australian government’s Department of Health, and the State Government of Victoria’s Department of Health and Human Services have both developed frameworks for stakeholder engagement. Meanwhile, the Victorian Health Promotion Foundation, VicHealth, published a Stakeholder Engagement Framework 2018-23 that speaks directly to its constituency (Annex 5.E) (VicHealth, n.d.[64]).

A similar framework document for supporting the internal engagement process with other government actors and also with local authorities in Wales may be beneficial. This could help better establish the roles of each party, clarify definitions, identify appropriate engagement methodologies and align expectations with respect to participatory processes. Such a document may contribute to strengthening collaborative relationships with CROs, for example. It could also provide a mechanism to ensure effective participatory processes between the Welsh Government and CJCs, as well as CJCs and the communities they would serve, should CJCs be established. Ensuring that subnational “voice” is appropriately integrated into the policy and investment processes that support regional development should be actively pursued and supported. However, it should also be undertaken with clearly established and agreed-upon parameters. This includes with respect to Regional Economic Frameworks but goes beyond them as well. There is still work to be done among Welsh national and subnational-level stakeholders to ensure effective engagement processes.

Engagement through active, continuous and clear communication with government and non-government stakeholders, including other political parties, the private sector, the third sector and citizens is another important tool that can build support for regional development and investment initiatives. This can be particularly crucial when undertaking any transformational reform or large-scale investment project. Not only does this help align objectives, interests and priorities, it “brings people on board” with the reform and increases the legitimacy of government investment and policy decisions. Bilbao, Spain, is a good practice example of active stakeholder engagement in the successful physical and economic transformation of the city (Annex 5.E) for a number of reasons. It worked with the spectrum of political parties and local interests, and dedicated sufficient resources and managed stakeholder expectations throughout the multi-year process. It also used the engagement process to inform its decisions, rather than use it to drive the decisions it had already made. Finally, it was responsive to the accountability mechanisms embedded into engagement processes. During this transformative period associated with Brexit, the Welsh Government and local authorities may wish to continue strengthening the active communication and dialogue with respect to public investment initiatives with each other and with a broader range of stakeholders. Engagement processes that incorporate diverse stakeholders, including non-government sectors (e.g. private sector and higher education institutes, the third sector, etc.) can provide a wealth of ideas, innovation and new contribution to the design of policy content and public services. While Bilbao created a framework for participation that helped the government proactively engage with communities and nourished a more participative and empowered relationship between government and citizens, Australia has taken this capacity to a national level through its 52 Regional Development Australia Committees. These are composed of local leaders who work with all levels of government, business and community groups to support their region’s development (Annex 5.E) (OECD, 2019[23]).

Taking a more strategic and policy-driven approach to stakeholder engagement in regional development and investment could contribute to trust-building between the Welsh Government and a diverse set of stakeholders. Setting out the “rules of engagement”, providing principles for engagement and a clear statement of purpose, as well as definitions and engagement methodologies, could make the engagement processes clearer, easier and more transparent. Combining this with offering tools that build capacity and support successful engagement processes could further contribute to managing expectations and lead to more satisfying, and effective, engagement processes – for the “engager” and the “engagees”. Reinforcing an engagement culture, building the trust necessary to engage, and building engagement capacity all take time. Box 5.15 offers some pointers to consider when engaging with stakeholders.

There is ample possibility to achieve the Welsh development agenda of growth, inclusiveness and well-being through place-based, integrated regional development and public investment. Doing so successfully calls for reconsidering diverse aspects of the multi-level governance system. Brexit offers a window of opportunity to refine the relationship between the Welsh Government and the UK government, and it also creates space to redefine the relationship supporting regional development and investment between the Welsh Government and local authorities.

Taking a more precise place-based approach to that supported by ESIF structures is a strong step forward. The Welsh Government is introducing mechanisms to reinforce this, such as CROs and their teams, Regional Economic Frameworks and CJCs. At the same time, there is room to improve the capacity to create and implement integrated policies, as currently the strategic framework for regional development and investment is fragmented across government. A fresh look at the toolkit supporting the design and implementation of regional development policy and its delivery will be valuable in the short, medium and longer terms. A clearer strategic approach will be valuable, as would be a single dedicated regional development policy – one that considers and helps integrate the regional ambitions of diverse policy sectors. Expanding the mix of co-ordination mechanisms used, including at the centre of government and particularly with an eye on managing the policy fragmentation and mitigating its impact, would help. Creating an office for regional development and investment could effectively boost cross-sector co-ordination and policy delivery, as well as investment management. It could also support co-ordination efforts among levels of government. Finally, having a clear understanding of what works and what does not work in terms of policy interventions and investment is fundamental, and an outcome-based performance measurement system for regional development could provide this level of insight, as well as serve as an accountability mechanism to citizens.

The Welsh Government is also examining how to implement its regional development and investment agenda by increasing devolution. As it looks to do so, there is a need to ensure capacity is built among all parties, national and subnational. At the national level, the government will need to become more comfortable assuming a strategic role and moving away from one that emphasises delivery. At the same time, local authorities will need to recognise their capacity “cans” and “cant’s”. For all parties, managing this will mean being open to new structures, new mechanisms and new ways of working. This can include taking an asymmetric approach to devolving tasks, based on capacity rather than the task itself, and establishing pilots to identify what works and what might not. Formalising partnership agreements is another useful mechanism. Ensuring that a wide range of stakeholders can support the agenda is fundamental. This can mean building “on the ground” implementation support for SMEs, urban and rural area entrepreneurs, larger private sector actors, the third sector, etc. A regional development agency here is a possibility.

There is broad consensus among Welsh stakeholders that place-based regional development is the right approach to meeting the government’s agenda, as well as subnational priorities and needs. Gaps arise in what this means and the forms it could or should take. These will need to be bridged. The process of doing this through multi-level governance could bring regional development and investment actors closer together in their efforts to advance productivity, growth and well-being throughout Wales.

