Inclusive growth: what does it look like?

Part 2: Inclusive growth in practice: what’s changed?

Sharing learning on inclusive growth interventions in Scotland

Whether or not inclusive growth delivers improved outcomes will rely on how ambitions are translated into progress on the ground. While effective initiatives to ‘reshape’ growth will need to understand and respond to specific local contexts, learning from effective interventions elsewhere can provide inspiration or a starting point for policymakers across Scotland looking to take new approaches to local economic development.

This report takes the broad definition of inclusive growth outlined by the Scottish Government as its starting point, and the four-part definition outlined in IPPR Scotland’s previous work, and looks to identify examples of inclusive growth in practice. In developing a bank of projects that provide insights into different approaches, we hope to share learning and build connections across Scotland. This next chapter will explore what inclusive growth looks like in practice in Scotland – drawing on a series of case studies.

How are people measuring inclusive growth in Scotland?

This chapter provides a more detailed exploration of approaches to delivering and measuring inclusive growth on the ground across Scotland. We find that while designing local interventions in line with inclusive growth and their measurement remains a consistent challenge, significant progress has been made in the context of individual projects. We reflect on design and measurement challenges in more detail through the case studies explored.

National Performance Framework

At the national level, the outcomes laid out in the National Performance Framework include that people in Scotland ‘have a globally competitive, entrepreneurial, inclusive and sustainable economy’; ‘have thriving and innovative businesses, with quality jobs and fair work for everyone’ and ‘tackle poverty by sharing opportunities, wealth and power more equally’.

The challenge, however, comes in translating these ambitions into appropriate measurable indicators and design of interventions for the sub-national level. Within the National Performance Framework, indicators included under economy are as follows:

• Scotland’s rank for productivity against key trading partners
• The value in GDP of Scottish exports (excluding oil and gas)
• GDP growth rate, measured against the previous three-year average
• Carbon footprint, expressed in million tonnes of carbon dioxide equivalent
• Natural capital, as measured by the quality and quantity of terrestrial habitats and their potential to deliver ecosystem services now and in the future
• Income inequality, as measured by the income share of the top ten percent of the population relative to the bottom forty per cent
• The percentage of addresses at which access to superfast broadband is available
• Spend on research and development as a percentage of GDP
• Entrepreneurial activity, as measured by proportion of the adult working age population that is trying to start a business, or that owns or manages a business which is less than 3.5 years old

In addition, Fair Work and Business indicators are as follows:

• The number of businesses in Scotland
• The share of high growth businesses in Scotland
• The share of innovative businesses in Scotland
• Economic participation rates relative to other UK nations
• Employees on the living wage, measured by the percentage of workers earning less than the living wage
• The pay gap between men and women in full-time work
• Employee voice, as measured by the percentage of workers who are affected by a collective bargaining agreement in their workplace
• Gender balance in organisations, measured as the gap between male and female employment rate
• An additional indicator measuring contractually secure work is currently in development

Translating local-level activity to promote more inclusive economic development into national ambitions to re-pattern economic activity remains a persistent challenge for policymakers and practitioners working to deliver inclusive growth. Other relevant indicators include the number of assets in community ownership, the percentage of workers earning less than the living wage, the gender pay gap, and wealth inequality.

Wellbeing Economy Monitor

Figure 2 below shows a framework for Scottish Government’s Wellbeing Economy Monitor, designed to guide policymakers and practitioners. The monitor is currently in development. The framework emphasises the equal importance of human, natural, social and economic capital as ‘the assets that generate wellbeing for current and future generations’. This demonstrates how a wellbeing economy approach conceives of physical and mental health, the restoration of nature, physical infrastructure and civic engagement as key components of a thriving and sustainable economy future economy. Within this framework, inclusive growth approaches can contribute towards developing each of these four capitals through cross-cutting activity.

Figure 2: The Scottish Government’s Wellbeing Economy Monitor

Wellbeing Economy Monitor

To help us achieve our vision of an economy that delivers sustainable and inclusive growth for the people of Scotland.

Creating and growing a wellbeing economy founded on three pillars:

• Inclusion
• Growth
• Sustainability

Build on Scotland’s National Performance Framework

Our Purpose: To focus on creating a more successful country with opportunities for all of Scotland to flourish through increased wellbeing, and sustainable and inclusive economic growth.

Our Values: We are a society which treats all our people with kindness, dignity and compassion, respects the rule of law and acts in an open and transparent way.

• We have a globally competitive, entrepreneurial, inclusive and sustainable economy.
• We are open, connected and make a positive contribution internationally.
• We tackle poverty by sharing opportunities, wealth and power more equally.
• We live in communities that are inclusive, empowered, resilient and safe.
• We grow up loved, safe and respected so that we realise our full potential.
• We are well educated, skilled and able to contribute to society.
• We have thriving and innovative businesses, with quality jobs and fair work for everyone.
• We are healthy and active.
• We value, enjoy, protect and enhance our environment.
• We are creative and our vibrant and diverse cultures are expressed and enjoyed widely.
• We respect, protect and fulfil human rights and live free from discrimination.

Four Capitals

The assets that generate wellbeing for current and future generations.

• Social – Civic engagement; social network support; personal relationships and trust and co-operative norms.
• Economic – Produced capital (buildings, transport, infrastructure and knowledge assets such as R&D) and financial capital.
• Human – Skills, competencies and mental and physical health status of individuals.
• Natural – Critical aspects of the natural environment: assets and ecosystems.

