The social mobility penalty

Think tank: Onward

Author(s): Angus Groom; Adam Hawksbee

August 10, 2023

This report from UK think tank Onward looks at how local government funding misses areas with fewer opportunities.

Grants to local authorities are targeted on deprivation, missing parts of the country that might be more affluent overall, but have some of the lowest levels of social mobility. Inner-city boroughs are the winners while smaller towns and rural areas are missing out. There is a “social mobility penalty”: after taking deprivation into account, an area in the top decile for social mobility receives 50% more in Whitehall grants than an area in the bottom decile. The current funding formula is blind to social mobility. It explicitly targets funds towards areas with higher deprivation. This is an important measure, as these areas have high levels of need and their services may be more expensive to provide. But basing grants on any single measure can ignore the broader picture. Mostly, deprivation and social mobility align. But some local authorities with low levels of deprivation face entrenched low social mobility while areas with high deprivation are extremely socially mobile. The Vale of White Horse and South Derbyshire see low deprivation but also very low levels social mobility, whereas Hackney, while it sees higher deprivation, also has very high social mobility. We have calculated two alternative funding arrangements: Social Mobility Model: This model removes the deprivation target in funding and reverses the social mobility penalty, targeting funding towards low social mobility areas. But it does so at the expense of more deprived areas which arguably need a greater than average allocation of funding. Balanced Model: Targets funding to high deprivation and low social mobility areas in equal measure – ensuring that both measures are taken into account, addressing poverty while also boosting opportunity.