Impact case study database

In 2013, the UK coalition government introduced fees of up to GBP1,200 on claimants to employment tribunals. Within months, tribunal cases fell by more than half from 11,938 in 2013/14 Q2 (July to September) to 5,454 in 2013/14 Q3, while the number of claimants declined by more than 70% over the same period from 39,660 in 2013/14 Q2 to 10,842 in 2013/14 Q3. The negative impact persisted with a total of 18,341 cases over 2013/14 as compared with 60,982 in 2012/13 [E1a, Main Tables ET_1].

The trade union UNISON applied for judicial review of tribunal fees, with the Equality and Human Rights Commission (EHRC) as an “interested party” (i.e. a third party directly affected by a judicial review outcome). UNISON lost twice in the High Court and once in the Court of Appeal, prior to taking the case to the UK Supreme Court (UKSC).

In 2015, UNISON instructed Dinah Rose QC and Karon Monaghon QC to prepare a further challenge against the fees. By this time, a draft version of the research by Adams and Prassl [R3] on tribunal fees had been circulated to senior lawyers for feedback and Adams and Prassl discussed their research findings with Rose, Monaghon and Prof Michael Ford QC, EHRC’s counsel. Ford states that ‘it was immediately clear to me that the article [R3] was very important for the eventual appeal to the Supreme Court. Both Counsel for UNISON and I drew on its analysis for the purpose of our submissions’ [E4, E8]. In the run-up to the case, Adams and Prassl had repeated discussions with counsel, and provided detailed feedback on the final documentation submitted to the Supreme Court Justices. Rose, representing UNISON, stated that she was ‘greatly assisted by the article’ [R3] in that it presented an economic analysis that supported her key argument [E2, E9].

The Supreme Court

In February 2016, the Supreme Court granted UNISON leave to appeal the Court of Appeal’s decision that the fee regime was legal. The Adams-Prassl paper [R3] was an important element of the UNISON case, and the only academic piece to be cited as evidence in Court [E4]. Rose directly quoted from the paper [R3] to advance the argument that the fee regime rendered it irrational for individuals to bring low-value meritorious claims, thereby denying them effective access to justice [E6, E8].

It should be noted that none of the arguments developed in the Adams-Prassl paper [R3] had been brought forward in the three previous court hearings. These prior attempts failed, according to one commentator, because ‘In the lower courts, no judge had been prepared to leap the slender evidential gap between the aggregate statistics on tribunal claims to the unaffordability of the fees for individual claimants. Since the behavioural pattern might be explained on the basis that claimants were unwilling, as opposed to unable to pay, the principle of effectiveness in EU law was not breached’ [E3]. The important contribution of the economic analysis undertaken by Adams was to provide the evidential basis for the argument that the fees restricted access to justice when set at levels that compared to the amounts at stake because this made it irrational to bring claims. This argument was highlighted in a series of hypothetical examples referred to by Lord Reed, Justice of the Supreme Court, in presenting the UKSC’s judgment [E7, pp.61-2].

The Supreme Court heard the case in March 2017, with counsel and the Justices repeatedly discussing the research by Adams and Prassl. The seven ruling Justices were unanimous in finding the system of tribunal fees illegal, thereby overturning the previous decisions of the High Court and Court of Appeal. The article, states Rose, ‘had an influence in persuading the Court to find in our favour. Lord Reed specifically commented in his judgment on the lack of basic economic literacy in the Government’s position’ [E2]. Ford is similarly convinced of the importance of the article to the case, stating ‘I have no doubt that the article was a significant influence on the eventual outcome’ adding ‘it is interesting to note how significant points raised in the judgment can be traced back to the article. For example, the Supreme Court placed at the forefront of its judgment how the Government had ignored the positive externalities of tribunal claims, a point highlighted in the article; just as Abi and Jeremias had argued, the Court accepted that ability to pay was only one of the relevant factors for the purpose of the right to access to a court in Article 6 of the European Convention; and one part of the judgment, in which Lord Reed explained that fees made it economically irrational for claimants to bring claims for small amounts, echoed very much the arguments in their article’ [E4].

The case has been hailed as a landmark constitutional case. A House of Commons Library Briefing Paper, for example, explicitly highlights the importance of the research: ‘ the Court was swayed by the argument that fees restricted access to justice when set at levels that, compared to the amounts at stake, made it irrational to bring claims. While not cited in the judgment, the Court had heard argument based on an influential journal article by Oxford academics Abigail Adams and Jeremias Prassl…’ [E7]. Lord Reed, quoted in the UK Supreme Court’s press release, recited the central argument developed by Adams and Prassl in stating that ‘ even where fees are affordable, they prevent access to justice where they render it futile or irrational to bring a claim’ [E5, E10]. Dave Prentis, general secretary of UNISON interviewed by the BBC after the judgment, stated that ‘The government has been acting unlawfully, and has been proved wrong – not just on simple economics, but on constitutional law and basic fairness too’ [E11a].

Extent of Impact

‘The effect of the Supreme Court judgment cannot be overstated’, said Michael Ford, ‘Claims struck out due to fees must be reinstated, and the Government must repay all the fees paid in the past (a bill estimated at more than £30 million). More fundamentally, no longer will claimants to tribunals face a very severe impediment to access to justice: anecdotal evidence already suggests a resurgence in claims since the judgment of the Supreme Court. In the longer term, the judgment is likely to be of enormous constitutional significance in the UK and beyond’ [E4].

Workers no longer face a negative expected payoff from bringing high quality cases. Dave Prentis said after the judgment ‘It’s a major victory for employees everywhere. Unison took the case on behalf of anyone who’s ever been wronged at work, or who might be in future. Unscrupulous employers no longer have the upper hand’ [E11b].

