What does ‘levelling up’ mean?

As currently used, levelling up is an opaque term. Any forthcoming government strategy will first need to define prosperity, clarify what exactly is to be levelled up, the target area or group, and the rationale for investment.

Defining ‘prosperity’

Ensuring that ‘no region is left behind’ and that ‘everyone has the same opportunities to get on in life’, seems to be the focus as stated so far by government. Yet in recent government initiatives linked to levelling up, such as those outlined in the government’s paper Build Back Better: Our Plan for Growth, prosperity is not well defined or takes on a meaning narrowly restricted to economic growth, jobs, or productivity. Following work by the Stiglitz-Sen-Fitoussi Commission in 2009, looking ‘beyond GDP’ in measuring economic performance and social progress, many are adopting a wider definition of prosperity. Countries such as New Zealand, Scotland and Wales, as well as international agencies, now use some variation of the ‘four capitals’ approach (see Box 1) to guide policy and significant investment.

The Bennett Institute for Public Policy has emphasised that sustained prosperity will ‘depend on stewardship of the whole portfolio of a society’s assets’, which need to be ‘properly measured and understood’. James Heckman’s work has also set out the gains to be had from investing in the early and equal development of human potential – an approach that pays dividends for future generations by creating a more capable, productive and valuable workforce. These approaches recognise that in addition to financial/physical capital, human capital (physical and mental health as well as people’s knowledge and skills); social capital (including the cohesiveness of communities, culture, local identity and pride); and natural capital (aspects of the natural environment needed to support life and human activity) are all vital to create opportunities for people to thrive.

Box 1: The four capitals

Human capital: Encompasses people’s skills, knowledge and physical and mental health. These factors enable people to participate fully in work, study, recreation and in society more broadly.

Social capital: The norms and values that underpin society, including levels of trust, the rule of law, cultural identity, and the connections between people and communities.

Natural capital: All aspects of the natural environment needed to support life and human activity including land, soil, water, plants and animals, as well as minerals and energy resources.

Financial/physical capital: All the things that make up the country’s physical and financial assets, which have a direct role in supporting incomes and material living conditions. This could include, for example, new houses, roads, buildings, hospitals, factories and equipment.

Where does health fit in?

While health is generally considered to be a part of human capital in such frameworks,, good health also has wider social and economic value. It underpins and interconnects with many other assets. For example, in relation to financial/physical capital, there is a well-evidenced positive association between health status, economic growth and labour productivity. Poor health can mean individuals are unable to participate in the labour market altogether or limit the amount or nature of the work they do, incurring an estimated cost to the UK economy of £100bn per year in lost productivity.

Developing a ‘physical impairment’ doubles the probability that a person will experience a reduction in productivity, while the onset of clinically poor mental health trebles the risk. The quality of the physical environment (including green space and housing) and material living conditions also have a significant impact on people’s ability to live healthy lives. With regards to social capital too, there is well-established evidence that relationships are important for good health. Loneliness is a strong predictor of poor health (with living alone also associated with increased health care use among older adults). By contrast, people with high levels of social capital are likely to have better health.

What is to be levelled up?

Other dimensions are important to clarify as part of a levelling up strategy (outlined in Box 2). For example, what exactly is to be levelled up, and are hard outcomes or widening opportunities the real aim? What is the target unit to be levelled up (for example, deprived towns, regions, neighbourhoods or specific population groups)? And would the target be areas or population groups hardest hit by the pandemic, or those with more deep-rooted structural issues – for example, areas endemically ‘left behind’ due to long run changes in the wider economy, or populations long held back by poverty or education?

Other considerations include the timeframe for achieving goals of the investment – whether these are short, medium and longer term objectives – and how various investments or initiatives are intended to influence prosperity. It will also be important to establish whether the strategy should be nationally or locally driven, and the rationale for this, as well as specifying the underlying assumptions about how levelling up can be achieved successfully through the targeting and timing of investment. The assumption that economic growth and infrastructure capital will automatically improve social and human capital in deprived communities needs hard scrutiny.

Box 2: Basic dimensions of levelling up

* There are some helpful moves in this direction. For example, in December 2020 the Treasury revised the Green Book to help ensure investment decisions are better aligned with strategic government objectives – including those relating to ‘levelling up’. This included putting more weight on environmental, social and place-based impacts as part of business cases put forward to the Treasury for public investment (House of Lords Library, Government investment programmes: the ‘green book’; March 2021 (https://lordslibrary.parliament.uk/government-investment-programmes-the-green-book).

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