Press release: Levelling up agenda will fail if the government ignores spending on social infrastructure

The Centre for Progressive Policy (CPP), an economics think tank, today launches a report arguing that the productivity benefits of social infrastructure are on a scale comparable to that of transport and other traditional economic infrastructure.

The report brings together evidence from multiple disciplines on the economic returns to social infrastructure investment and finds that the benefits from investment are large. For example; improving ill-health in the North could boost GVA by £13bn and each completed level 3 apprenticeship adds £176,00 to a person’s lifetime productivity (see Figure 1).[1]

CPP calls for the Chancellor to recognise these benefits in next week’s Budget and at the forthcoming Spending Review, prioritising strategic investment in the public services and social policy systems – such as early years, education, mental health and social care – that enable communities to thrive while boosting the economy at the same time.

There was widespread anticipation that Sajid Javid would revise the fiscal rules to allow for increased public spending following a decade of austerity. The report recommends that spending decisions by the new Chancellor, Rishi Sunak, are underpinned by the understanding that social and economic outcomes are inextricably linked. Investment in transport alone will not address chronic regional inequalities.

Children living in newly Conservative ‘Red Wall’ areas, for example, are 34% more likely to be in care that the average English child, whilst adults are more likely to commit suicide and live fewer years in good health (see Figure 2).

If government is serious about levelling-up the UK it should have the courage of its convictions and increase investment in social infrastructure based on the following principles.

  1. Taking a place-based approach. Government should trial place-based budgeting, giving local leaders have full flexibility and accountability for integrated spending and investment across economic and social policy.
  2. Thinking long-term. Setting strategic central government budget allocations over 10-15 years, rather than one to four.
  3. Accounting for assets. Government should report on assets at the Budget and use the Whole of Government Accounts to inform spending decisions.
  4. Moving beyond capital. Government should design a new accounting category to capture resource spending which is preventative and or has predominantly long-term benefits.
  5. Promoting a level playing field for project appraisal. WebTAG style guidance should be available for social infrastructure projects.

CPP will be working to develop this agenda in the run up to the Spending Review.

Report author, Rosie Stock Jones, Senior Research Analyst, Centre for Progressive Policy, said,

“CPP has long advocated for inclusive growth to be achieved by integrating social and economic policy at a national level, whilst putting place at the heart of efforts to increase productivity and shared prosperity.

“The current ‘levelling-up’ agenda speaks to issues of income and wealth inequality, but government must go beyond shiny new, big infrastructure projects and instead invest systemically in people and places for the long term. Investments in nursery teachers, are just as crucial as investments in trains if we are to eradicate place-based inequalities.”

Figure 1: Evidence summary: the productivity returns on social infrastructure investment[2]

Infrastructure type

Potential annual productivity gain (£bn)

Economic gain per £1 spent (£)

Per person lifetime productivity gain (£)

Education & skills

-

-

176,000 - 283,000

Physical & mental health

11.3 – 33.9

-

-

Childcare & social care

2.6

2.28

300 - 600

Transport

0.1 - 15

-

-



Figure 2 – Social infrastructure investment is needed to tackle endemic deprivation in Red Wall constituencies that voted Conservative in 2019[3]

Infrastructure type

Outcome measure

England average

Conservative red wall average

Difference compared to England average

Skills

Percentage who attained Level 3 at 19 (2018)

57

53

-7%

Health

Healthy life expectancy at birth (2016-18)

64

61

-5%

Mental health

Suicide, rate per 100,000 (2016-18)

9.6

10.5

9%

Early years

Percentage achieving a GLD at end EYFS, (2019)

72

70

-2%

Social care

Looked after children, rate per 10,000 (2019)

65

87

34%


Notes to the editor:

  1. Download the report
  2. About this report: Prime Minister Boris Johnson has promised to ‘unite and level-up’ the UK, recognising the link between places that have been ‘left-behind’ and the Brexit vote in 2016. This report argues that investment in social infrastructure is essential for levelling-up the UK due to its long-run economic returns, but that the current spending system has led it to be neglected. The report defines social infrastructure as the systems which enable society to work effectively and focuses on the productivity returns of a subset of social infrastructure for which there is an existing body of literature. Based on previous literature, it finds that the productivity returns to social infrastructure investment are comparable to that of physical infrastructure. The report then considers the features of the current spending system that have led to social infrastructure investment being overlooked. Social infrastructure must be prioritised as part of this re-balancing agenda, as place-based inequalities in areas such as health, skills and education are central to understanding and addressing the distribution of economic deprivation across the country.
  3. About CPP: The Centre for Progressive Policy is a think tank committed to making inclusive economic growth a reality. By working with national and local partners, our aim is to devise effective, pragmatic policy solutions to drive productivity and shared prosperity in the UK. Inclusive growth is one of the most urgent questions facing advanced economies where stagnant real wages are squeezing living standards and wealth is increasingly concentrated. CPP believes that a new approach to growth is needed, harnessing the best of central and local government to shape the national economic environment and build on the assets and opportunities of place. The Centre for Progressive Policy is fully funded by Lord David Sainsbury, as part of his work on public policy.
  4. For more information on the Centre for Progressive Policy, please see www.progressive-policy.net or follow @CentreProPolicy
  5. For interview requests contact Thomas Hauschildt, Communications Manager, Centre for Progressive Policy: THauschildt@progressive-policy.net, 020 7070 3370.

[1] Men with a level three apprenticeship generate an additional lifetime productivity of £176,000 compared to those with level 2 qualifications.

[2] This table collates these figures for illustrative purposes although it should not be used to draw direct comparisons. Research findings are expressed differently across disciplines and are not always available in each format. For ease of reference the prices are in the year of publication rather than in 2020 prices.

[3] CPP analysis based on ONS and DfE statistics. Conservative Red Wall average includes 44 constituencies in the Midlands and the North of England whose elected representative changed from Labour to Conservative in 2019. Data is based on the local authority in which most of the constituency population live.