We need a social supply side revolution too. By Danny Kruger MP

We can agree the politics has been… unsuccessful. If the Government hoped for a boost in public opinion from its tax-cutting mini-budget it has been disappointed. To be fair to the PM and Chancellor, they weren’t focused on the politics. Liz Truss said all along that to fix the UK’s chronic economic problems, especially our low productivity and regional inequality, things had to change, and that she was ready to take unpopular decisions to boost investment and drive growth.

This was an economic not a political plan. But there are two problems. One, well explored by the media over the last week, is that the politics tends to affect the economics. The markets are a branch of public opinion, and their view matters because a lack of confidence in the City directly increases the Government’s borrowing costs and weakens the currency. 

The other problem, less discussed but to my mind more important, is the absence so far of a social narrative alongside the economic one. And I don’t mean the story of state support for people’s cost of living, vital as the Government’s spending package and energy price cap are. I mean the necessary corollary of the economic supply side reforms that are planned. We need to focus on the social supply side too.

The social supply side is the real foundation of our economy. This is the households and the communities where people live, look after their children and their elderly parents, where young people learn the values and the skills for life and where everyone finds - or doesn’t find - the fulfilment and purpose of living. It means homes - decent affordable homes of the right size and in the right places - but it also means social infrastructure, the gathering places and public services that sustain a neighbourhood. 

Today a group of MP colleagues and I publish ‘Social Capitalism’, in partnership with Local Trust, Power to Change, Lloyds Bank Foundation and Social Enterprise UK. This calls for a renewed focus on the social infrastructure which is the real foundation of economic growth, and sets out a series of proposals to strengthen this foundation. But to embark on this course we need a change of mindset.

Conservatives are often most comfortable talking about the economy, the taxes and regulations that boost or hinder growth and the red tape that needs cutting to ‘unleash’ the hounds of enterprise. We seem to think that the social stuff - families and communities and culture itself - are none of our business, outside the proper sphere of politics. We are wrong about that. Culture is upstream of politics and communities are upstream of the economy. 

If we want to boost growth, and do so without simply overheating London and the South East - exacerbating regional inequality and lengthening the long tail of low productivity everywhere else - we need to get our social policy right. That means strengthening the natural units of society, families and neighbourhoods, the informal institutions which create capable resilient individuals and provide the unconditional, unlimited support that no public service can offer. 

And it means applying a social lens to economic policy itself. We need more patient capital which recognises that it takes time to grow a business in a tough area, and that companies rooted in their communities might make slower returns but over time they’ll create more profit and more jobs and pay more tax. 

And perhaps most pertinent of all, it means public sector reform. The Government is rightly focused on balancing the books, ‘living within our means’ as the Chancellor puts it. Until the supply side reforms he is introducing induce the higher tax receipts he predicts, that means restraint on public spending. Already ministers are suggesting there are savings to be made in the welfare state. And so there are - but the last thing we should be doing now is cutting welfare just to make savings.

The UK spends far too much on what Tony Blair once called ‘the costs of social failure’: acute, remedial services designed to mitigate problems that should never have developed, whether crime, long-term unemployment, or the illnesses of lifestyle which swallow a quarter of the NHS’s budget. 

In justice, welfare and health we should not be asking how to reduce the supply of public services but how to reduce the demand for them. And that may mean shifting spending elsewhere, crucially into childcare and social care, and into the things often labelled ‘nice to have’ but which play an essential role in preventing social problems developing - like youth projects, or mental health services, or programmes to stop the cycle of reoffending or get the long-term unemployed into work. 

Funding these projects does not have to entail big new spending commitments in a time of extreme fiscal pressure. There are other options, including the billions available through the dormant assets programme, which should be used to create a great new endowment for local communities; or ‘outcome based commissioning’ where the work is funded by risk-taking investors and the taxpayer only pays them back on the evidence of results, out of the savings created for the public sector; or through mobilising the vast army of philanthropists, large and small - including you and me - who want to contribute to their communities. 

This is the real opportunity of social supply side reform. We need all hands on deck, and policy that supports families and communities - as well as economic reforms to create well-paid jobs in the places people live - can free up the man- and woman-hours that our neighbourhoods need. We need to devolve more power to local places, letting people take back control of their communities and encouraging the amazing spirit of responsibility and mutual aid that we saw during Covid-19 and in the Ukrainian refugee crisis. 

The true capacity of the UK is not in the balance sheets of the Square Mile but in our cities, towns and villages. As well as the reforms planned for the economic supply side, we need a social supply side revolution to sustain and empower local communities.