There is a way to boost economic growth without spending money

Independent

3 days ago

Repeatedly, we hear Keir Starmer and Rachel Reeves are putting pressure on ministers and departments to generate ideas for economic growth.
So, here is one: the third sector. Start using the civil society, as it's also called, to its full potential, to drive the economy. A new report from the Gradel Institute of Charity at Oxford University, A Third Way of Doing Growth, makes a persuasive case for a fresh look at this frequently ignored national resource.
Research by Pro Bono Economics for the study suggests the third sector creates at least £39.5bn of economic value a year if volunteer hours are factored in – and well over £100bn if the full economic contribution by the sector is assessed. Adds the report: 'Statistical evidence also shows that there are many persistent societal challenges that the third sector can often tackle more effectively (and therefore more cost-efficiently) than the public or private sector alone.'
So, a win-win. Stephen Bubb, executive director of the Gradel Institute and a former head of the charity leaders' representative body, Association of Chief Executives of Voluntary Organisations, argues that a huge opportunity is being missed. 'The government should think about the third sector and how they can harness its energy and strength,' he says.
Bubb said similar to Tony Blair in his third term as prime minister. The result was the appointment of Ed Miliband as the first third sector minister and a white paper. As with many such initiatives, it was promptly forgotten as the government changed.
It was resurrected, of sorts, under David Cameron with his 'big society' push. 'Cameron got the point about how civil society could be used more,' says Bubb, 'but he tried to implement it at the same time as the austerity programme.' As a result, it never took off.
What is different this time is that Labour are desperate for something new that does not involve the spending of vast sums of public money. The report makes a few key recommendations.
Firstly, deliver better social business models for social care. Currently, the market is dominated by private firms, which are mostly extractive, putting little back, taking out their profits. New businesses mean new jobs, new tax revenues, and significant net gains for local economies.
Secondly, focus on prevention to reduce crisis management. A lot of the focus in the third sector is on assisting people once they are in crisis. 'The prisons are full,' says Bubb. 'The state is hopeless at rehabilitation. Charities are good at it, they know what they are doing. Prisoners leaving and going into jobs is seeing them making a positive contribution to society, to the economy. Charites are better at helping them in securing work than the state. It's the same with mental health – the charities' record in this area is also much better.'
Rebuild social connection to drive social mobility. A decline in investment in public social infrastructure, combined with Covid and the rise of social media, has led to 'a crisis of social connection in the UK – one of the most important factors in social mobility and economic inclusion,' the report says. The problem is especially acute among the nearly 1 million young adults not in employment, education, or training (Neets). 'The most effective means to engage this cohort is through charitable and voluntary institutions which – through community-based approaches and one-to-one engagement – have a proven ability to connect with those most distant from society.'
Help government rewire delivery of public services. Starmer has talked about his ambition for a 'complete rewiring of the British state' to better serve the needs of the people. 'By involving the third sector in this endeavour, government has enormous potential to move away from for-profit commissioning to innovating services built around people's real-life needs and a far greater focus on rewarding organisations based on the outcomes achieved.'
To that end, they suggest creating a 'Civil Society Satellite Account' in the national accounts, so there is clarity as to the third sector's full value (similar to how tourism and other sectors are treated). Sixteen countries already do this, but not the UK.
They also recommend opening up public sector procurement to the third sector to transform service delivery. Of the £350bn a year that the government spends on procurement, only £21bn is administered by the third sector, meaning their skills, abilities and perspectives are simply not being efficiently deployed.
Other suggestions include: building a national programme of volunteering, aimed particularly at those 18-25 Neets; and creating innovative partnerships to rebuild the social infrastructure critical for inclusive growth.
As Bubb says: 'It is not so much a policy shift but the better, more focused use of an enormous resource.' It also plays to Labour ideology.
Put like that, you do wonder what Starmer and Reeves are waiting for.