The Supreme Court decision led to a sharp rise in claims to employment tribunals, with cases more than doubling from 4459 in 2017/18 Q1 to 9208 in 2018/19 and the numbers of claimants increasing over the same period from 13766 to 52167 [E1, Main Tables, ET_1]. A scheme for employment tribunal fee refunds was launched in October 2017 and by June 2020, a total of over 22,500 refund payments had been made with a total value of GBP18,335,249 [E1b, Employment Tribunal Refund Tables, EFTR_2].

International Labour Organisation (ILO)

In the autumn of 2016, Adams and Prassl were invited to present their research and lead a discussion on claim enforcement at the UN’s International Labour Organisation (ILO) in Geneva. Following this engagement, they were commissioned to produce a summary report on the empirical evidence on the prevalence of, and working conditions under zero hours contracts, including the enforcement of labour rights [R6].

Professor Abi Adams received the 2018 ESRC Celebrating Impact Prize for Outstanding Impact in Public Policy for her research on the incentive effects of employment tribunal fees [E12].

The provision of liquidity insurance to commercial banks (i.e. surety that liquidity is obtainable by solvent banks as and when needed) is a core function of the Bank of England and key to maintaining financial and economic stability within the UK. The financial crisis of 2007/8 illustrated that in times of stress, demand for liquidity insurance, and consequently the price that market participants are willing to pay for it, escalates. The challenge for the Bank of England, as for all central banks, was to provide liquidity insurance at far larger scale and at minimal cost to the taxpayer, which could only be achieved by ensuring that banks adequately collateralise their borrowings from the central bank.

In response to the financial crisis, the Bank of England developed a set of permanent liquidity insurance tools, specifying for the first time the detailed terms of a suite of facilities to deal with both market-wide and institution-specific liquidity shocks. The most innovative of these is the Bank’s Indexed Long Term Repo (ILTR) operations, a monthly auction of Bank reserves for three or six months, which provides the commercial banks with an opportunity to obtain liquidity against collateral [E3, p.182]. The ILTR is based on Professor Klemperer’s ‘product-mix’ auction design and was developed in collaboration with him as described in a 2014 REF Impact case study [E1]. A key feature of liquidity provision via the ILTR is that it provides regular liquidity insurance to the banking system and adjusts automatically to increases in demand caused by liquidity stress. Since its introduction in 2010, the ILTR has played a central role in the Bank’s Sterling Monetary Framework [E3].

The ILTR, along with other reforms to the Sterling Monetary Framework, were the subject of an external review in 2012, and the subsequent report (known as the ‘Winters report’) encouraged the Bank to consider whether more could be done to improve the usability and flexibility of its facilities [E2]. In this context, Professor Klemperer was invited to redesign the auctions, and the resultant changes to ILTR operations, as implemented in February 2014, are the basis for this continued impact case study. [E1]

Improving the Bank of England’s Liquidity Insurance Facility: Implementation of Indexed Long-Term Repo Operations (ILTR)

The ILTR is a permanent market-wide facility that until 2014 only accepted a relatively narrow range of collateral. The Winters report also noted that the stigma attached to seeking liquidity and risk of consequent reputational damage led to banks taking the minimum amount of liquidity believed adequate for their needs. These factors, combined with the sub-three month term of ILTRs, led to limited take-up of the facility, which potentially exacerbated liquidity problems in the market [E2, pp.55-57]. Banks needing emergency liquidity provision that could not meet the narrow collateral requirements for ILTRs risked having to use the BoE’s Extended Collateral Term Repo (ECTR) facility, which it only provided in times of peak stress and at a cost of Bank Rate plus 125 basis points [E2, p.104]. The step up, the report observed, between ILTR and ECTR was large, both because of uncertainty around ECTR activation and the potentially large step up in pricing between ILTRs and ECTRs. Klemperer’s redesign of the monthly market-wide ILTR auctions, outlined in the Bank of England’s ‘Developments in the Sterling Monetary Framework’ published at the end of 2013 [E5], addressed this problem by effectively amalgamating the functions of the ILTR and the ECTR. The 2014 innovation improved the ILTR design so that it provided ‘ consistent six-month committed liquidity, at cheaper (auction-determined) rates, and against the full range of eligible SMF collateral’ [E4]. In practical terms, this means that the range of collateral was expanded from two to three types from three different risk profiles, categorised as A (high quality liquid sovereign securities, min. bid +0 basis points), B (liquid collateral, including sovereign, supranational, mortgage and corporate bonds, +5bps), or C (less liquid securitisations, own-name securities and portfolios of loans, +15bps) [E5]. Additionally, by expanding the accessibility and practical use of ILTRs to encompass use in times of stress stigma attached to accessing emergency liquidity was significantly reduced.

The enhanced flexibility of the improved ILTR enabled it to automatically release extra funds at times of stress. An evaluation of the 2014 reforms, undertaken by the Independent Evaluation Office in 2018, observed that ‘the ILTRs use a sophisticated auction mechanism that is designed to react automatically in size and price as stress increases’. The usefulness of the improved mechanism to the Bank is reflected in its increased usage; rather than being run on a monthly basis, the ILTR auctions were held weekly from June-Sept 2016 (following the Brexit referendum) and from March 2019 (around the initially intended EU withdrawal date), to ensure banks did not suffer from liquidity constraints as they did during the financial crisis [E6, p.15]. Limits on the amount the mechanism can allocate were removed by the 2014 redesign; It has allocated up to GBP7,200,000,000 in a single auction, and between its introduction in 2014 and October 2020, approximately GBP150,000,000,000 has been allocated through this mechanism. The design of the ILTR was praised in the evaluation report, which noted that ‘As we understand no other central bank has employed such a sophisticated approach’ [E6, p.15].

The Independent Evaluation Office noted that ILTRs offer a ‘degree of liquidity to the market at commercially attractive rates in order to limit stigma’ which had had the effect of changing business practice in financial institutions, encouraging ‘routine take up among some, including smaller / challenger institutions, some of whom have integrated the facility into their business models’. [ E6, p.15]. Bigger financial institutions also increased their usage of this facility ‘ as banks sought to make use of the liquidity insurance provision on offer by pre-emptively securing term funding ahead of a period of potential uncertainty around key events, such as the UK general election’, whereas previously, according to the Executive Director of Markets at the Bank of England, ‘the Bank’s liquidity insurance facilities saw relatively modest usage’ [E7, pp.2-3].

