Matt Leach: A new approach to social investment can help level up the country

15 Dec 2021 Voices

Social investment could be part of the answer for left behind regions of the UK, but it needs longer-term thinking and a focus on impact, writes Matt Leach from Local Trust

Left behind places are a relatively new idea, but not a new phenomenon. 

Deprived neighbourhoods, which lack places and spaces to meet and which see low levels of community activity and poor digital and transport connectivity, appear to suffer worse socio-economic outcomes than other parts of the country. 

These are areas with fewer employment opportunities, with lower household income and markedly worse health outcomes, while educational attainment is significantly lower. 

Oxford Consultants for Social Inclusion (OCSI) and Local Trust research in 2019 found many of those communities were concentrated on the periphery of post-industrial areas in northern England and the Midlands, and in coastal areas in southern England – often places that have suffered economic blight over decades because of the closure or failure of previously buoyant traditional industries. 

Is social investment part of the solution?

Social investment is also a relatively new idea. 

The modern history of social investment in the UK this century began in 2000, when Sir Ronald Cohen introduced the work of the Social Investment Taskforce to the government in a letter to the then chancellor of the exchequer. Sir Ronald described “a new approach and a far-reaching programme to improve dramatically the prospects of under-invested communities”.

Ten years later, as the Social Investment Taskforce published its final report, Sir Ronald again returned to the idea of “developing new approaches to improve the difficult lives of those whom rising national prosperity has not helped”.

Last month, in a challenging new report which generated a fair amount of debate on social media, not least amongst those championing the cause of social finance, Dan Gregory asked a critically important question: ten years further on from that Taskforce report, and with growing government concern with levelling up, is social investment delivering sufficiently for those who have been ‘left behind’?  

His conclusion, after talking to communities across the country, was that more than two decades into the social finance experiment, there was limited evidence of impact and, for that to change, radically different investment approaches would be needed.

Success stories

That is not to say there are not some good news stories. 

A few funds, including the Access Foundation and Key Fund, have played an important role in reaching areas of the country others haven’t. They have channelled investment into run-down high streets and town centres. They have helped save and transform empty buildings into local ownership and enabled new models of enterprise and public services.  

Blended finance of the sort pioneered by Access, where a grant is accompanied by social investment, appears to be one way to enable social investment to meet a wider range of needs.

But, as Gregory’s report highlights, current approaches to social finance don’t tend to work at a very local, neighbourhood level, in areas with little civic activity, including peripheral estates and the hardest hit coastal communities – places where civil society clearly needs long term support to rebuild and recapitalise itself. 

The left behind must not be left behind again

Local Trust has worked in some of these places delivering the Big Local programme, and while considerable resource was put into promoting social investment, particularly in the early days of the programme, take-up has been persistently low. Lawrence Weston, a group in northwest Bristol, investing in a community wind farm was a rare exception. 

So, as the government considers how to deliver levelling up at a neighbourhood level, it’s worth noting that interventions reliant on historic approaches to social investment will only ensure that the left behind continue to be left behind. 

That is not to say that social investment doesn’t have an important role to play in contributing to social change. Rather, as Gregory makes clear, we need to develop different solutions to reflect differing needs and circumstances, and the different geographical scales at which those interventions work best.

The bottom line is that if social finance is to play anything more than a peripheral role in contributing to levelling up, we need something radical and new to emerge, including models which lie beyond most of the current social investment field of vision and operation. 

Patient capital

As Gregory emphasises, this means patient, long-term investment, which doesn’t demand or perhaps even expect a financial return, at least directly or over a limited time horizon. There needs to be less of a focus on short-term financial returns for investors and more emphasis on the longer term. 

A new approach is needed which supports the acquisition and sustainability of community assets including endowments, and shifts power into the hands of residents. 

Grants or very long-term equity-style investment rather than loans – genuine patient risk capital, committed over decades – could be one answer. This would replace debt which is repayable in the immediate sense with committed capital that has a focus on generating a sustained and better balanced social and financial return.

This doesn’t mean that social investment as commonly understood does not deliver value and innovation or make a difference. However, it needs both to be radically rethought and placed alongside a range of other responses and solutions and build a platform that can support change, especially in ‘left behind’ areas, and with an awareness of how different products are needed to reflect differing requirements and geographical scale. 

Truly addressing inequality will require investment that tackles imbalances over the long-term, recapitalising local social infrastructure, and empowering local people to take a lead in responding to their particular circumstances.  

As the government considers plans for the future of both current dormant assets and the next wave to come, this needs to be at the forefront of their thinking.

Matt Leach is chief executive of Local Trust

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