Government spending in response to Covid-19 stands at well over £300 billion in the UK, and over £10 trillion globally. How this money is spent will shape the future of the economy and the environment for decades to come.
A new report from the Bennett Institute for Public Policy finds that investing public funds - in people’s health and skills, and in social, natural, and physical capital - is the best way to bring about a more resilient and prosperous future, and to deliver the ‘levelling up’ agenda. Investments in this Inclusive Wealth will have a high return as countries look to ‘Build Forward’.
“Future economic possibilities are shaped by the current management of Inclusive Wealth. Mutually reinforcing investments in social cohesion, health, skills, the environment, and strong communities are crucial for delivering growth, productivity, and well-being in the UK’s towns and cities. Measuring and maintaining what really matters is the first step toward a resilient economic recovery,” says Dr Matthew Agarwala, Project Leader of The Wealth Economy.
The report demonstrates that investing in these assets across the country is the best way to restore prosperity and ensure fiscal health after the pandemic. A temporary rise in the government debt/GDP ratio should not prevent investment. In periods of high uncertainty, low confidence, and unemployed economic resources, public investments in the natural environment and local community programmes offer attractive economic returns.
Such investments are all the more important as the report reveals striking inequalities in the capacity of communities to respond to the pandemic. Using data on the formation of Covid-19 Mutual Aid Groups, the research shows that estimates of the number of Mutual Aid Groups per 250,000 people ranges from 0 to 57 across Local Authorities. The pandemic has heightened inequalities in life chances and opportunities across the UK such as life expectancy, employment, access to hospitals.
The report shows how human capital (health, skills, and education) interacts with social capital (personal networks and family or community support) to ignite ‘virtuous cycles’ of productivity and growth for some places. But in other places these interactions can lock in a ‘vicious cycle’ instead. Coordinated investments in skills development, knowledge sharing, and infrastructure are needed to avoid growing inequality.
Gaps in economic measurement have contributed to the chronic underinvestment in assets such as natural and social capital. As clean air, public green space, or social relationships are not traded in shops and stock exchanges, these assets do not have a market price and so are not counted in economic statistics. This makes them invisible in policy choices. Investment is needed in data gathering and statistics to provide timely information about the stock and performance of all the components of wealth. The pandemic has highlighted the importance of high-quality statistics for policy.
The Bennett Institute Wealth Economy team is working with the United Nations and governments around the world to deliver a statistical infrastructure to measure the benefits of human, social and natural capital, and ensure that they are included in decision-making by business and individuals. Inclusive Wealth is a measure of our capacity to achieve the Sustainable Development Goals, the Paris Agreement, and commitments to safeguard biodiversity.
The Wealth Economy approach is also a practical recipe for policy making for a sustainable future. The report shows how countries from Scotland to New Zealand are pioneering the wealth approach, and it sets out concrete actions – in education, infrastructure, fiscal policy, and the Treasury’s Green Book guidance – that the UK could take to Build Forward.
“This report by the Wealth Economy team focuses on the practical, immediate policy lessons emerging from our approach. The pandemic, alongside mounting evidence of the consequences of climate and biodiversity crises, has opened many people’s eyes to the fact that this is a fork in the road. Building back is not the challenge; it is Building Forward to something better,” says Professor Diane Coyle, Bennett Professor of Public Policy and Co-Director of the Bennett Institute for Public Policy, Cambridge.
Building Forward: Investing in a Resilient Recovery is part of the Bennett Institute’s ongoing Wealth Economy project, which attempts to expand understanding of economic prosperity by accounting for the complete range of society’s natural, social and human assets. The project is generously supported by LetterOne.
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