‘The ILTR is now a core part of the Bank of England’s provision of liquidity insurance to commercial banks in the UK, and [Klemperer’s] research and design work ensures the auction responds flexibly to market demand and the level and structure of participants’ bids’ Head of Sterling Money Markets Division, Bank of England [E1].

Improving the BoE Quantitative Easing Toolkit: 2016 Bank of England Corporate Bond Purchase Scheme (CBPS)

Klemperer’s research also had impact on another related area of Bank of England operations. In September 2016 the Bank of England launched the CBPS scheme, the purpose of which was to ‘ impart monetary stimulus by lowering the yields on sterling corporate bonds’ thereby lowering the cost of borrowing for companies and stimulating new issuance of sterling corporate bonds. A portfolio of GBP10,000,000,000 of sterling investment grade bonds representative of ‘issuance by firms making a material contribution to the UK economy’ were initially purchased by the Bank in to ‘ impart broad economic stimulus’ [E8]. Klemperer’s research [R3-5] and subsequent collaboration with the BoE fed into the CBPS design which included some features of the ILTR [E1]. The CBPS departed from past asset purchase programmes along a number of key dimensions, including the size of allocations and auction pricing [E9]. Unlike the approach used for gilt purchases, the size of each auction was designed to be flexible, adjusting automatically to reflect the quantity and quality of offers received, using the product-mix auction approach, and the auction pricing also followed product-mix pricing [E9]. The scheme thus improved the BoE’s Quantitative Easing toolkit, reducing the spreads of eligible bonds compared to foreign bonds issued by the same set of firms by up to 14 basis points. [E10].

The Bank used the same CBPS design, based on Klemperer’s research, in March 2020, in the onset of difficult market conditions caused by the worldwide Covid-19 outbreak. GBP10,000,000,000 of investment-grade corporate debt was purchased, alongside GBP190,000,000,000 of gilts, ‘Had the Bank not stepped in, things would have got very difficult,’ according to the chief executive of the Debt Management Office [E11].

These changes led to efficiency gains in allocation that both the Bank of England and financial institutions benefited from, in allowing financial institutions to submit a broader range of collateral in bidding for UK treasury debt without significantly adding to the administrative or risk burden of the Bank of England.

International Impacts: Banco de Mexico

More recently, Klemperer’s research has fed into the approach taken by other central banks. In February 2019 Klemperer met the Governor of the Banco de México and explained his mechanism. Since then, he has been advising Banco de México on its Subasta de Vasos Comunicantes, which also has some similar features to the ILTR. Through Spring 2019 Klemperer worked with the Bank on the revision of the algorithm used to determine price setting, and quantities to allocate, of zero-coupon bonds of different maturities. These revisions were implemented in Spring 2019, and the expectation is that this will reduce the government’s debt-financing costs [E12].

Summary

Klemperer’s product-mix auction design, from its initial implementation in 2010 and redesign in 2014, has led to the efficient administration and function of the Bank of England’s liquidity management of the UK economy and is key to the Bank’s Sterling Monetary Framework. Described in 2010 as ‘ a world first in central banking’ by a then member of the Monetary Policy Committee [E13], Klemperer’s model continues to be successfully used to ensure that the UK central Bank can inject liquidity into the economy and so avoid financial crisis of the like witnessed in 2008. The direct beneficiaries are the Bank of England and the banks which use its facilities, but the wider impacts extend to the entire UK economy and beyond, as the purpose is ultimately to provide economic stability.

Since the publication of Dull Disasters [R5], Dercon’s framework has been adopted by several organizations, leading to major policy innovations at DFID*, the International Monetary Fund (IMF), the World Bank, and the United Nations Office for the Coordination of Humanitarian Affairs (OCHA). These organisations have each implemented a range of significant and pioneering activities to operationalise Dercon’s proposed framework that aim to bring insurance-like approaches (based on pre-agreed financing including from insurance markets) into the responses to humanitarian crises and natural disasters.

‘Dull Disasters, alongside the World Bank’s DRFIP [Disaster Risk Financing and Insurance Programme] and the Red Cross forecast-based financing work, has helped build political consensus in the UK and globally that has led to work on establishing anticipatory financing mechanisms within the [UN] Central Emergency Response Fund (CERF) and the IDA [International Development Association] Crisis Response Window…[this] has led to the exploration of anticipatory financing mechanisms across several countries and humanitarian agencies (Malawi, Kenya, Afghanistan, Somalia, and WFP [World Food Programme] , FAO [Food and Agriculture, UN] , ICRC [International Committee of the Red Cross] , IFRC [International Federation of Red Cross and Red Crescent] , Start Network etc).’ Former DFID lead advisor on Disaster Risk Finance and Insurance and current Senior Consultant on Disaster Risk Finance within the World Bank Group [E2].

DFID: Creation of The Centre for Disaster Protection

According to the former DFID lead advisor on Disaster Risk Finance and Insurance it is: ‘… no overstatement to say that ‘Dull Disasters’ transformed the way that DFID thought about the role of disaster risk financing, its linkages to humanitarian financing and UK objectives on Humanitarian Reform… The transformation that ‘Dull Disasters’ ignited led to, for example, the creation of a new team in DFID (that I led and worked closely with Stefan and his former student and collaborator, Dr Daniel Clarke) that worked to develop and operationalise the framework postulated by Dull Disasters within DFID’ [E2].

