The Levelling Up White Paper, published by the government last week, offers an ambitious vision of how we can spread opportunity and prosperity to all parts of the UK, with 12 new "missions" – on issues ranging from employment, productivity, housing, education and skills, health and wellbeing – to be delivered by 2030. The scale and duration of investment needed is such that the public sector cannot achieve this alone. This is where private capital – which will be a crucial tool for delivering the levelling up agenda – comes in.
Of course, this is not the first time politicians have sought to address this challenge. The question of how we unlock private sector investment into poorer and less-developed parts of the UK has been a longstanding one in UK public policy. However, even when that private investment has been achieved, it has often been done in a way that does not particularly benefit the community it was intended to serve: creating low quality jobs, through extractive businesses that fail to invest and send returns elsewhere.
"Even when that private investment has been achieved, it has often been done in a way that does not particularly benefit the community it was intended to serve: creating low quality jobs, through extractive businesses that fail to invest and send returns elsewhere"
However, there are reasons to suggest that these latest proposals have the potential to create a more lasting impact ,especially through harnessing social impact investment. The government’s levelling up strategy is coinciding with changing sentiment among private investors in the UK and elsewhere. We are seeing that there is a growing investor appetite for investments addressing significant social challenges as well as achieving sustainable financial returns – known as social impact investment. Big Society Capital’s latest figures show that UK social impact investing grew more than eight times in nine years, increasing from £830m in 2011 to £6.4bn at the end of 2020. With this comes great opportunity for private capital to crowd in with public money to further the levelling up agenda.
Through blending public investment with external investment capital, local grants can go much further. We have seen first hand how public-private co-investments can support the development of community institutions, for example. Alongside Sports England, we backed a new impact investment fund run by Sporting Assets that will invest in around 150 new or improved gymnastics clubs across the UK, focused on early intervention in children’s physical and mental health. And with Arts Council England and others, we have back what is now the world’s biggest impact investment fund for the creative arts. Run by the innovation foundation Nesta, it supports arts, culture and heritage organisations that have a positive social impact on people and the communities they live in.
Crucially, we are also now seeing mechanisms that enable private investment to come into areas previously seen as high risk. An example of this is through the work of Community Development Finance Institutions – locally-rooted social enterprises who get finance to people and businesses who have been ignored by mainstream finance. Greater levels of investment are now being enabled through these bodies, thanks to the private sector and government working together (through the form of loan guarantees from the British Business Bank), which is making a tangible difference to local communities across the UK.
There will always be a call for government spending, of course. But this not about digging further into the public purse; rather, it is about spending smarter. Funding social outcomes rather than services via Social Outcomes Contracts is a prime example of achieving better results without spending more. This type of contracting can be an exciting opportunity for social sector organisations, because it frees them from the narrow "service specifications" inherent in many public contracts. It also gives much greater room for flexibility and innovation in delivery and, crucially, allows for more person-centric outcomes.
Over the last ten years, 90 contracts like these have tackled critical social challenges – from a programme supporting families to stay together across ten London boroughs, to a partnership in Manchester providing 300 homes alongside wrap-around support to people experiencing homelessness.
The scale of investment needed to deliver on levelling up is overwhelming, but through working with the private sector and capitalising on the appetite among investors to achieve positive social impact through their investments, it is possible to considerably further public money and improve people’s lives across the UK. Social impact investing is no longer niche, and we are now at the point where the scale of what is happening, and scale of what is possible, means it can be a key tool in levelling up.
Stephen Muers is chief executive of Big Society Capital, an independent social investment institution that provides finance to organisations that support front-line social sector organisations