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[62] OECD (2016), OECD Territorial Reviews: Córdoba, Argentina, OECD Territorial Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264262201-en.

[9] OECD (2016), Regional Outlook 2016: Productive Regions for Inclusive Societies, OECD Publishing, Paris, https://doi.org/10.1787/9789264260245-en.

[10] OECD (2015), OECD Regional Outlook Survey, GOV/RDPC(2015)8, OECD, Paris.

[39] OECD (2015), “Roles of the centres of government”, in Government at a Glance 2015, OECD Publishing, Paris, https://dx.doi.org/10.1787/gov_glance-2015-26-en.

[38] OECD (2014), Centre Stage: Driving Better Policies from the Centre of Government, OECD, Paris, https://www.oecd.org/gov/Centre-Stage-Report.pdf.

[37] OECD (2014), Slovak Republic: Developing a Sustainable Strategic Framework for Public Administration Reform, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264212640-en.

[1] OECD (2013), Investing Together: Working Effectively across Levels of Government, OECD Multi-level Governance Studies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264197022-en.

[4] OECD (2013), Poland: Developing Good Governance Indicators for Programmes Funded by the European Union, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264193543-en.

[22] OECD (2012), Promoting Growth in All Regions, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264174634-en.

[25] OECD (2011), Estonia: Towards a Single Government Approach, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264104860-en.

[5] OECD (2010), Finland: Working Together to Sustain Success, OECD Public Governance Reviews, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264086081-en.

[57] OECD (2009), Governing Regional Development Policy: The Use of Performance Indicators, OECD Multi-level Governance Studies, OECD Publishing, Paris, https://dx.doi.org/10.1787/9789264056299-en.

[32] Persson, M. (2019), “Success factors in regional development reform and investment: The Örebro County perspective”, Presentation given at the OECD Seminar "The Future of Regional Development and Investment in Wales".

[56] Phillips, L. (2018), “Improving the Performance of Sub-national Governments through Benchmarking and Performance Reporting”, OECD Working Papers on Fiscal Federalism, No. 22, OECD Publishing, Paris, https://dx.doi.org/10.1787/ffff92c6-en.

[43] Pötzsch, S. (2019), “Regional policy and regional cooperation in Saxony-Anhalt”, Presentation at OECD Seminar: "The Future of Regional Development and Investment in Wales".

[75] Red Ciudadana: Nuestra Córdoba (n.d.), Plan de Metas, https://www.nuestracordoba.org.ar/plan-metas-gob.

[84] Regional Development Australia (2019), About, https://www.rda.gov.au/.

[48] Regional Investment for Wales Steering Group (2019), “RISWG 14/19”, in A Framework for Regional Collaboration, https://gov.wales/sites/default/files/publications/2019-09/framework-for-regional-collaboration.pdf.

[63] Reid, G. (2018), Review of Government-funded Research and Innovation in Wales, Welsh Government.

[69] Scotland Highlands and Islands Enterprise (2019), Homepage, https://www.hie.co.uk/.

[68] Scottish Enterprise (2020), Homepage, https://www.scottish-enterprise.com/.

[73] Scottish Government (2014), About Performance, http://www.scotland.gov.uk/About/Performance/scotPerforms.

[74] Scottish Government (n.d.), National Performance Framework, https://nationalperformance.gov.scot/.

[44] Simpson, J. (2011), Local, Regional, National: What Services are Best Delivered Where, http://www.wales.nhs.uk/sitesplus/documents/829/Local%2C%20regional%2C%20national-%20what%20services%20are%20best%20delivered%20where%202011.pdf.

[52] Teles, F. and B. Swianiewicz (eds.) (2018), Inter-Municipal Cooperation in Europe: Institutions and Governance, Governance and Public Management Series, Palgrave Macmillan, https://www.palgrave.com/gp/book/9783319628189.

[60] UK Government (n.d.), Cardiff Capital Region City Deal, UK Government, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/508268/Cardiff_Capital_Region_City_Deal.pdf.

[61] UK Government (n.d.), Swansea Bay City Region City Deal, UK Government, https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/611685/Swansea_City_Deal_-_English.pdf.

[53] UK Government (n.d.), Welsh Development Agency, https://www.gov.uk/government/organisations/welsh-development-agency.

[78] VAGO (2015), Public Participation in Government Decision-Making: Better Practice Guide, Victorian Auditor-General’s Office, Melbourne, Victoria, http://www.audit.vic.gov.au/publications/20150130-Public-Participation-BPG/20150130-Public-Participation-BPG.pdf.

[72] Van Dooren, W., G. Bouckaert and J. Halligan (2010), Performance Management in the Public Sector, Routledge.

[82] VicHealth (2018), Stakeholder Engagement Framework 2018-2023, VicHealth, https://www.vichealth.vic.gov.au/-/media/Files/PDFs/VicHealth-Stakeholder-Engagement-Framework-2018-23.pdf?la=en&hash=00363DAB04FB0F66CFF8AD27B6EF7EAFFD49635B.

[64] VicHealth (n.d.), About - What We Do, https://www.vichealth.vic.gov.au/about/what-we-do.

[54] Welsh Government (2020), Welcome to Business Wales, https://businesswales.gov.wales/.

[19] Welsh Government (2019), “Responses to OECD Questionnaire, unpublished”.

[16] Welsh Government (2017), Prosperity for All: Economic Action Plan, Welsh Government, https://gov.wales/sites/default/files/publications/2019-02/prosperity-for-all-economic-action-plan.pdf.

[15] Welsh Government (2017), Prosperity for All: The National Strategy, Welsh Government, https://gov.wales/sites/default/files/publications/2017-10/prosperity-for-all-the-national-strategy.pdf.