The proposal for a Centre for Disaster Protection within DFID was announced by then UK Prime Minister Theresa May at the G20 meeting in July 2017, stating that it ‘ will use world-leading UK expertise and innovation to help developing countries strengthen disaster planning and use insurance to provide more cost-effective, rapid and reliable finance in emergencies, such as the severe drought in East Africa. This will reduce the need for expensive humanitarian aid, reassure private investors and help people rebuild their lives. Insurance protection built through this centre could provide £2 billion when crises hit to ensure that the high costs of disasters aren’t borne by people or businesses trapping them in cycles of poverty’ [E3]. The approved Business Case [E1] extensively and directly references Dull Disasters and Dercon’s research as the framework and source of inspiration for the centre. The centre became active in 2019 with Daniel Clarke as its first Director and is initially funded by GBP30,000,000 from Prosperity Fund and GBP3,000,000 from Commonwealth Summit 2018-20 Fund [E4]. London-based, it is a partnership between the UK Government (DFID and the Government Actuary’s Department), the World Bank, leading research institutions and the private sector.

Early benefits of the Centre for Disaster Protection include the provision of technical assistance to the Caribbean, the Association of South East Asian Nations (ASEAN)’s new regional risk pool, Indonesia, the Philippines and Kenya [E6, p.2]. Key activities include Disaster Risk Finance training to executives in South Africa, the Caribbean and Asia and innovation labs prior to the replenishment of the International Development Association (IDA19) [E5, E6].

The basic concepts and frameworks put forward by Dull Disasters have inspired, through the Centre for Disaster Protection, a series of wider innovations in the use of disaster-risk finance for broader applications including the establishment of an Innovation Lab, in partnership with Lloyds of London, focused on developing new financial instruments that combine incentives for resilience with risk transfer, such as Resilience Impact Bonds [E4, pp.3-4]. Work is also underway by the Centre for Disaster Protection and the International Rescue Committee on how risk financing can be used to speed response in refugee crises [E5].

World Bank: Creation of the Global Risk Financing Facility (GRiF)

A Multi-Donor Trust Fund designed in partnership by DFID, the World Bank and the German Federal Ministry of Economic Cooperation and Development (BMZ), the GRiF was launched in October 2018, with over USD200,000,000 in pledges from Germany and the UK. Utilising the framework described in Dull Disasters [R5], the GRiF’s objective is to strengthen the financial resilience of vulnerable countries by enabling more timely and more reliable responses to climate and disaster shocks, ‘ and over time to a wider range of crises, through establishing or scaling up pre-arranged risk financing instruments, including market-based instruments like insurance’ [E7a]. The former DFID lead on Disaster Risk Finance and Insurance states: ‘ I led the design and implementation on DFID side until January 2019, and now have some involvement in the projects it funds on the World Bank side. On this DFID side, this was directly inspired by ‘Dull Disasters’, and I worked closely with Stefan Dercon and others in the early stages to design the underlying structure and principles that guide the operation of the Facility’ [E2].

The GRiF co-financed a range of World Bank projects with the International Development Association [E7b]. Projects include the ‘Resilient Livelihoods Project’, designed to improve resilience among the poor and vulnerable population of Malawi, to which USD125,000,000 has been designated. By March 2020 nearly 128,000 people had benefitted from the resulting Social Cash Transfer programme [E7d]. In Mozambique, USD132,270,000 was assigned to support Mozambique’s Disaster Risk Management and Resilience Programme, which seeks to improve Mozambique’s financial protection against natural disaster, strengthen disaster preparedness and response, build climate resilience into vulnerable education infrastructure and establish a sovereign risk financing program. It is estimated that the programme will directly benefit a total of 3,360,000 people [E7c].

IMF: Informing Policy on Small States’ Resilience to Natural Disasters and Climate Change

The framework underpinned policy proposals presented within an IMF Board Policy Paper in 2016 on small states’ resilience to natural disasters and climate change, highlighting the need to increase focus on preparedness and funding [E8]. The new policy has been implemented in the Seychelles, where climate change, compounded recently by El Nino, has put Seychelles’ archipelago and biodiversity systems at risk. The IMF’s June 2017 Country Report outlined how Dercon’s Risk Management framework might be applied to the Seychelles [E9, p.16] and further cited his research multiple times [E9].

The United Nations Office for the Coordination of Humanitarian Affairs (OCHA): Influencing Policy Change and Humanitarian Outcomes

The Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator invited Dercon to New York in January 2019 to work with his team to improve their approach to humanitarian financing, and thereafter took ‘ direct action to implement some of the policy recommendations from Dull Disasters in OCHA’s work’. He describes how they: ‘ initiated work to develop OCHA’s policy position on anticipatory action for natural disasters, modelled closely on the conclusions of Dull Disasters. This culminated in… our collaboration with the World Bank on their Famine Action Mechanism, and pilots through the UN’s Central Emergency Response Fund (CERF) to respond to drought in the Horn of Africa. The launch of anticipatory action pilots in the CERF led to increased donor support, in particular from the UK and Germany, resulting in a historic record year of funding of over $800m.’ [E10].

This initiative has had profound impacts in mitigating the consequences of disastrous situations. In 2018, Madagascar faced ‘… one of the largest outbreaks [of plague] … in decades’ with more than 2,700 cases predicted between August and October [E10, E11]. Through the UN’s Central Emergency Response Fund (CERF), OCHA provided USD1,000,000 to interrupt disease transmission through community engagement activities. In total, the CERF funds benefitted 1,460,000 people and only 250 cases (including 50 deaths) were reported in that period [E11].

In July 2020 a high probability of severe flooding was forecast for mid-month along the Jamuna river, Bangladesh. This triggered the immediate release of USD5,200,000 from a CERF pilot [E10] to help communities urgently prepare and protect themselves. Before the event it was anticipated that some 61,500 families in the flood plains would receive a one-off unconditional cash transfer of 4,500 taka (USD53). This release of funding is the first time CERF has been used in this way and was the fastest CERF allocation in history – within four hours of the trigger being activated, the delivery agencies had been given authority to spend the money [E12].

Summary of Dercon’s Research Impact:

The Under-Secretary-General, and former Permanent Secretary for the UK’s Department for International Development (DFID) says ‘ Professor Dercon’s work set out in ‘Dull Disasters’ is having an impact on the lives of millions of people affected by crises and is playing a significant role in re-shaping the way in which the global humanitarian system is meeting the challenges of the next decade’ [E10].

