Productivity knocks

Levelling up with social infrastructure investment

5 March 2020

By Rosie Stock Jones

The new Chancellor will soon reveal the steps his 2020 Budget will take to ‘level-up’ prosperity across the UK regions. The focus on reducing regional imbalances is welcome but not sufficient; an urgent rethink of existing mechanisms is required. To date, transport infrastructure investment has dominated the headlines, but capital spend alone will not level-up the economy. Deprivation in the UK is associated with significant health and education inequalities. Children living in newly Conservative ‘Red Wall’ areas, for example, are 34% more likely to be in care than the average English child, whilst adults are more likely to commit suicide and live fewer years in good health. Tackling these regional imbalances will require policymakers to consider the need for social and physical infrastructure together.

Social infrastructure investment is needed to tackle endemic deprivation in Red Wall constituencies that voted Conservative in 2019

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%

Why social infrastructure?

The term social infrastructure has increasingly been used to elevate the status of investment in a combination of activity which has previously been regarded as soft or intangible. Broadening the understanding and application of economic policy by integrating social policy and investment in social infrastructure, is critical to addressing the underlying structural causes of deprivation.

We define social infrastructure as the systems which enable society to work effectively. This is broadly in line with other working definitions and includes areas such as early years, mental health and housing. Whilst investment in social infrastructure has many benefits for inclusive growth and economic wellbeing, we focus on a subset of social infrastructure for which there is an existing body of literature demonstrating its economic impact in terms of productivity. Based on previous literature, we have found that the productivity returns to social infrastructure investment are comparable to that of physical infrastructure.

Evidence summary

Previous findings on productivity returns on social infrastructure investment

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

-

-

Principles for an integrated spending system

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 to 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 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.

Notes

CPP analysis of Red Wall areas is based on ONS and DfE statistics for constituencies in the Midlands and North of England which changed from Labour to Conservative in 2019. Data is based on the local authority in which most of the constituency population live.