The Social Mobility Commission has published a new report today, unveiling an ambitious new blueprint for channelling investment into the UK’s most disadvantaged areas.
The report, from the Commission’s Economic Growth and Investment Group (EGIG), urges the Government to support the creation of new ‘Opportunity Zones’ in parts of the UK most in need of economic progress.
Under the proposal, private investors would receive deferrals and reductions in Capital Gains Tax when investing in the poorest parts of the UK.
The Commission argues that this bold approach could unlock billions in private investment, generating economic growth, improved housing, and more local jobs.
This plan draws on the experience of Opportunity Zones in the US, which have already generated an estimated $75 billion in investments since 2020.
Notably, the report also calls on pension schemes to allocate 5% of their portfolios to UK growth investments. It found that UK pension funds now allocate just 4.4% of their assets into UK companies, compared to 25 years ago when they invested over half their assets.
The Commission launched its Economic Growth and Investment Group in February this year, with the aim of boosting regional growth, innovation, entrepreneurship, and investment in areas of economic disadvantage outside of London and the south east.
The group argues that public investment alone cannot solve regional differences in economic opportunity. It proposes incentivising and attracting large-scale private investment, in close collaboration with local, regional and national governments.
Rob Wilson, Deputy Chair of the Social Mobility Commission, and Chair of the EGIG, said:
“Successive UK governments have tried and largely failed to improve economic growth in struggling regions in the UK. Many of these policies have been frustratingly short-term, fragmented and limited in scope. With growing pressure on public funding, it’s time to take a radical new approach that incentives private investment and enterprise in the areas that need it most.
This report offers a bold new vision for social mobility, one which harnesses the power of regional leadership, devolution, and private investment to bring real change to some of the UK’s poorest communities. Our proposal for Opportunity Zones represents exactly the kind of targeted place-based approach we need to tackle the extreme regional disparities that exist in the UK today.”
Elsewhere, the report shines a spotlight on significant regional disparities in productivity in the UK. It proposes that improving workforce skills and levels of entrepreneurship are key to fixing this.
Productivity (in terms of output per hour worked) is highest in London and the South East (29% and 8% higher than average, respectively), and lower in all other regions in the UK, particularly in Wales, the West Midlands, East Midlands, and the North East (15% below average).
To tackle this, the group argues that the UK needs to “break the vicious circle in disadvantaged regions of low productivity, low investment and low skills”.
Entrepreneurship remains “unevenly distributed in the UK”, according to the Commission. To tackle this, the report makes 10 key and urgent recommendations, including calls for:
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The Government to encourage entrepreneurial education through greater outreach at schools and further education colleges.
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Job Centres to promote entrepreneurship and encourage ‘side-hustles’.
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The revival of the New Enterprise Allowance, a programme that supported unemployed people and certain benefit claimants to start their own businesses. The report proposes creating a much larger trading allowance – that is, the tax-free allowance you receive for any trading or casual income sources – and providing business support for anyone on Universal Credit looking to start a business.
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Local government to build or support the expansion of start-up hubs for entrepreneurs. This could involve providing spaces for hubs and start-ups, or building connections between the private sector, local government, and academia.
Access to skills is also critical to productivity. Yet, the report argues that the UK faces a striking challenge: nearly a million young people are not in education, employment or training (NEETs) after years of underinvestment in adult skills.
To build the nation’s skills, the Commission had made several recommendations, including that:
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Local authorities should prioritise providing free public transport for young people to improve access to education and skills opportunities.
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There should be greater efforts to promote apprenticeships and technical education in schools and colleges, along with other vocational/technical pathways.
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Apprenticeship rules should allow more flexibility for employers, and support SMEs (small and medium enterprises) more.
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Local authorities should work to meaningfully join up employers, universities, and further colleges.
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The Government should provide flexible upskilling funds (worth up to £3,000) for adults in work living in disadvantaged areas to use for courses and qualifications.
Throughout the report, the Commission argues that more “devolution provides the way forward” and that every region should have a Strategic Growth Plan. This is a long-term blueprint for growing the local economy, which involves local and national government, enterprise and other important local organisations working collaboratively to improve opportunity in their communities.
This aligns with the Commission’s calls for a place-based approach to social mobility. This is the idea that a one-sized-fits-all national strategy is no longer effective and that approaches to growth and innovation should be led at a local level.
Karen Barrett, Founder and Chief Executive Officer of Unbiased and Member of the Economic Growth and Investment Group, said:
“If we want to tackle regional disparity and encourage private sector investment, the Government needs to bring businesses on board. This latest report from EGIG paves a new path, showing how private business and the public sector can work collaboratively to create meaningful opportunities in disadvantaged areas.”