*Note – DFID was merged with the Foreign Office in June 2020 to create the Foreign, Commonwealth and Development Office

According to data released by the United Nations High Commissioner for Refugees (UNHCR) of the estimated 1,200,000 refugees in need of resettlement globally, (i.e. permanent relocation to another country) in 2018, only 55,692, just 4.7%, were actually resettled. Moreover, evidence shows that socioeconomic outcomes of refugees depend strongly on the quality of the match with the first community they are resettled to. The pioneering software Annie™ MOORE has been shown to increase the capacity of refugee agencies to match the needs of refugees and their families (e.g. child care or language support) with the service capacities of hosting communities (e.g. housing or places in training programmes), thereby significantly improving socioeconomic outcomes for the resettled refugees and their communities.

Impact on Resettlement Agencies and Refugees

Annie™ MOORE was developed by Teytelboym et al. in collaboration with HIAS, one of nine US refugee resettlement agencies. By identifying data-driven, optimized matches between refugees and local affiliates which take account of refugee needs and community capacities, Annie™ increases the probability of a successful first match. Back-testing using HIAS data on the 496 refugees it resettled during 2017 indicates that using Annie™ to identify matches would have increased the proportion of refugees obtaining employment within a 90-day window by between 22% and 38% [R5, p3]. Commenting on these results, a member of the HIAS team observed that ‘the program significantly improves the chances of the refugees settling into, and therefore likely becoming a benefit to, the wider community’ [E1]. HIAS report that the early results of using Annie™ increased the likelihood of employment by at least 20%, in line with the research estimates [E2, p 12.].

The subsequent roll-out of Annie™ followed in 2018. Since then it has helped HIAS to resettle over 1,105 refugees who did not previously have any ties with the U.S., and the evidence shows a broad range of benefits. The Associate Vice-President, U.S programs, at HIAS, observed ‘ Many people think that once a family has resettled, they continue to be supported by the government…but in the United States this simply isn’t true. Refugees are expected to obtain employment very quickly and start supporting themselves. This technology has been key to helping our regional offices connect relatively straightforward resettlement cases with new homes and communities where they are more likely to thrive in their jobs’ [E1]. In addition, Annie™ has reduced the fraction of refugee families who are placed in communities which cannot provide services to support them, significantly improving the quality of refugee integration in their communities. The HIAS CEO states that Annie™ has ‘completely eliminated any refugee-affiliate service mismatch (for example with respect to single parent support or language support)’ [E3].

Finally the software has enabled HIAS itself to streamline and improve their processes and, by extension, add value to the broader American refugee resettlement programme. As more refugees are able to get into employment more quickly and become self-sufficient, the return on government funding for arriving refugees dramatically increases. HIAS’ Associate Director for Pre-arrival, observes ‘I now spend 80% less time on routine matching, and can focus my time and energy on the more difficult cases, such as those with significant medical conditions, ensuring that their placement is as good as possible’ [E3].

HIAS sees considerable potential to expand the use of Annie™, and is currently negotiating with several other US resettlement agencies about their adoption of this software [E3]. HIAS is hopeful that the forthcoming change in the US administration, coupled with progress in controlling the coronavirus pandemic, will accelerate this process

Ongoing Impact

A report by the UK Independent Chief Inspector of Borders and Immigration (2017-8) highlighted the unacceptable length of time it takes to settle refugees within the UK, and recommended that the Home Office ‘ improve the geographical matching process’ of refugees in the Syrian Vulnerable Persons Resettlement Scheme. In its response to the report, the Home Office committed to ‘consider whether there are any changes that could be made to make more effective use of the time between a refugee’s acceptance onto the scheme and their resettlement in the UK’ [E4, para.4.2]. To this end, Teytelboym was invited to present his work on Annie™ at the Home Office in April 2020, though the current pandemic has stalled further development in this area.

Presentations of the Annie™ system have also been made by Teytelboym to the US Department of State (August 2017), the World Bank (May 2017) and the Swedish Ministry of Finance (April 2018). A recent report from the Swedish Equalities Commission recommended the use of statistical matching algorithms to improve the integration of refugees, noting the use of such methods in the US, and referencing the papers by Teytelboym and his co-authors [E5].

Since its launch, Annie™ and the underlying research has been the subject of many media articles and blog posts, including in The Atlantic, Forbes, and Financial Times, helping to shape the discourse around refugee resettlement [E6]. In November 2020, a case study of Annie™️ MOORE: Increasing Employment of Resettled Refugees using Machine Learning and Optimisation was featured in the OECD’s Observatory of Public Sector Innovation report “ Focusing on the Overlooked”. [E7, 12-13]

Professor Collier’s research has led to a major reappraisal of the causes of, and solutions to, persistent state fragility. His work has contributed to reshaping the strategic directions, policies and practises of major international agencies and financial organisations, shifting the focus from humanitarian agencies to development finance institutions and leading to major new funding initiatives.

Context: The Commission on State Fragility, Growth and Development

The catalyst for the impact was the creation of the Commission on State Fragility, Growth and Development. Launched in March 2017, the Commission was jointly chaired by former UK prime minister David Cameron, former president of the African Development Bank, Donald Kaberuka, and Adnan Khan (International Growth Centre / LSE), with Paul Collier and Tim Besley (LSE) as academic directors. Their objective was to draw on academic research and evidence from policymakers, academics, business leaders and other practitioners to arrive at a set of recommendations for national governments and international agencies to address the syndrome of fragile states. In April 2018, the Commission published its analysis and recommendations in its report, Escaping the Fragility Trap, co-authored by Collier, Besley and Khan [E1]. The report’s analytical framework (pp 46-68) is a synthesis of research by Collier and others (including direct references to R1-3, R5). The Commission’s main recommendations recognise that building stability in fragile states is a gradual process of developing effective institutions. Following Collier’s research, the Commission recommends that international agencies focus on economic governance, not specific policies, and that aid be used to support the development of the private sector and to catalyse job creation [E1, p.12]. The report directly influenced FCS strategy within the IMF, the Development Finance Institutions, and the World Bank.

