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(Re)Designing the Foundational Economy Challenge Fund

Welsh Government recently launched a new fund to support ideas that can improve the foundational economy in Wales. We’re very supportive of this, not least because of the importance of the foundational economy to the wider Welsh Economy - accounting for more than a third of employment and £1 in every three that we spend.

New ideas are needed for local economies to ensure and that the economic and wellbeing benefits are felt by as many people as possible. These ideas need to be tested and explored in a way that ensures they are fit for purpose and that the lessons and outcomes are shared widely.

We’ve been working on programmes that support experimentation, research and development, and the implementation of new ideas in Wales for some time now and we’ve learnt a lot about how to do it well.

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The foundational economy accounts for £1 in every £3 spent in Wales

We’re sceptical about how effectively the fund, in its current format, will deliver on its ambitions. There’s still time for this fund to avoid replicating some important lessons we learned. But it requires urgent action.

Here are three key things we learnt that we’d recommend the fund includes:

Give yourself (and others) time to build a solid pipeline

Applications for the Foundational Economy Challenge Fund are only open for eight weeks. The ideas that are needed to really address this issue probably won’t come from the people most likely to hear about the fund through official channels, and this amount of time is not long enough for the development of comprehensive proposals.

A programme like this should reach right across Wales, into towns and villages that are geographically dispersed, and into business and organisations that might not normally consider applying, it’s going to need a significant amount of time on the ground, talking to people, working up ideas and connecting potential partners.

Eight weeks isn’t a long time to try and find the right people with the right ideas and make sure they can submit a high-quality, fully developed application.

It’s also the part of the process that is most risky for people who want to take part. Of the applications we had to take part in Innovate to Save, just 18% were successful. The opportunity cost (and often real cost) of making an application is significant, with no guarantee of a return to applicants.

We recommend extending the deadline and making this a more active phase, with Welsh Government representatives visible across Wales (and outside of Welsh Government offices), delivering both advice about the fund and also workshops that build the skills people need to make a high-quality application.

A programme like this should reach right across Wales, into towns and villages that are geographically dispersed, and into business and organisations that might not normally consider applying.

Money is necessary but expert help and support is even more valuable

It’s good to see that the value of potential grants is significant - up to £100,000. However, what we’ve found in almost all cases is that while the money is necessary, it’s other types of support that can mean the most.

In fact, we’ve demonstrated through Innovate to Save that relatively small grants (up to £15,000) can be enough to support people to undertake R&D and develop business cases for substantial loan funding (up to £1 million) - our ratio of loan application requests to grant funding was £37.50:£1 - but the additional support that we give, especially to people who have never been through the uncertainty of an R&D process before, is often cited as the most useful element of our programmes

It’s not clear from the call what additional support might be on offer, or how funded projects might be encouraged to form a self-supporting cohort of peers that share ideas, challenges and lessons with each other as they go through the foundational economy programme.

We recommend that Welsh Government invest a significant amount of the programme funding in non-financial support and make it clear what additional support is on offer to participants in the programme beyond the funding.

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While the money is necessary, it’s other types of support that can mean the most

Clarity on what comes next is vital before people start - scale, replication or sharing?

Finally, it’s absolutely vital that people entering this type of process know what happens when the programme (or more crudely the money) comes to an end. These ideas, if they work, should spread.

But what does that mean? Should they be scaled up by the organisation that developed them? Should other organisations replicate elements that are appropriate to them and their specific context? If the lessons are to be shared, will that be an active or passive exercise? And if there’s no grant funding for people to implement those lessons, why should they even listen?

The real risk here is that the benefits of public funding accrue only to those organisations in receipt of the grant. Clear pathways should be established to spread the value to others.

All Innovate to Save projects are expected to provide a report at the end of their R&D phase, and lessons learned are shared through a case study. We are also clear from the outset that significant amounts of loan finance were available for those projects that could demonstrate their ability to repay it.

We recommend Welsh Government set aside a significant amount of the £3 million fund to support either scale, replication or a highly active programme that shares lessons and supports others to adopt them, once the R&D phase has finished.

We’ve learnt a lot about how you make this work well in Wales over the last five years - with public services, the third sector, arts organisations and private companies. How we ran the first version of Innovate to Save can all be found in our playbook and we’d be happy to share the lessons with anyone who might be interested.

Author

Rob Ashelford

Rob Ashelford

Rob Ashelford

Head of Y Lab

Rob is Head of Y Lab, the Public Service Innovation Lab for Wales.

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