The M Word: the long and the short of it

Ed Miliband’s speech wasn’t the only place for new policy ideas this week at the Labour Party Conference. The SMF’s M Word competition on Twitter has been collecting the best manifesto ideas in 140 characters. Our Labour conference competition closed yesterday and submissions ranged from education reform to income tax to online safety tests for children.

For our winner, we plumped for an idea that may be a possible solution to a perennial problem: how to help governments make effective decisions on investment in the early years when the rewards are so far away.

It is now bordering on a truism to advocate spending more on early intervention. Graham Allen’s report and now his foundation is building up a strong evidence base. The SMF’s own research into childcare showed that high quality settings can significantly reduce the attainment gap for the most disadvantaged. And, the topic came up again at an SMF event on ‘Fairness of opportunity’ with a clear consensus that prompt action in a child’s life could even out life chances for those from poorer backgrounds.

Yet, despite appearing an exposition of the obvious, governments rarely act on this evidence. Two things in particular stand in the way: politicians struggle to lift their sights above the immediate electoral cycle; and concern about the impact of borrowing on market confidence in UK Government debt has made them wary of risking the wrath of the bond markets for a benefit that may arise some fifteen years hence.

Social Impact Bonds offer one way of securing finance for interventions that pay off in the longer term – although these are likely to remain on the fringes of public services.

But, other options are worth consideration. First, as our M Word winner, the NPC’s Vicki Prout, proposed, engraining a more consistent appraisal of early intervention options and their payback could make consideration of early investment a conventional way of making policy decisions. We have quickly become used to assessing equality and gender. Why not this?

Second, parallels can be drawn between physical and human capital. Both the LSE Growth Commission and the Armitt Review have recently proposed establishing an independent OBR-like institution to make recommendations on the physical infrastructure requirements of the UK over a 20-30 year period. Such a move would elevate debate beyond the current electoral cycle, whilst offering a framework of external scrutiny to ensure that governments stick to the plans. There seems little reason why the same should not apply to human capital.

Third, this might open one more opportunity. As Dieter Helm lamented in a pamphlet for the SMF, ‘We have no accounts for the (sometimes declining) value of human capital.’ Such an account sheet would allow policymakers to understand more fully the implications for additional spending and spending cuts and shine a clearer light on the opportunity cost when we ignore opportunities for early intervention. Quite whether it will convince the bond markets (or nervous politicians) is another question – but we could at least convince ourselves as a starting point.


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