Building blocks of growth

Civil society is weakest in Levelling Up priority areas – with a third less local charitable activity than in the lowest priority areas. Worse, our data suggests the gap has grown – with local charitable activity falling between 5% and 6% since 2018 (compared to less than 1% drop in wealthier places).

This matters because the evidence shows civil society can make people and places healthier and improve their education and skills – key building blocks of the local economic growth at the heart of the Levelling Up agenda.

Civil society brings three unique advantages to tackling inequalities:

• Preventing issues
• Connecting communities
• Targeting services to where they’re most needed

But civil society remains weakest in the poorest parts of Britain – and our new data suggests it’s getting weaker still. A key asset for growing local economies is therefore struggling precisely where it’s most needed.

We need greater support for civil society as an engine of growth if we are to truly tackle regional inequalities across the UK – such as through new targeted social investment zones, a social investment fund and better evaluation of what programmes work.

Our recommendations

1. Targeted ‘social investment zones’

In parallel with the 12 investment zones announced for the East Midlands, North East, Greater Manchester and elsewhere, these social investment zones should be distinct areas where Gift Aid incentives and targeted support allow civil society to flourish. There should be a minimum of one zone in each of the nine ITL 1 regions in England, and equivalent in devolved nations, informed by the indices of multiple deprivation and calculations of charity density.

With an initial investment of around £1.2bn[1] drawn from the Social Investment Fund (mentioned next page) as they should contain:

1. Co-developed ten year plans to transform their area alongside the local authority, civil society and community, reflecting lessons from abroad about the importance of long-term investment.
2. Partnerships with existing local philanthropic bodies, including Community Foundations, with initial 5-10 year matched funding from government for grants given to local organisations in the most deprived areas of the Social Investment Zone, and sustained focus on leveraging in other private sector and philanthropic funding to ensure a legacy in these areas beyond this period.
3. Funding for locally designed, long-term (average of five years or more) civil society interventions to tackle local priorities, social issues, and improve the health and educational assets of the community.
4. More generous Gift Aid tax breaks for donors who want to give to the area.
5. New processes to involve civil society organisations with decision-making to target support to needs. Efforts should also be made by local leaders to engage independent grantmakers who may have a connection to the area to support initiatives in different ways.
6. Robust measurement and evaluation frameworks to track impact against these plans with ongoing process evaluations and annual reviews against key performance indicators informed by partnerships with, and the best evidence from, the What Works Centre for Local Economic Growth and elsewhere.

2. A national framework for tackling inequalities

Alongside the social investment zones that have intensive activity to increase civil society activity and promote local economic growth, there also needs to be a broader national approach to investing in disadvantaged areas across the county. We need a new national framework for tackling inequalities which includes:

1. Identify local and hyperlocal ‘hotspot’ areas: Regional mayors (where they exist) should work with the ONS to identify priority local and hyperlocal areas in consultation with local authorities to prioritise tackling social and economic inequalities. We would expect around 1/3 of local authorities to have at least one hotspot area. Where regional mayors do not exist, central government should identify the relevant lead local authority to facilitate this process. This should be based on guidance from central government which requires the use of transparent criteria including the indices for multiple deprivation and metrics of social infrastructure (such as number of registered charities) to tackle regional deprivation as well as pockets of social deprivation in wealthier areas. This should be scrutinized by an advisory council which must include civil society groups and local leaders from across the UK. Local communities should also have the right to hold their representatives accountable and challenge decisions which do not meet the guidance.
2. Weight central government funding to reflect these hotspots: Grants to local government and other public services should be weighted to how a local authority performs on these metrics of deprivation and social infrastructure. Local authorities should submit plans outlining how a portion of this funding would be used to invest in community and civil society projects to tackle social inequalities in these hyperlocal hotspot areas.
3. Set up a new ‘Social Investment Fund’: This should combine new funding, along with around £1bn reallocated from the Levelling Up Fund and Dormant Assets to make a total investment of around £9bn[2] over ten years. As well as supporting the Social Investment Zones with an initial £1.2bn, the fund should invest in projects nationally across the UK. The fund should be long-term wherever possible, support projects across the UK in the local and hyperlocal hotspot areas mentioned earlier, and focus on a range of social issues which our research shows are central to tackling regional inequalities including: tackling poverty and the other wider determinates of poor health, and improving education and skills—particularly through an early years focused approach.
4. Devolve decision-making: End the regional competitive bidding process bygiving control of the ‘Social Investment Fund’ to the local authorities (or regional mayors) in the hotspot areas to distribute to projects which tackle these issues locally. Local authorities would be responsible for using a data driven approach to scope capacities, needs, organisations and infrastructure and engaging meaningfully with communities, civil society organisations, faith groups and businesses to identify shared priorities.
5. Trial civil society interventions: Develop evidence-driven approaches to tackling inequalities and contributing to local economic growth through developing education and health, such as the three interventions in this paper. These should wherever possible build on existing local initiatives, and be co-designed with civil society and communities so they can be driven by the best understanding of local circumstances and priorities. A key condition of programmes receiving funding must include robust and realistic mechanisms for tracking the impact of their intervention.
6. Invest in measurement and evaluation: There is little consensus around what approaches are most effective to tackling regional inequalities – the National Audit Office notes that efforts to evaluate past attempts have been limited. To tackle this, the Department for Levelling Up, Housing and Communities should invest heavily in measurement and evaluation capacities. This should include ongoing process evaluations to learn how partnerships can work, and impact evaluations to test different programmes’ effectiveness. This should happen in partnership with the What Works Centre for Local Economic Growth, and the What Works Centre for Wellbeing to best support narrowing national disparities.
7. Exploit opportunities to leverage further funding: Government funding alone is not going to solve regional disparities. The What Works Centre for Regional Inequalities should look in partnership with government at how to leverage further assets to tackle disparities including, the Gift Aid tax breaks for philanthropic giving in investment zones, as well as exploring Blended Finance approaches and other efforts to involve the private sector. Local areas should also explore opportunities to draw in further funding for projects using educational and public health budgets and the community infrastructure levy.

[1] This estimate comes from the cost of Labour’s New Deal for Communities, scaled to 12 areas and adjusted for inflation

[2] This estimate comes from the cost of European Social Fund’s expenditure in supporting people in England from 2007-2013 adjusted for inflation and scaled up to 10 years.

We are grateful to Lloyds Bank Foundation for England and Wales for their support for this work.