[14] Welsh Government (2017), Well-being of Future Generations (Wales) Act: The Essentials, Welsh Government, https://futuregenerations.wales/wp-content/uploads/2017/02/150623-guide-to-the-fg-act-en.pdf.

[21] Welsh Government (2014), ERDF West Wales and the Valleys Operational Programme Summary, Welsh Government, https://gov.wales/sites/default/files/publications/2019-06/west-wales-erdf-operational-programme-summary.pdf.

[20] Welsh Government (2014), ESF East Wales Operational Programme Summary, Welsh Government, https://gov.wales/sites/default/files/publications/2019-06/east-wales-esf-operational-programme-summary.pdf.

[45] Williams, P. (2014), Commission on Public Service and Delivery: Full Report, https://gov.wales/sites/default/files/publications/2019-01/commission-public-service-governance-delivery-full-report.pdf.

[28] WLGA (n.d.), Partnership Council for Wales, http://www.wlga.wales/partnership-council-for-wales.

[47] WLGA Council (2019), Local Government Reform.

[51] WLGA Council (2019), Local Government Reform - Item 5.

Australia

In April 2008, the Australian government convened the Australia 2020 Summit to foster a national conversation on Australia’s long-term future. The summit aimed to harness the best ideas for building a modern Australia, ready for the challenges of the 21st century. It brought together 1 000 participants from across the country to think about long-term challenges confronting Australia’s future and requiring responses at the national level that would not be limited to the span of the usual electoral cycle. The summit generated more than 900 ideas over 2 days. Participants came from the business sector, academia, community and industrial organisations, and the media. They debated and developed long-term options for Australia across ten critical areas: productivity (education, skills, science and innovation); the economy; sustainability (e.g. population, climate change, water); directions for rural industries and communities; a long-term national health strategy; strengthening communities (e.g. social inclusion); indigenous populations; culture (e.g. art, film, design); governance; security and prosperity. The Department of the Prime Minister and Cabinet provided the Secretariat for the Summit and was responsible for co-ordinating the development of the Summit report and the Australian government’s response to the Summit, as well as the implementation of the policies and programmes generated.

Slovenia

Vision of Slovenia 2050 was developed using a strategic foresight process designed and implemented in co-operation with the OECD. Its preparation included discussion with ministries, an extensive civic engagement process, a public opinion survey and a total of 27 events. The vision played a key role in identifying global megatrends that are likely to affect Slovenia over the coming decades and developing appropriate policy responses to them. It served as an important input into the Development Strategy of Slovenia 2030.

Canada

Canada’s Policy Horizons Canada, a centre-of-government unit, conducts scanning and foresight to anticipate emerging policy challenges and opportunities. The unit monitors and explores social, economic, environmental and technological changes in Canada and across the world, and analyses how these changes may come together in the future. Its work supports medium-term policy development by the government of Canada, by helping federal organisations to take a comprehensive, longer-term approach while dealing with their short-term priorities. The unit does not formally analyse regional dimensions, but some of its prior work has considered how trends might have different impacts across regions.

Estonia

At the national level, the Strategy Unit, housed in the Government Office, is Estonia’s centre-of-government long-term planning unit. The Strategy Unit is responsible for developing and implementing government action plans and Strategic Development Plans (SDPs) to increase the country’s competitiveness and sustainable development. For example, preparations are underway to develop a long-term strategic vision called Estonia 2035, to reduce bureaucracy, fragmentation and the number of government level development plans. Estonia 2035 will take into consideration input from political and opinion leaders, top experts, and private, third and public sector organisations.

Sweden

The Unit of Economic Policy Analysis within the Economic Division of Sweden’s Ministry of Finance is responsible for economic development and long-term strategic foresight. Through that role, the unit develops and publishes a “long-term inquiry” (Långtidsutredningen) on a regular basis, with several sub-reports on specific territorial and regional issues: e.g. migration, commuting, places of economic growth and demographic challenges for regions. Regional GDP, workforce and population projections to 2035 are also included, based on the Regional Analysis and Forecasts (Raps) tool for regional planning. This tool can be used for analyses on historical developments, forecasts, forward-looking scenarios, comparative regional descriptions, groupings of regions by structure and trends, and regional simulations and impact assessments.

Source: OECD (2010[5]), Finland: Working Together to Sustain Success, https://dx.doi.org/10.1787/9789264086081-en; OECD (2019[2]), OECD Regional Outlook 2019: Leveraging Megatrends for Cities and Rural Areas, Country Profiles, https://doi.org/10.1787/9789264312838-en.

Australia

The national-level 2017 strategy document “Regions 2030: Unlocking Opportunity” outlines the Australian government’s regional development agenda. To support the development of the strategy, a ministerial taskforce was established and chaired by the Prime Minister. The strategy places regional Australia at the heart of government decision-making, where implementation is realised through investment and activity in five focus areas across government: i) jobs and economic development; ii) infrastructure; iii) health; iv) education; and v) communication. At the subnational level, several state governments have undertaken long-term strategic regional planning. For example, the state government of New South Wales (NSW) released “The Vision”, outlining its 20-year vision for economic development in regional NSW. The NSW state government assisted local councils to develop regional economic development strategies based on the concept of functional economic regions. Developing these enables faster access to dedicated state funding and may be used to support other types of government grant applications. Similarly, the Victorian state government has established nine regional partnerships. Through ongoing consultation, including nine annual regional assemblies, the partnerships ensure that regional communities have a greater say about what matters to them and that the voices of these communities are heard by the government.

Estonia

Estonia’s regional policy, managed by the Ministry of Finance, focuses on the living and business environment in urban and rural areas, on better using regional assets and on promoting greater cohesion and development capacity among regions. While past regional policy has focused on infrastructure and public services, it has now placed greater emphasis on economic development and employment based on regional strengths. Some examples include a new programme for regional competency centres; programmes for developing the competitiveness of regions and supporting regional entrepreneurship; and employment development initiatives. At the subnational level, county governments develop ten-year county development strategies and county development plans. These are developed jointly with local municipalities and the Ministry of Finance. Local government action plans (four-year plans) are also developed and serve as mid-term plans to support country development strategies.