Impact on IMF

The Escaping Fragility report was launched at the IMF-World Bank Group Spring Meeting 2018 (Washington DC), coordinated with the IMF’s Independent Evaluation Office (IEO) study on the IMF and Fragile States, which concluded that the ‘ IMF’s approach to fragile member states seems conflicted and its impact falls short of what could be achieved’ [E2]. The launch panel for the report included the then CEO of the World Bank, and now head of the IMF, who subsequently announced upon assuming leadership of the IMF that state fragility was to be one of her three priorities, and that the Fund should ‘engage even-handedly with all countries experiencing more difficulties while giving ever closer attention to fragile and conflict-affected economies’ [E2c]. Consequently, she continues to be closely involved with initiatives within the IMF to ensure staff are adequately trained to rise to the challenges posed by this agenda [E9].

The Deputy Director of the IMF’s Strategy, Policy and Review Department observed that the ‘ institution has found it difficult to adapt its approach to engagement to respond fully effectively to the circumstances of FCS’. Hence, he explained, Escaping the Fragility Trap was a ‘ truly useful resource’, and ‘ particular messages, such as the call to focus on economic governance, not policies, run counter to deeply-ingrained institutional practices that are not easily over-turned—but the spirit of the message (e.g. give governments space and options, requiring them to take ownership of their own policies) can still be infused into operational practices that differ fundamentally from the old ways of doing business. We are seeking to weave these themes into the formal guidance for FCS country teams that we are currently preparing’ [E3].

Following publication of the Escaping the Fragility Trap report, Senior members of the IMF’s Research Department, and Strategy and Policy Department, organised a workshop to consider new approaches and means of implementing its recommendations. The workshop, hosted by Collier in Oxford in December 2018, was developed into a book, with research by Collier providing a theoretical introduction to the policy analysis [R4]. Collier’s contribution was described by the Deputy Director of the Policy and Strategy Department of the IMF as ‘ particularly valuable to Fund staff for its hard-headed assessment of the political economy of achieving transitions’. This assessment became the foundation for the creation of an IMF taskforce / working group on FCS [E3]. Collier remains involved in the ongoing mission and training of this taskforce, which has continued online throughout the pandemic, including online training to 250 IMF staff in November 2020 [E9].

Impact on Development Finance Institutions (DFIs)

The leading development finance institution is the International Finance Corporation (IFC), part of the World Bank Group. A key recommendation of Collier’s research [R6] and of the Escaping Fragility report [E1] was that aid should be used by DFIs to initiate investment by firms in fragile states. Instead funds were flowing in the reverse direction: IFC’s profits were being transferred to the World Bank’s aid program, the International Development Association, to be spent on public projects. [Text removed for publication] [E8].

Collier’s recommendation that the focus of international policies should shift from the humanitarian agencies to DFIs [R6] was put into practice by the UK Government in July 2015 when the UK Secretary of State for International Development approved the business case for a GBP735,000,000 recapitalisation of Britain’s DFI, the CDC Group, by the Department for International Development (DFID) for use in fragile states. Collier’s role in advising DFID in this matter was highlighted by Sir Mark Lowcock, then permanent secretary at DFID, when he was called upon to give evidence at the public bill committee hearings established to scrutinise the recapitalisation proposal [E6]. Additionally, Collier was the only academic witness called upon to give evidence to the public bill committee in the lead up to the parliamentary hearings of the Commonwealth Development Corporation Bill, which resulted in the passing of the Commonwealth Development Corporation Act 2017. This Act further increased the limit of government funding for CDC Group from GBP1,500,000,000 to GBP6,000,000,000 [E7].

These changes within IFC and CDC Group were complemented by efforts to coordinate policy among DFIs internationally. Until this point, a forum for DFIs did not exist and so the potential to formulate a common strategy was lacking. The IFC and CDC Group (the two foremost DFIs) convened a conference for DFIs, entitled ‘Private Investment in Fragile Environments’, at the University of Oxford’s Blavatnik School of Government in February 2019. This event provided a forum for DFIs to discuss how to take forward the recommendations contained in the Escaping Fragility report. The event attracted 27 DFIs and was so productive that the participants requested that this become an annual event. In February 2020 the forum attracted 33 DFIs, at a more senior level, and it was agreed to create a series of transformational pilot programmes, in Madagascar, Ethiopia, Democratic Republic of Congo and Sierra Leone, to increase effective collaboration between DFIs in selected countries [E11]. This has been impeded by COVID, but a report on these pilot schemes is planned for February 2021.

Impact on the World Bank Group

The Senior Director within the World Bank’s new Fragility, Conflict, Violence (FCV) and Forced Displacement Division asked Collier to host their first consultation workshop on strategy at the Blavatnik School in February 2019, and Collier subsequently addressed their first FCV conference in Washington [text removed for publication] [E4, E5].

Ongoing impact: The Legacy of the Commission

The mission started by the Commission on State Fragility, ‘ to work with national, regional and international actors to catalyse new thinking, develop more effective approaches to addressing state fragility, and support collaborative efforts to take emerging consensus into practice’ is continued in the Reducing State Fragilities initiative domiciled at the International Growth Centre (IGC). The IGC is a Foreign, Commonwealth and Development Office funded research cooperation between LSE and the University of Oxford which Collier co-directs. Leadership of the Reducing State Fragilities initiative takes the form of the Council on State Fragility, inaugurated April 2020, based at the Blavatnik School, and is co-chaired by David Cameron, Donald Kaberuka (former President of the African Development Bank), and Ellen Johnson-Sirleaf (former President of Liberia), and includes a number of world leaders from the public and private sectors and Professor Collier [E10].

