What can the Basque Country Teach the UK About Levelling up?

In light of ongoing debates in England over the scope for new devolution deals to ‘level up’ the country, how have devolved powers been used to transform and sustain the economy in one of the most economically successful regions in Europe: the Basque Country?

I conducted interviews with Basque politicians, researchers and practitioners to examine the role that multi-level governance and public-private collaboration have played in shaping the region's economic development, as well as the challenges.

Decentralisation in the Basque Country

The Basque Country, or Basque autonomous community, is a region in northern Spain with a population of just over 2 million. Like Spain’s other autonomous communities, it has three political and administrative levels of government—regional, provincial and municipal.

In the Basque case, in terms of subregional levels of administration, there are three provinces each headed by a provincial government, and 252 municipalities. What is unique is the significant role afforded to the three provinces. The Basque region, like neighbouring Navarre, has extensive fiscal autonomy and it is the provincial governments who are responsible for collecting taxes. An additional level between the provinces and the municipalities is that of the twenty counties. While not an official governmental level, they house local development agencies. Economic competences overlap somewhat as the regional government is responsible for industrial and competitiveness policy, while provincial governments are responsible for fostering local economic growth. Local authorities are also involved in economic promotion. The most important players at the local level are the town halls of the provincial capitals, most notably Bilbao, the capital.

Collaboration

The Basque regional government leads on strategy design and policy making in the field of economic development, but gradually this has become more collaborative. Regional initiatives in the 1980s saw the creation of the first technology centres, which became a key meeting point for government and businesses. The 1990s saw the government's pioneering programme to cluster economic activity, providing a means for greater influence from businesses on the regional government's economic strategy and industrial policies. The 2004 Basque Competitiveness Forum, which brought together representatives from a range of public and private actors and organisations to help inform policy, was a key milestone.

At provincial and local levels, from around 2005 the county development agencies started to transition from providers of services to firms into facilitators of networks designed to address local economic development through cooperation. Public sector innovation labs, designed to bring together politicians and civil society, were also set up.

How has such collaborative governance worked in the Basque Country in the field of economic development? What coordination challenges have occurred and why?

Regional-level organisations

Enjoying a fluid, two-way relationship with the Basque government, clusters provide strategic intelligence to help inform policy, with the gains outweighing their relatively small cost.

To what extent, however, have other institutions and networks created since then achieved similar success? In the full journal article, I analyse the examples of the Basque Institute of Competiveness (Orkestra) and the Basque Innovation Agency (Innobasque).

Orkestra, funded through a mix of public and private financing, conducts rigorous, independent research. Its mission is to undertake transformative research and activities, working alongside practitioners. Interviewees suggest that its core contribution has been achieved through working not for stakeholders, but with them.

Regarding the Basque Innovation Agency, Innobasque, its aim was to support the Basque Country to become the leading European reference by 2030. A private, non-profit initiative with both public and private financial support, Innobasque sought to provide a space above existing public institutions and private structures (for example, the clusters) that could bring them together to discuss overarching objectives and challenges in relation to innovation-driven transformation.

It generated a significant impact and momentum from day one. Not all, however, viewed Innobasque's intense activity entirely positively. Some within government were uncomfortable with the fact that Innobasque received a lot of public funding and yet its management was independent. Sometimes its projects encroached on already existing work by other agents. Innobasque evolved in consequence, becoming responsible in later years for ensuring the implementation of the government's Science, Technology and Innovation Plan (PCTI).

Multi-level governance within the Basque region

The most notable challenge in the Basque case concerns the relation between regional and provincial governments, where a lack of coordination and therefore duplication of efforts can occur, in particular when it comes to policy implementation.

As the provincial governments have their own resources and competences, they launch initiatives in the sphere of economic development with a degree of independence from the Basque government, and not always in tune with it. In most cases, there is no fundamental disagreement, but rather each institution wants to assert ownership and promote its achievements to voters.

Interesting examples of where provincial initiatives can complement regional ones are explored more fully in the journal article.

Key findings and learnings

To conclude, the Basque Country's economic success stems in no small measure from the complex system of institutions and networks that make up the region's economic governance structure. This intricate web of connections and common language, purpose and knowledge base have far outlived any specific government, minister or business leader.

Challenges have occurred, revealing the fine balance that needs to be achieved when creating new institutions. Nevertheless, it is a very positive example of devolution facilitating economic development and competitiveness and avoiding short-termism linked to particular government terms so often seen elsewhere.