Source: Scottish Government 2020a

Inclusive Growth Outcomes Framework

The Scottish Government’s Inclusive Growth Outcomes Framework offers a useful tool to conceptualise inclusive growth (see Figure 3). It underlines efforts to translate ambitions for greater economic inclusion into economic policy approaches, where inclusion (or lack thereof) has long been viewed as challenge for social policy alone. Its broad areas and dimensions are designed to communicate the breadth of the inclusive growth agenda, and to guide practitioners to think through the specific interventions that might work for particular groups of people, or particularly places within Scotland. However, their breadth also highlights the challenge for policy practitioners attempting to operationalise a national strategy at the local level – who have to grapple with designing and evaluating local interventions that can deliver against these national ambitions.

Figure 3: Inclusive growth outcomes framework

Productivity – Businesses are competitive and economic growth is resilient and sustainable.

Population – Scotland has a sustainable working age population.

Participation – Inequality of opportunity to access work is addressed and jobs are fulfilling, secure and well-paid.

People – Scotland’s population is healthy and skilled and economic benefits are spread more widely, with lower levels of inequality.

Place – Communities across Scotland have the natural and physical resources to ensure they are strong and sustainable.

Cross-cutting all five areas – People and Place.

Developing an inclusive economy matrix

Through this report we wanted to take some steps to understand how high-level definitions and ambitions on inclusive growth could be translated into the design and measurement of interventions at the sub-national level. For this we have developed what we have termed an inclusive economy matrix to show some of the features and measures that inclusive growth interventions could include.

Inclusive growth: scale of activity

Inclusive growth activity spans the breadth of economic activity in Scotland: from micro-level interventions to national outcomes. Here, we map out a range of levels for inclusive growth activity, in order to map what activity to support different areas of action might look like at different levels.

At the micro-level, inclusive growth activity can relate to sub-contracting, or the actions that individual employers and workers can take to deliver inclusive growth.

At the local level, inclusive growth can be embedded through local authority systems and approaches, including through use of the inclusive growth diagnostic tool and the development and adoption of community wealth building strategies.

At the regional level, £5bn worth of investment has been directed towards delivering inclusive growth through place-based ‘growth deals’; approaches taken through regional economic partnerships. Highlands and Islands and South of Scotland enterprise agencies are coordinating regional economic activity to promote inclusive growth.

At the national level, inclusive growth ambitions can be captured and measured through Scotland’s National Performance Framework.

Inclusive growth: Key areas of activity in Scotland

In line with the Scottish Government’s definition of inclusive growth, and our own working definition outlined in Chapter 1, we have outlined some broad areas of activity that inclusive growth interventions cut across. Having looked across examples of inclusive growth activity in Scotland, these are outlined below together with examples of specific interventions and outcomes within each. This list is not intended to be exhaustive, but covers many of the core areas of inclusive growth activity. These areas are developed further through our inclusive growth matrix, which is detailed later in this chapter.

Creating and incentivising good work

• Activity: Fair Work; job creation; procurement conditionality
• Outcomes: Real Living Wage employment; local pay growth; increasing employment participation rates for under-served groups, i.e. women, people with disabilities

Investing in social infrastructure

• Activity: childcare expansion; transport investment
• Outcomes: women’s employment outcomes; gender pay gap accessible affordable transport

Connecting people to economic activity

• Activity: transport; affordable housing; broadband and digital access
• Outcomes: affordable and accessible transport links improving connectivity and labour market outcomes

Growing green industry

• Activity: sustainable transport; jobs
• Outcomes: more people accessing high-skilled green jobs

Strengthening local economies

• Activity: community wealth building; land and asset ownership; procurement
• Outcomes: socially productive use of land and assets

Improving educational and labour market outcomes

• Activity: upskilling; retraining; early years education and care
• Outcomes: narrowing attainment gap; increasing rates of labour market participation among women; narrowing the disability employment gap; improved redundancy outcomes

Fairer systems for power and reward in the economy

• Activity: ownership models; tax
• Outcomes: narrowing wealth (and gender) inequality

An inclusive economy matrix

We have attempted to bring these key questions of scale, key areas of work and potential measures together into a draft inclusive economic matrix, outlined below. This could act as a tool to help in the design of local inclusive growth interventions and their measurement.

Table 1: Inclusive economy matrix

	Micro	Local	Regional	National
Good work	Opening training opportunities up to sub-contractors	Real Living Wage procurement in e.g. local authority social care services	Designing routes into training opportunities for marginalised groups	Share of employees paid at least the Real Living Wage; narrowing of gender pay gap; percentage of employees affected by a collective bargaining agreement
Social infrastructure	Sub-contracting through social enterprises	Local childcare investment	Engaging ‘anchor institutions’ as employers and suppliers	Quality of public services; trust in public organisations
Connecting people to economic activity	Data sharing to map out local suppliers and sub-contractors	Investing in affordable and social housing in town centres	Strengthening transport infrastructure	Quality of public services; economic participation
Green industry	Supporting small businesses to transition to net zero	Investing in net-zero emission homes	Decarbonising transport infrastructure	Percentage of energy consumption coming from renewable energy sources;
Strengthening local communities	Real Living Wage employment adopted by local businesses	Community ownership of high street premises	Linking disadvantaged groups to employment, education and training opportunities	Assets in community ownership; places to interact; perceptions of local area
Education and labour market outcomes	Strengthening skills pipelines by opening up education and training investment to sub-contractors	Community benefit clauses in procurement	Investment in skills pipelines for under-served groups as part of city-region deals	Percentage of employees earning at least the Real Living Wage; percentage of employees in in-work training; educational attainment
Fairer systems of power	Supporting businesses to adopt new ownership models – such as employee ownership trusts	Enabling community land ownership	Promoting procurement through local suppliers	Assets in community ownership; wealth inequality