In the wake of the 2008 financial crisis, central banks have faced mounting criticism and

mistrust of their actions and influence, leading some critics to suggest limiting their degree of operational independence over monetary policy. Andrew Haldane, Chief Economist at the Bank of England, in a 2017 speech highlighted the need for these institutions to “rebuild trust among a wider set of societal stakeholders, more distrustful and diffuse than ever previously” [E1]. These challenges have led central banks to rethink how, and with whom, they engage, and to reach out beyond their traditional audience of financial markets participants and policy makers to the general public in an effort to rebuild trust and broaden support for independent central banks and their policies. The research by Hansen and McMahon provided the Bank of England with the analytical framework and empirical basis to develop a communication strategy to meet these objectives.

Impact on Bank of England Communications and Outreach Programmes

As part of its Vision 2020 Strategic Plan, the Bank of England devised new communications and education strategies, designed to “ ensure that our policy messages reach a broader range of people and have impact” with the aim of building “ awareness, engagement, understanding and trust, in order to ultimately make our policies more effective” [E2a, pp.15-17]. “Michael’s research,” writes Haldane , “has provided the intellectual and academic foundations of this new approach to communications and education by the Bank and more widely. Michael has served as a consultant as the Bank developed this programme” [E3].

McMahon’s “ *research and expertise has been a significant catalyst and contributor to the Bank’s thinking and practice on communication over a number of years” [E3]**. This has involved adopting a new layered approach to key publications. All layers are based on the same underlying analysis but targeted at different audiences, with an ‘announcement’ layer intended to be shared via social media; a visual summary which makes use of graphics and simpler language and targeted at a non-expert, general audience; and the Monetary Policy Summary intended for a more specialist economics audience [E2a, p.25]. This approach was piloted in the Inflation Report of November 2017 and an early evaluation of the experiment by Haldane and McMahon [R5] provided evidence for its effectiveness in increasing public understanding and perceptions of Bank policies. Further evaluation, by the Bank of England’s Behavioural Insights Team, confirmed that the new visual summary’ “improved public understanding of Bank messages compared to the traditional Monetary Policy Summary” and had a positive effect on peoples’ trust in the information [E4, p.2]. Consequently, the Bank of England has made these new communications a permanent part of their toolkit and further expanded their use to include more accessible versions of the Financial Stability Reports, as well as the Monetary Policy Report (formerly the Inflation Report [E2b, pp.6 & 23].

Following the policy recommendations set out in [R5], the reconfiguration of the Bank’s publications has been accompanied by an enhanced programme of education and outreach. This includes a schools’ programme with a range of classroom resources, which by the end of 2019 over 1,800 schools had registered for, and over 300 school visits were conducted by bank staff in the same year [E2c, p.64]. In November 2018, the Bank of England launched its Citizens’ Panels programme intended to give policy makers the opportunity to engage directly with the people they serve. Since the programme’s launch, the Bank has held 17 Citizens’ Panels across the UK, set up an online community to keep in touch with those who attend, and introduced monthly online surveys. In 2019, the Bank expanded this to target 16-24 year olds and recruited its first youth forum, created in partnership with the British Youth Council [E2c, pp.64-65].

Ongoing Impact at the Bank of England

The Bank of England’s Independent Evaluation Office (IEO) recently completed a review of the Bank’s quantitative easing (QE) programmes, including an examination of the bank’s communications around QE as part of the Bank’s wider strategy around public-facing communications. As part of the review process McMahon was consulted by the IEO and his research “has informed the IEO’s recommendations of how best to talk about QE to the public. In particular, his research on the Bank’s new “layered” communications shed light on the content and ways of delivering messages that could best enhance public understanding and trust in QE (Haldane and McMahon (2018), Haldane & McMahon, 2020)” [E5]. The IEO’s final report on QE was published in January 2021 and a focus of their recommendations is on building public understanding and trust in QE. To this end, they recommend further expanding the use of the ‘layering’ approach to key publications relating to QE, and providing accessible responses to the debates around QE arising at Citizens’ Panel events and Governor Q&As [E6, section 4.1].

International Impact

The Bank of England is widely perceived to be a pioneer in adapting its communications to engage with wider audiences [E7, p. 3 & fn 7, p 21]. Its ‘layering’ approach has “since been emulated by other central banks around the world, including the Federal Reserve in the US and the ECB (European Central Bank) in the euro-area” [E3]. McMahon’s research and expertise has also provided valuable inputs to the work of the central bank of Indonesia on building and evaluating its credibility [E8].

In April 2018, McMahon and Schipke presented their research findings on China’s Monetary Policy Communication (subsequently published as an IMF Working Paper **[R4]**) to a joint conference of the IMF and the People’s Bank of China (PBoC) held in Beijing and attended by senior officials of the PBoC and the Ministry of Finance [E9]. Among their policy recommendations to improve communications with financial markets was the provision of timely information, in one place in both Chinese and English, and regular press conferences [R4, p.23]. Later in 2018, the financial press noted a significant increase in the number of statements issued by the PBoC in English. This was followed by the launch of a revamped English-language website in January 2019. As reported by Financial News website, “ Previously only 2% of the Chinese site’s content was available in English, whereas the new English site covers almost every major aspect of policy” [E10a]. Both Bloomberg news and Central Banking websites connect the more transparent communications policy of the PBoC to the recommendations of McMahon et al [R4, E10b&c].