Iceland

The Regional Policy of Iceland 2018-24 is an integrated social and economic development plan that provides a framework for regional support. Its main goals are to address depopulation in individual regions; address the lack of economic and industrial diversity; support technological changes and the development and adaptation of individual industries; outline necessary adaptation measures to counter the impacts of climate change; ensure smooth communications and access to services; and respond to increasing international competition for people and companies. Special emphasis is placed on economically disadvantaged regions. On the basis of the regional policy, each of Iceland’s eight regions develops its own regional plan of action (Sóknaráætlun), which is financed through eight regional plan-of-action contracts. The governmental steering committee of regional development provides support to regional associations of local authorities in preparing plans of action and in negotiations between the associations and ministries. Regional plans of action are drafted in a consultative forum in each region with the participation of stakeholders. The Icelandic Regional Development Institute supports regions (all rural areas) through financial assistance and loans, regional strategy development to implement government goals and a network of eight industrial regional development agencies whose goal is to provide support to businesses in each area as well as to promote innovation.

Ireland

Regional spatial and economic policy in Ireland is made by three regional assemblies established in 2015. The framework for this policy is set by Project Ireland 2040 – the National Planning Framework (NPF) 2018, a long-term spatial development framework. This is complemented by the National Development Plan (NDP) 2018, a ten-year public investment strategy to 2027. Together, both the NPF and the NDP comprise a planning and investment programme for the future growth of Ireland’s regions, cities, towns and rural areas, focused on a common set of ten shared national strategic outcomes. The overall Project Ireland 2040 strategy is based on the enhanced growth of Ireland’s regions and in particular the four cities other than Dublin (i.e. Cork, Galway, Limerick and Waterford) to become accessible cities of scale. At the same time, it supports Dublin’s continued role as a key national growth driver. The strategy also identifies five smaller regional and cross-border growth drivers that complement the five-city catchment areas. Ireland’s regional assemblies develop spatial and economic plans for their territories. The Regional Spatial and Economic Strategy (RSES) is the Eastern and Midland Regional Assembly’s approach to supporting Project Ireland 2040. It is based on a vision statement advancing sustainability, competitiveness and regional well-being, and combines a spatial strategy with economic and climate strategies, as well as plans for “place-making” and for the first time a strategic plan for Dublin’s metropolitan development.

New Zealand

The New Zealand government’s key regional economic development policy is the Provincial Growth Fund (PGF). The PGF provides NZD 3 billion between the 2018-19 and 2020-21 financial years to improve the productivity potential of regional New Zealand. Its priorities are to create more and better-paying jobs, increase social inclusion and participation, support Māori development, encourage environmental sustainability and improve infrastructure and economic resilience. All regions (except for the three main metropolitan areas of Auckland, Christchurch and Wellington) are eligible for PGF funding, although regions identified as needing the most assistance are prioritised. The PGF provides funding for initiatives that have been prioritised by regions, sectors of the economy and the government to address social and infrastructure deficits in regional New Zealand. The PGF is administered by the newly established Provincial Development Unit (within the Ministry of Business, Innovation and Employment), and is overseen by a group of relevant regional economic development ministers.

Slovenia

The Law on the Promotion of Balanced Regional Development provides a framework for making regional development policy more predictable and transparent, as well as fairer and more efficient. One of its main innovations is a mechanism to avoid needing ad hoc measures and region-specific legislation in response to shocks. Greater reliance on contractual arrangements for national co-financing of regional projects and emphasis on improving monitoring and evaluation is also used to strengthen accountability and co-ordination. Development decisions are adopted by Slovenia’s 12 regional development councils and the two development councils of the cohesion regions. The Development Strategy of Slovenia 2030 defines key challenges for improving the lives of current and future generations. It emphasises the sustainable use of natural resources to create a healthy living environment, ensure long-term food safety, create high-value-added economic activity and provide quality jobs. It includes environmental objectives such as: introducing an ecosystem-based way of managing natural resources that overcomes sectoral silos; managing surface and groundwater effectively; developing forests sustainably to allow them to play an ecological, economic and social role; the prevention of excessive pollution; and maintaining high levels of biodiversity.

Sweden

The National Strategy for Sustainable Regional Growth and Attractiveness 2015-20 focuses on a wide array of considerations ranging from innovation and employment to public services and transport. It adopts a cross-sectoral approach and implementation relies on multi-level governance mechanisms for dialogue and learning along with a strong focus on results, monitoring and evaluation. The strategy emphasises regional sustainability and inclusiveness. It has strengthened the dialogue with regional-level stakeholders through a formalised forum for dialogue between the national government and politicians as well as civil servants at the regional level. Regional policy includes rural as well as urban growth considerations. At the regional level, regional development strategies are produced in every county by its county council (except for Gotland). Moreover, regions, in conjunction with national forward-looking agencies, participate in the Region 2050 project in order to build awareness around processes of change, discuss territorial consequences and strategies, and increase strategic foresight competencies among stakeholders.

Source: OECD (2019[2]), OECD Regional Outlook 2019: Leveraging Megatrends for Cities and Rural Areas, Country Profiles, https://doi.org/10.1787/9789264312838-en; Bradley, M. (2019[11]), Regional Spatial and Economic Stratgy (RSES) for the Eastern and Midland Region, Eastern and Midland Regional Assembly (Ireland).

