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This publication is available at https://www.gov.uk/government/publications/uk-community-renewal-fund-prospectus/uk-community-renewal-fund-prioritisation-of-places-methodology-note
This note sets out the methodology used to develop an index of priority places for the UK Community Renewal Fund. For the purpose of this index, “places” are defined at the district, unitary or borough scale in England, council areas in Scotland and unitaries in Wales.
To ensure the UK Community Renewal Fund reaches the places most in need, we have identified 100 priority places based on an index of economic resilience across Great Britain.
Priority places have been identified for two main purposes:
- The UK Community Renewal Fund will prioritise applications that target the top 100 places where they also demonstrate a good contribution to strategic fit and delivery/effectiveness. This does not mean that other places should not apply. Applications from other places who demonstrate strong alignment with strategic fit and good delivery/effectiveness may also receive funding.
- The lead authority of each of the 100 priority places will also receive capacity funding to help them invite bids locally and appraise these bids.
The index was developed in accordance with the following core principles:
- That the criteria selected should prioritise places that suffer from weak economic performance and are less equipped to resist and recover from shocks.
- That the criteria used should measure factors that contribute to economic resilience and/or are directly targeted by the local growth interventions in scope of the UK Community Renewal Fund.
- That any data used should be publicly available, so that the calculations behind our rankings are fully transparent.
- That any comparison of need between places across Great Britain should be made using a consistent set of GB-wide metrics only.
Relevance to the UK Shared Prosperity Fund
The UK Community Renewal Fund will help inform the design of the UK Shared Prosperity through funding of one-year pilots, but the funds are distinct with regard to design (including allocation approach), eligibility and duration. Successful UK Community Renewal Fund bids will be for 2021-22 only.
Choice of metrics
A place’s index score is based on the following criteria (for full definitions, see Table 1):
c) Unemployment Rate
d) Population Density
e) Household Income
These criteria were selected because they contribute to economic resilience and/or are directly targeted by local growth interventions in scope of the UK Community Renewal Fund:
- Productivity provides a measure of a place’s business base. It is a workplace-based measure, so measures the productivity of businesses based in a place, not of that place’s residents. This will be targeted through business support interventions, which intend to strengthen a place’s business base.
- Skills provides a measure of the human capital of a place. The funding will target improving local skills through pilot funding that supports access to skills and local labour market opportunities.
- The rate of unemployment measures the efficiency of a place’s labour market. The funding will target unemployment through pilot funding that removes labour market barriers.
- Population density contributes to the economic resilience of a place. Denser areas experience agglomeration economies such as deeper labour markets. As a result, places with low population density, e.g. rural areas, are considered less economically resilient, and therefore given a higher index score. This also results in a diverse typology of places by targeting rural areas with low population density (29% of places on the list of priority places are categorised as rural, 22% as urban and 40% as ex-industrial).
- Finally, household income focuses on the income available to spend of residents within an area and provides an alternative measure of a local economy to workplace productivity, for example places where a strong business base might not be benefitting local residents.
The indicators used to measure these criteria are:
a) The natural logarithm of the nominal smoothed Gross Value Added (GVA) per hour worked (2018)
b) The natural logarithm of the Gross Disposable Household Income (GDHI) per head at 2017 prices (2017)
c) The proportion of those aged 16–64 with no qualifications (NVQ) (2019)
d) The ONS model-based estimate of the unemployment rate among those aged 16+ (July 2019 - June 2020)
e) The natural logarithm of those aged 16-64 per squared km of land area (high water excluding area of inland water)
The indicators selected for each criterion reflect the objective of the index to measure economic resilience.
For both skills and population density, we have therefore measured the working age i.e. 16-64 population. The indicator chosen for unemployment covers the 16+ population given that this is the only model-based data available at a local authority level.
Similarly, the indicator used for productivity reflects the hours worked by the economically active population. This allows for a more precise comparison between areas than, for example, GVA per capita or GVA per filled job (which respectively wouldn’t take into account the share of the population in work, or the share of part-time and full-time workers in a place).
We have used a measure of no qualifications rather than a particular level of qualifications, to identify those likely to face the greatest challenges in the labour market.
Household income is measured using GDHI, rather than wages, as it includes domestic income after income distribution measures (including taxes, social contributions and benefits) have taken effect. As a result, this provides a broader measure of the total disposable income amongst residents in a specific local area.