McMahon’s wider influence is supported by his role as the founding Director of the Centre for Economic Policy Research (CEPR) Research and Policy Network on Central Bank Communications (RPNCBC). This initiative was launched in October 2018 by McMahon with Christine Graeff, then Director General Communications at the European Central Bank, as co-director. The RPNCBC is a vehicle for discussion and idea-sharing intended to link researchers from different specialisms and connect them in a two-way dialogue with policy-makers and practitioners through workshops, blogs etc. [E11]

Summary

“My judgement”, writes Haldane, “is that Michael’s research and insights on these topics have not only led to him being widely regarded as one of the world’s leading experts in these areas; they have also had a very significant impact in shaping practice, radically, within the central banking community, at the Bank of England and beyond…He has provided the academic underpinnings of a wholly new approach to central bank communications that appears to be increasingly effective and important at a challenging time for central banks.” [E3]

Research by Professor Tony Venables on the mechanisms that drive the wider economic impacts of investment in transport infrastructure and how these may be critically evaluated underpinned a major update of the Department for Transport’s (DfT) Transport Analysis Guidance (TAG) which was fully implemented in 2018. ‘ Tony’s research on economic geography over the years as well as his involvement in our Joint Analysis Development Panel and support in developing our Appraisal and Modelling Strategy has significantly shaped and continues to shape the Department’s thinking on wider economic impacts’ DfT’s Chief Analyst [E5].

The revisions to the TAG were driven by the key recommendations of Venables et al in the TIEP report [R3, pp.4-7] and designed to ensure a coherent and consistent approach to identifying and evaluating the wider economic impacts of an investment. The DfT describe the revisions to the TAG arising from this research as representing a ‘ major milestone in (their) analytical strategy’ [E1, Executive Summary, para 11].

Enhancing the appraisal approach

UK government decisions on investment in transport projects are informed by evidence set out in a business case developed in line with Treasury’s framework for evidence-based decision-making, as set out in its Green Book [E2]. The Department for Transport’s (DfT) Transport Analysis Guidance (TAG) provides tools and guidance for responsible bodies on the evidence required for the business case, and All transport projects that seek UK government funding are required to use this guidance. The TAG is essentially a guidebook setting out the Department’s current understanding of how the costs and benefits of transport projects should be modelled and appraised. It includes advice on how to set objectives and identify problems, develop potential solutions, create a transport model for the appraisal of the alternative solutions, and how to conduct an appraisal which meets the Department of Transport’s requirements. Transport projects that seek government funding are required to use this guidance in making their business case. The TAG is used not only by officials working for the DfT, but also by analysts in local authorities or other transport bodies such as Transport for London, and private consultancy firms, and is ‘internationally respected as best practice’ [E3c, Executive Summary, para 1].

In 2013, the DfT set out its plans to develop its appraisal framework for transport projects, placing particular emphasis on the need to update its guidance in order to take better account of the potential wider economic impacts of major transport investment projects [E3a, para 4.5]. It was in this context that Venables, with Overman and Laird, was commissioned to develop a framework for appraising wider economic impacts in the light of recent theoretical developments, (including R1 and R2), and the latest empirical evidence. The specific remit of their commission was to ‘ provide recommendations on the scope for enhancing our current appraisal approach, while ensuring the evidence base remains robust’ [E3a, Executive Summary, para 3]. The DfT committed to update and restructure the guidance to improve the analysis and communication of wider economic impacts, based on the recommendations of the TIEP report [E3b, Executive Summary, para 6-7].

In Spring 2015, the DfT established the Joint Development Analysis Panel (JDAP) to provide strategic advice on developing its modelling, appraisal and evaluation guidance and methods, and more particularly, on updating the Department’s TAG in line with the recommendations of the TIEP report. The panel consisted of six external experts, including Professor Venables, together with the Department’s senior analysts. The JDAP reviewed the proposed changes to the TAG at its meeting in June 2016 [E4] and the detailed proposals were published for consultation in September 2016 [E1].

Updating the TAG

The updated guidance sought to implement the key recommendations of the TIEP [R3, pp.4-7] “ to improve the analysis and communication of wider economic impacts and ensure that the full range of material impacts re captured [E1, Executive Summary, para 7]: The main changes were:

• A new requirement to produce a context-specific economic narrative that establishes the transmission mechanisms through which transport investment will impact the economy and achieve the stated economic objectives.

• Greater clarity on the relationship between the measures of benefits used in appraisal (welfare) and economic metrics such as GDP and employment.

• A stronger focus on additionality and displacement in the analysis and reporting of economic impacts.

• Greater flexibility to use new modelling and valuation approaches to supplement standard appraisal methods.

• The integration of wider economic impacts including those arising from increasing economic interaction, moves to more productive jobs, productivity impacts, and changes in the location of economic activity.

The analysis developed by Venables et al. in TIEP was fundamental in shaping the revised guidance. In the words of the DfT’s Chief Analyst:

“*The report shaped the structure of the Department’s guidance and introduced key concepts that are now fundamental to how the Department undertakes appraisal. It highlighted the importance of understanding local context, and setting out a strong theory of change in an economic narrative. This guidance now underpins the development of transport business cases across the Department.*” [E5].

Following a consultation period, the revised guidance was implemented in May 2018 with the addition of five new units within TAG, designed to support transport officials, project managers and appraisal practitioners to ‘better communicate and to robustly appraise’ transport projects. The five units cover [E6]:

─ A2.1 Wider Economic Impacts Appraisal: sets out the overall framework underpinning the analysis of wider economic impacts;

─ A2.2 Induced Investment: guidance on how to identify and value effects on the level or location of private investment;

─ A2.3 Employment Effects: guidance on how to identify and value the employment effects;

─ A2.4 Productivity Impacts: guidance on how to capture the productivity impacts associated with agglomeration economies;

─ M5.3 Supplementary Economic Modelling: describes alternative modelling approaches for cases where there may be significant land use change.

The revised framework places the onus on those promoting a transport project to justify their appraisal approach. The revised TAG units provide descriptions of the different transmission mechanisms through which wider economic impacts may arise, and specify the types of evidence which would be required to justify the relevance of these impacts to any given business case.

Since its implementation, the revised guidance has provided the appraisal framework underpinning the business case for a number of major transport projects including: HS2 (Full Business Case, High Speed 2 Phase 1, April 2020) [E7]; Crossrail 2 (Business Case, July 2019); Northern Powerhouse Rail (Outline Business case, February 2019) [E8]; and West London Orbital (Strategic Outline Business Case, June 2019) [E9].