Finland

Finland’s single-tier subnational government level is formed by 320 municipalities. Finnish municipalities are often too small to provide health, secondary education or social services by themselves, making voluntary inter-municipal co-operation very common. This is most frequently structured through a joint municipal authority, which is a legal entity, financed by member municipalities and led by a board assigned by member municipalities. Joint municipal authorities do not receive central government transfers. While inter-municipal co-operation is generally voluntary, municipalities must a joint municipal authority for specialised healthcare (hospitals) and regional planning. Although there have been voluntary municipal merger reforms, inter-municipal co-operation is still common, as it enables utilising economies of scale especially in rural and sparsely populated areas. Inter-municipal co-operation has allowed municipalities to focus on tasks that best suit their capacities. Currently, the trend is to form even larger co-operative units that integrate all health and social services in order to utilise both economies of scale and scope.

Source: OECD (2019[35]), Making Decentralisation Work: A Handbook for Policy-Makers, https://dx.doi.org/10.1787/g2g9faa7-en.

France

To facilitate horizontal co-operation among 36 000 municipalities, France has 2 145 inter-municipal structures with own-source tax revenues. Each municipal grouping constitutes a “public establishment for inter-municipal co-operation” (EPCI). EPCIs have limited, specialised and exclusive powers transferred to them by member municipalities. They are governed by delegates of municipal councils and to have legal status, they must be approved by the French state. To encourage the formation of EPCIs, the central government provides a basic grant plus an “inter-municipal grant” to preclude competition on tax rates among participating municipalities. EPCIs draw on budgetary contributions from member municipalities and/or their own tax revenues.

Slovenia

In Slovenia, inter-municipal co-operation is increasing. In 2005, amendments to the Financing of Municipalities Act provided financial incentives for joint municipal administration by offering national co-financing arrangements: 50% of a joint-management body’s staff costs are reimbursed to the municipalities by the central government in the subsequent fiscal period. The most frequently performed tasks covered by this arrangement are inspection (e.g. waste management, roads, space, etc.), municipal warden services, physical planning and internal audit.

Spain

The Autonomous Community of Galicia encourages economies of scale by improving the flexibility for voluntary inter-municipal co-ordination arrangements, and offering financial incentives to encourage them. Investment projects involving several municipalities are prioritised for regional funds. Local co-operation is encouraged in urban mobility plans for public transport involving the region’s seven largest cities.

Source: OECD (2019[23]), Effective Public Investment across Levels of Government: Implementing the OECD Principles, https://www.oecd.org/effective-public-investment-toolkit/.

Regional development agencies can take a number of forms and serve diverse functions. Below are a series of examples of some of the more common forms.

Canada

The Canadian Regional Development Agencies are part of the government’s Innovation and Skills Plan and are dedicated to advancing and diversifying their regional economies and ensuring that the communities therein thrive. These agencies have also served to address economic challenges in their regions by providing tailored programmes, services, knowledge and expertise. This includes: building on regional and local economic assets and strengths; supporting business growth, productivity and innovation; helping SMEs effectively compete globally, providing adjustment assistance in response to economic downturns and crises, and supporting communities. Each of the six regional development agencies brings a regional policy perspective to advance the national agenda by providing regional economic intelligence to support national decision-making; contributing to federal regional co-ordination and co-operative relationships with other levels of government, community and research institutions, and other stakeholders, and supporting national priorities. Regional development agencies work collaboratively with each other and with the provincial and local development agencies in their territories to ensure national co-ordination and a maximum of efficiency. They represent Canada on territorial development matters and in developing or renewing national programmes or services delivered at a regional level.

Finland

While not regional development agencies per se, Finland’s 15 ELY Centres (Centres for Economic Development Transport, and the Environment) are a form of cross-sectoral, decentralised national action to support regional competitiveness, well-being and sustainable development in each region. Thus, they cover a wide range of issues from business and industry support (including labour force and skills), transport and infrastructure to the environment and natural resources. While the Ministry of Employment and the Economy oversees the ELY Centres, they also deliver policy coming from other ministries, including those of the Environment, Transport and Communications, Agriculture and Forestry, Education and Culture, and the Interior.

France

Originally established in 1960 as the Institut d’aménagement et d’urbanisme de la Région parisienne and later transformed into Institut d’aménagement et d’urbanisme de la Région Ile-de-France (IAU-IdF), the Institut Paris Région (Paris Region Institute) is the development and urbanism body for the Ile-de-France region, which includes the Paris metropolitan area. It carries out studies and other work (e.g. data and cartography) to support decision-making for the Ile-de-France region and its diverse base of partners. Its activities cover various domains, including urbanism and transport, environment data and maps, and economic and social matters. In this last category, it contributes to different drivers of economic development, today, such as the green and circular economy, digitalisation, innovation and clusters, tourism and regional attractiveness, as well as employment, territorial disparities, housing and health.

Ireland

Enterprise Ireland is a government entity with responsibility for developing and growing Irish enterprise globally. It is co-financed by European Structural and Investment Funds (ESIF). Its mission is to support sustainable economic growth, regional development and employment. It works with each of Ireland’s regions to build business scale, innovate and expand their reach, as well as to develop and implement Brexit plans and diversify exports. It is also dedicated to promoting balanced regional development, ensuring growth and investment throughout the country. Examples of Enterprise Ireland impact in 2019 include 126 new start-ups supported by Enterprise Ireland funds, supporting 2 000 Brexit-exposed companies, assisting in securing 1 554 new contracts overseas, and supporting over 1 000 collaborative innovations between industry and higher education institutes.

Scotland

Scottish Enterprise is Scotland’s national economic development agency. While part of the Scottish government, it is a non-departmental public body that partners with the public and private sectors. Enterprise Scotland is dedicated to reaching national objectives by ensuring that the government’s National Performance Framework is realised, as well as local development by supporting local business growth, increasing employment, creating quality jobs and addressing inequalities. It supports companies throughout Scotland increase their international trade, boost innovation capacity, access funding and invest in people and capital. Scottish Enterprise has some very clear performance goals, including creating or safeguarding up to 10 500 jobs that pay at least the real living wage, enabling up to GBP 300 million of research and development (R&D) investment, enabling up to GBP 200 million of capital investment, and helping businesses raise their growth funding of up to GBP 255 million.