We have used unemployment rather than economic inactivity. This means that we do not pick up individuals who are economically inactive (people looking after family and home, retired individuals, long-term sick and disabled individuals, discouraged workers and students). This reflects the aim of the index to focus on economically active populations in order to understand the economic resilience of an area, rather than broader characteristics. Model-based unemployment was used to avoid concerns with the confidence in data for some areas at the local authority level.
The selection of metrics as set out above was subject to ministerial approval at the design stage based on alignment with the policy goals of the fund. Ministers accepted the recommendation of officials and no changes to the index, weightings or metrics were made as a result of Ministers being sighted on the list of places.
The index score was calculated for each place as follows:
- Use natural logarithms where appropriate
- Assign a score (0-100) based on the place’s relative position in that indicator
- Combine these relative scores into a weighted average (the index score)
Step 1: Use natural logarithms where appropriate
We have made the decision to use the natural logarithm for some indicators and not others. We have made these decisions on a case-by-case basis. Taking natural logarithms of GDHI per capita (for example) means that same absolute difference in a place’s income weighs less for LAs with higher income levels. In other words, the difference between places with £20,000 and £22,000 GDHI per head is registered as more significant than the difference between LAs with £60,000 and £62,000 per head).
The natural log of the proportion of the 16-64 population without National Vocational Qualifications is not taken because we wanted the index to give the same weight to differences in these proportions, independent of the levels of these proportions. Differences between LAs of (for example) 3% qualification attainment are registered as equally significant, regardless of the proportion of attainment. In other words, the difference between places with 3% and 6% attainment is as significant as the difference between places with 12% and 15% attainment.
Step 2: Assign a score (0-100) based on the places relative position on that indicator
Giving the indicator data a relative score between 0 and 100 enables us to make comparisons between indicators, despite them being measured using different units.
The minimum value in the indicator dataset receives a score of 0 and the maximum value receives a score of 100. All else is given a score between 0 and 100 based on their relative distance to the minimum and maximum values. The scores are assigned using the relative position of the place within Great Britain as a whole (rather than using the maximum and minimum within its home nation alone).
Step 3: Combine these relative scores into a weighted average (the index score)
To consider performance across multiple indicators simultaneously, the place’s five scores are combined using the weights in Table 1.
Outcome: The higher the index score, the lower the economic resilience of a place.
Table 1: Indicators and their weights
|Characteristic||Indicator||Geography||Source (year)||Date accessed/Data as of||Weight|
|Productivity||Natural log of Nominal (smoothed) GVA per hour worked||Local authority level (district, unitary or borough scale in England, council areas in Scotland and unitaries in Wales)||ONS (2018)||19 February 2021||30%|
|Household Income||Natural log of GDHI per head of population at 2017 prices||Local authority level as above||ONS (2017)||19 February 2021||10%|
|Skills||Proportion of the 16-64 population with no qualifications (NVQ)||Local authority level as above as a first resort – where LA level data points were not available, data points for the closest aggregated geography were used[footnote 1]||Annual Population Survey, ONS (Jan 2019 – Dec 2019)||LA data as of 10 December 2020; Aggregated geography data[footnote 1] as of 4 January 2021||20%|
|Unemployment Rate||Model-based estimates of unemployment rate for local authorities||Local authority level as above as a first resort – where LA level data points were not available, data points for the closest aggregated geography were used. These higher level data were not model-based||LA level: ONS model-based estimates of unemployment for local authorities. ONS (July 2019 – June 2020); Aggregated geography data[footnote 1]: ONS July 2019 – June 2020||LA level data as of 15 December 2020; Aggregated geography data[footnote 1] as of 4 January 2021||20%|
|Population Density||Natural log of those aged 16-64 per squared km of land area (high water excluding area of inland water)||Local authority level as above||Population data: ONS (2019); Land area: estimates from Geoportal Statistics (2020)||Population data as of 12 January 2021; Land area: N/A||20%|
Rationale for weightings:
Our baseline assumption was for each indicator to be weighted equally. On this basis, skills, population density and unemployment rate are given an equal weighting.
Given the conceptual relationship between household income and workplace productivity, i.e. GVA can be measured based on income although is not directly comparable to GDHI, these indicators have been weighted differently. Productivity is considered more relevant to the strength of a local economy and therefore has a greater weighting.
Note on boundaries:
Where LA boundaries have changed since datasets were published, we have constructed data points using previous LA data and population sizes.