Source: OECD (2019[23]), Effective Public Investment across Levels of Government: Implementing the OECD Principles, https://www.oecd.org/effective-public-investment-toolkit/; Government of Canada (2020[65]), Canada’s Regional Development Agencies, https://www.ic.gc.ca/eic/site/icgc.nsf/eng/h_07662.html; Government of Canada (2016[66]), Regional Development Agencies, https://www.wd-deo.gc.ca/eng/19092.asp. OECD (2016[9]), Regional Outlook 2016: Productive Regions for Inclusive Societies, https://doi.org/10.1787/9789264260245-en; L’Institut Paris Région (2020[67]), L’Institut Paris Région, http://www.institutparisregion.fr/institutparisregion.html; Scottish Enterprise (2020[68]), Homepage, https://www.scottish-enterprise.com/; Scotland Highlands and Islands Enterprise (2019[69]), Homepage, https://www.hie.co.uk/; Invest Northern Ireland (2020[70]), Homepage, https://www.investni.com/; Enterprise Ireland (2020[71]), End of Year Statement 2019: Innovate, Compete, Diversify, https://enterprise-ireland.com/en/Publications/Reports-Published-Strategies/Enterprise-Ireland-End-of-Year-Statement-2019.pdf.

When measuring the performance of regional development policy or investments, it is important to distinguish monitoring activities from evaluation. Monitoring is an ongoing process of collecting and assessing qualitative and quantitative information on the input, processes and output of programmes and policies, and the outcomes they aim to address. It may involve assessment against established targets, benchmarks or relevant comparable phenomena and the integration of incentives for actors to achieve targets.

Monitoring can be distinguished from evaluation in part by its objectives. Whereas monitoring aims to track (and possibly promote) continuous progress, evaluation aims to assess if particular objectives have been achieved. Evaluation frequently makes a specific attempt to link cause and effect and to attribute changes in outcomes to programme activities. Thus, assessing the impact of regional development policies on regional economic outcomes, regional disparities and regional competitiveness generally falls under the domain of evaluation.

Because the purposes of monitoring and evaluation differ, the two activities tend to rely on different methodologies. However, indicator systems can be important sources of information for both activities. Monitoring and evaluation are often discussed together because they are complementary, combined and provide a comprehensive approach to enhancing policy performance.

Performance measurement can be used for a variety of purposes – ranging from steering and controlling, to learning and promoting accountability. The reasons for each approach, their focus and the potential instruments used will vary. Thus, the government needs to understand why it undertakes performance measurement, what it wants to achieve from it and how it wants to use the information once obtained.

Source: OECD (2009[57]), Governing Regional Development Policy: The Use of Performance Indicators, https://doi.org/10.1787/9789264056299-en; Van Dooren, W., G. Bouckaert and J. Halligan (2010[72]), Performance Management in the Public Sector, Routledge.

In May 2007, the government of Scotland set out to streamline government resources and improve overall territorial performance. To do so, it aligned the government around five strategic objectives – a Scotland that was wealthier and fairer, smarter, healthier, safer and stronger, and greener. From these 5 objectives, it established a series of 16 national outcomes articulating what Scotland wished to achieve over the subsequent 10 years. It then established a set of 50 quantitative and qualitative indicators that cut across many of the national outcomes, helping decision-makers and policy designers identify policy complementarities, and helping citizens identify where progress could be made in more than one area. These indicators were primarily outcome-oriented and ranged from improving people’s perception of their neighbourhood to reducing child deprivation. On its website, “Scotland Performs”, the government clearly communicated its strategic objectives and what it sought to achieve. It explained why each national outcome was important, the factors that could impact outcomes and the role of the government in achieving them. It also identified the related strategic objectives and relevant national indicators. Performance in each indicator was easy to interpret as it was based on an arrow – up, down or horizontal – to indicate improvement, decline or no change over time. The importance of each indicator was also explained on the website, as well as its current status, the indicator measure, what influenced change, the government’s role, how Scotland was performing in the indicator over time, criteria for change, partners engaged in creating change, and any related strategic objective. These latter two points highlighted not only the different stakeholders engaged but also the multidimensionality and complementarity of measuring well-being and taking an integrated approach to policymaking. Scotland constantly monitored its performance, updating its objectives, desired outcomes and indicators accordingly. For example, in 2011, a national outcome relating to older people was added. Some of the initial indicators remained untouched, while others were adjusted, added or removed as they related to targets that were already achieved or were replaced by more appropriate measures of progress. Over the subsequent years, Scotland Performs was transformed into the National Performance Framework.

Much like Scotland Performs, Scotland’s next-generation performance framework clearly communicates broad national objectives (its purpose), the values that guide the approach to meeting its aims, and the national outcomes it is working toward and which will help it achieve its purpose. It is designed to help citizens and other stakeholders track the nation’s progress with respect to its desired national outcomes in 11 dimensions. Each dimension is associated with a vision statement, linked to the United Nations Sustainable Development Goals, and a series of indicators that citizens can follow to see progress over time. The performance measurement dimension includes a performance overview, which tracks progress towards national outcomes, highlighting Scotland’s performance on the 81 National Indicators and giving a graphic representation if performance is considered to be improving, maintaining or worsening. Significantly, the performance assessment is made by senior Scottish government analysts, independently of Scottish government ministers. In addition, there is an interactive data dashboard that breaks indicator data into sub-groups of people (e.g. age, gender, disability, etc.). The Scottish government has made the performance framework and indicators available on a government website, produced a brochure consolidating the relevant information and is committed to maintaining its framework up to date and relevant. For example, in 2018 indicators such as gender balance in organisations, child well-being and happiness and the importance of a secure network were added. The government is currently tracking 81 indicators. Significantly, the framework was adopted by the Scottish parliament as part of the Community Empowerment (Scotland) Act 2015.

Source: Adapted from Scottish Government (2014[73]), About Performance, http://www.scotland.gov.uk/About/Performance/scotPerforms; Scottish Government (n.d.[74]), National Performance Framework, https://nationalperformance.gov.scot/; Johnstone, R. (2019[58]), “Feature: National treasure - How the Scottish government’s National Performance Framework is linking policies to outcomes”, https://www.civilserviceworld.com/articles/feature/national-treasure-how-scottish-government%E2%80%99s-national-performance-framework-linking.

Our Córdoba (Nuestra Córdoba) is a non-partisan, non-governmental network that works with the participation of more than 200 citizens and 60 organisations (academia, civil society organisations, foundations, private enterprise, research institutes, etc.). Its citizen network (Red Ciudadana: Nuestra Córdoba) established a set of ten quality of life dimensions9 with quantitative and qualitative data to measure the city’s performance over time in relevant dimensions (e.g. green space, particulate matter, wealth distribution, number of licensed vehicles).

As part of its activities and at the beginning of each mayoral term, the Our Córdoba Citizen Network presents the mayor of the city of Córdoba with a proposed “Plan of Objectives” (Plan de Metas) for the administration’s consideration and adoption. Adopting a plan is required of the municipal government by Municipal Ordinance No. 11942 signed in June 2011, which was spearheaded by the network. The plan is intended as an instrument to enhance the clarity and transparency of the government’s proposed plans and actions. In practical terms, the plan is a planning and information instrument through which the sitting mayor must, before completing 120 days in office, present their goals, identify the strategic actions that will be undertaken by each branch of the municipal administration in order to meet the goals, and requires that objectives and indicators be fixed to facilitate monitoring and evaluation. The plan also requires that the mayor provide an annual performance report (before 10 March) with respect to the goals and indicators. Unfortunately, there is no requirement to provide a summary report at the end of the mayoral mandate. The network puts forth a proposal of objectives for the government to adopt. The 2015-19 proposal was developed with the participation of over 200 citizens and covers 3 themes, each of which is associated with sub-dimensions and quantifiable objectives: sustainable urban development (20 objectives); institutional development (19 objectives); inclusive development (10 objectives).

Source: OECD (2016[62]), OECD Territorial Reviews: Córdoba, Argentina, https://dx.doi.org/10.1787/9789264262201-en; Red Ciudadana: Nuestra Córdoba (n.d.[75]), Plan de Metas, https://www.nuestracordoba.org.ar/plan-metas-gob.

Stakeholder engagement can be conceptualised along a spectrum of increasingly collaborative interaction (Annex Figure 5.E.1). The most basic interaction is a one-way exchange with either the government providing information to stakeholders (inform) or stakeholders providing information to the government (consult). Interaction becomes increasingly complex, and arguably richer when the exchange goes in both directions and promotes dialogue between the parties. As engagement practices become more sophisticated, the level of public impact increases, together with the level of government commitment to stakeholder input. At the same time, it is important to recognise that each level of participation is associated with a specific aim and is supported by distinct methods or tools. Thus, it is fundamental to match the objectives with the level of participation. It is also fundamental for the government to be honest with itself and stakeholders about the degree to which it is willing to commit to participatory outcomes and be clear about its intentions in this respect. Finally, the participatory methods used must be realistically within a government’s capacity to undertake (OECD, 2017[76]). Engagement processes and particularly the more complex levels of involvement, collaboration and empowerment, take time. Their implementation and the use of the results depend on political will and political support. They also require financial and human resources – as well as capacity – to design, implement and apply to the policy or investment project at hand. Importantly the resource factor works both ways. Not only do governments require adequate resources and capacity for engagement processes, so do stakeholders. Stakeholders need to have the time to spend in an engagement process. They also need the ability to access the engagement mechanism – be it electronically or physically; and they need to understand why they are called upon to engage as well as their role and responsibilities within such a process. Finally, successful engagement depends on a culture of openness among all parties, and this, too, can take time to generate.

The Australian government’s Department of Health established a stakeholder engagement framework to outline its models for engagement, key actions, a capability improvement agenda, an approach to risk oversight and management, and its performance framework. The framework establishes the department’s strategic approach to engagement, clearly establishing engagement principles. These centre on being purposeful, inclusive, timely, transparent and respectful. In addition, it provides a five-step model for undertaking engagement activities: to think strategically; to analyse and plan; to provide resources and prepare; to design and engage; to review and measure. It also provides a matrix to help tailor the level of engagement to the purpose, highlights potential challenges and outlines strategies for success.

Similar to the stakeholder framework developed by the national-level Department of Health, the State of Victoria’s framework also sets out the Department of Health and Human Service’s principles of engagement and it provides a six-step model for engagement. The framework begins by stating its public engagement vision, which includes outcomes for communities as well as the public sector. It recognises the need to foster a culture of engagement and grow capacity for engagement, and identifies a series of mechanisms to do so. It also provides clear definitions of how it uses the terms “stakeholder”, “stakeholder engagement”, “public participation and public engagement”, “co-design” and “human-centred design”. Furthermore, it provides engagement planning tools and insight into undertaking an engagement process. The framework is supported by a separate Stakeholder Engagement Toolkit that outlines steps to successful stakeholder engagement and barriers to the same. It also provides stakeholder engagement templates to support an effective process.

VicHealth, a health promotion foundation supported by the Victoria State Government, published a Stakeholder Engagement Framework 2018-23 that speaks directly to its constituency, which includes not only all levels of government and diverse government actors but also public health groups, community and not-for-profit organisations, sports organisations, universities and researchers, the media, the private sector, the arts and creative industries, “innovation partners” and local communities within Victoria. The framework is written in clear, simple language and explains not only VicHealth’s commitment to its stakeholders but also its engagement objectives. It provides definitions and examples of the forms and methods of engagement it undertakes, its stakeholder landscape and a monitoring and outcome framework for its objectives. A variety of case studies show how its engagement processes work and how the strategic partnerships developed not only contribute to realising the engagement objectives but also the broader policy goal.

Source: Department of Health (n.d.[79]), Stakeholder Engagement Framework, https://www.health.gov.au/resources/publications/stakeholder-engagement-framework; Department of Health and Human Services (2019[80]), Public Participation and Stakeholder Engagement Framework, https://www.dhhs.vic.gov.au/publications/stakeholder-engagement-and-public-participation-framework-and-toolkit; Department of Health and Human Services (2019[81]), Stakeholder Engagement Toolkit, https://www.dhhs.vic.gov.au/publications/stakeholder-engagement-and-public-participation-framework-and-toolkit; VicHealth (2018[82]), Stakeholder Engagement Framework 2018-2023, https://www.vichealth.vic.gov.au/-/media/Files/PDFs/VicHealth-Stakeholder-Engagement-Framework-2018-23.pdf?la=en&hash=00363DAB04FB0F66CFF8AD27B6EF7EAFFD49635B.

In 2008, Bilbao, Spain, launched a highly successful renewal project to transform from an industrial city to a service-based one. In addition to establishing a clear vision and an implementation plan sufficiently flexible that it could be changed if the situation warranted, it also had leadership that was committed to ensuring citizen participation when preparing and implementing policies and programmes. Public consultation opened the door for citizens to express their concerns and discuss potential solutions to the problems the city faced, including unemployment, slow economic growth and poor-quality education. This provided the city with an overview of citizen priorities and the issues and challenges that a plan had to address. The city was committed not only to speaking with citizens but also to listening. At the same time, citizens had to be willing to enter the conversation. This often required them to trust that they would be heard and that they would see their wants and needs reflected in project plans and outcomes. This is particularly sensitive and important at the subnational level, where actors often know each other, community interests and individual interests may not align and outcomes directly affect individual households.

Bilbao’s mayor not only listened carefully to the needs of citizens but also explained potential solutions to problems, acknowledging that the citizens should be heard and brought into the decision-making process. Communicating transparently with citizens meant not only informing about what the government intended to do but it also meant explaining why something was or was not being done, why some policies were favoured more than others, etc. The challenge was to do so in a way that diverse audiences could understand and accept. One lesson stemming from Bilbao’s experience is that policymakers not only need to communicate their plans; they also have to remain open-minded about criticism and scrutiny of the decisions they make and to be ready to accept responsibility for the outcomes of their decisions.

Source: Bengoetxea-Otaolea, I. (2014[83]), Open Government at the Local Level; OECD (2017[76]), Making Decentralisation Work in Chile: Towards Stronger Municipalities, https://dx.doi.org/10.1787/9789264279049-en.

Regional Development Australia (RDA) brings together 52 communities into a network of local leaders who work with all levels of government, the private sector and community groups to support the development of their regions. Bringing together all levels of the Australian government, it is funded by the Australian government, together with the state, territory and local governments in some jurisdictions; and it is administered by the Department of Infrastructure, Transport, Cities and Regional Development.

RDA is made up of a network of committees comprised of local people. They serve as the “regional development voice” of their communities, taking a partnership-based approach to developing strategies and delivering sustainable infrastructure and services to their regions. RDA committees work together to identify cross-regional issues as well as consulting and engaging with communities, promoting and participating in regional programmes and initiatives, providing information and advice on their region to all levels of government and supporting informed regional planning. Each RDA committee has developed a regional plan that priorities for the region and serves as a guide to strengthening communities.

Source: Regional Development Australia (2019[84]), About, https://www.rda.gov.au/.

Notes

← 1. The differentiation made between strategy and policy is the difference between a long-term plan for achieving a stated objective (strategy) and the agreed-upon approach that guides action in specific sectors or situations (policy) to achieve that objective. Policies are likely to be shorter term (e.g. a government’s period in office) but ideally should help meet the strategy’s objectives.

← 2. Despite Brexit on 31 January 2020, the UK and Wales have until the end of the 2014-20 programming period (31 December 2020) to use allocated funds. Additionally, while the programming period officially ends in 2020, funding can be extended up to 3 years with the N+3 rule. Thus, EU funding for Wales will not disappear from one day to the next but rather be effectively phased out.

← 3. At the time of writing, Mid Wales is in the process of developing a Growth Deal.

← 4. In the case of the Council for Economic Development and the Workforce Partnership Council, this may change with the introduction of the Social Partnership Bill.

← 5. The Welsh government intends to establish “economic regions” to arrive at the desired scale for regional development planning. The Economic Action Plan is based on three such regions though, de facto, regional thinking and current subnational activity divides the country into four regions. The exact number of these regions is explored in this report’s case study.

← 6. “Soft” capacity is often associated with the capability to undertake and execute tasks.

← 7. The Development Board for Rural Wales was also established in 1976, with a sub-regional responsibility for the economic and social development of Mid Wales. The DBRW was merged into the WDA in 1988.

← 8. At the OECD, co-production corresponds to the direct involvement of individual users and groups of citizens in the planning and delivery of public services. This umbrella term covers a range of more specific concepts, such as co-design, co-creation, co-delivery, co-management, co-evaluation and co-review, which reflect the different stages and types of stakeholder involvement and input. For example, governments co-produce with citizens when they release information which is then reused by citizens to produce improved or new services (e.g. using open data to combine information on local bars and crime data to help people plan safer routes home); or when they partner with citizens or volunteer groups to monitor the physical conditions of public infrastructure and services, or to increase safety in their neighbourhood.

← 9. Environment, participative democracy, socio-economic development, urban development and housing, education, health, budgeting, safety, transparency and access to public information, transport and urban mobility (OECD, 2016[62]).

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