THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

Economic deficit, prosperity surplus : The social revolution driving rising UK prosperity

Standing in Hull, it is hard to imagine the UK as the third-best deliverer of prosperity in the world. Walk through this northern city’s estates and you are struck by a deep-rooted poverty of prosperity. It is the least prosperous part of the UK; a city where children grow up without knowing aspiration and the elderly die having never seen much beyond the end of their street.

Yet, Britain stands out as a world leader in turning its wealth into prosperity. The Prosperity Index ranks it third for delivery and tenth overall. At the heart of this success is an aggressive programme of social reform that has seen delivery in areas like education rocket. Britain is not alone. Those countries that have seen prosperity grow despite a tumultuous economic path following the global financial crisis have done so by delivering on social progress. However, such progress has not touched all, and lost potential is prosperity lost too. If Britain can bring human flourishing to all, then her future is extremely positive.


At the economic heights before the financial crisis, the UK ranked ninth for its delivery of prosperity. Wealth per head today is not notably higher than in 2007. The wealth increase over the past decade in the UK has been around a third of that in the US, and just a seventh of that in Germany. Yet, with similar wealth, the UK is delivering far more prosperity, something not frequently seen among OECD countries.

Much has been made of Britain’s dogged economic policy and its strong growth in recent years, but the Prosperity Index does not point to notable economic success as the factor at the heart of the UK’s growing prosperity surplus.

Much has been made of Britain’s dogged economic policy and its strong growth in recent years, but the Prosperity Index does not point to notable economic success as the factor at the heart of the UK’s growing prosperity surplus. While scoring well in the Economic Quality sub-index, the UK’s surplus here has been shrinking despite record employment and comparatively strong growth. Rising non-tariff trade barriers and less effective anti-monopoly policy are to blame. So too in Business Environment, where the UK is a world leader, its competitive edge has been slipping.

Social progress is at the heart of the UK’s growing prosperity surplus

It is social progress, not economic success, that has driven the UK’s growing ability to turn its wealth into prosperity. Radical reforms, such as those in welfare and education, have sought to return responsibility to the individual. In Education, the UK has risen from 14th to sixth over the past decade. Policy reforms such as the mass extension of vocational education, improving access to good education through Free Schools, and raising the school leaving age have done much to strengthen Britain’s human capital and extend opportunity. Here the surplus has risen by 43 percent. In Health (ranked 20th), the UK’s surplus has risen by an impressive 176 percent, driven by rising satisfaction with personal health and improvement in key outcomes such as mortality and diabetes.

A rising surplus in Social Capital shows a nation whose communities are growing stronger and taking greater responsibility.

Alongside health and education, the UK is safer than it was ten years ago. Crime rates have fallen, people feel safer, and the terrorist threat is being contained. The UK has risen from 32nd in 2007 to 13th in 2016 in the Safety & Security sub-index. Prosperity has also been rising in the nation’s communities. Volunteering rates have risen from 23 percent ten years ago to 33 percent today. A rising surplus in Social Capital shows a nation whose communities are growing stronger and taking greater responsibility.

The prosperity payoff of social reform is seen elsewhere among countries which have increased prosperity with similar or even shrinking wealth. Finland, whose wealth is well behind 2007 levels, has seen prosperity rise over the past decade, predominantly as the result of improvements in Education, Personal Freedom, and Social Capital. Countries such as Germany, on the other hand, whose wealth today is far higher than in 2007, have seen progress in prosperity largely as a result of economic, not social, improvement.

Yet, prosperity still does not reach all

This development of UK prosperity through social reform over the past decade offers good prospects in the task, so far unachieved, of bringing prosperity to all. Perhaps the most striking aspect of UK prosperity delivery is the fact that such prosperity has been achieved, according to the UK Prosperity Index, without realising the potential of the whole population. In places like Hull, and elsewhere, people have been left behind.

Rural areas deliver greater prosperity surpluses than their urban neighbours. This ability to turn less wealth into more prosperity is the result of rural areas performing well in the delivery of life chances. Be it good education, opportunity, good health, strong community, or economic security, rural areas outperform the UK's cities.
Rural areas are more likely to be delivering more with less

The UK Prosperity Index points to a wholescale failure of urban areas to deliver prosperity with their wealth because they fail fundamentally on providing basic life chances – health, education, social support, opportunities – to their citizens. Rural areas, on the other hand, are flourishing. It also points to the power of communities themselves to turn things around. With social capital growing in the UK, the potential for this community transformation is growing too.

Britain’s prosperity is strong, and if new prime minister Theresa May is successful in delivering a country that “works for everyone”, it has no limits.

Alongside broadly improving health and education, the fundamentals are there. Using the UK Prosperity Index, policy-makers can see where prosperity has not yet reached and why. Britain’s prosperity is strong, and if new prime minister Theresa May is successful in delivering a country that “works for everyone”, it has no limits.

Competitiveness and a poverty of aspiration still limit UK prosperity

However, slipping economic competitiveness strikes a warning note, particularly given Britain’s new need to go it alone in a global economy. The ongoing capacity for wealth creation is important to the UK’s future, particularly in more deprived areas like Hull, whose economy was stripped of its major industry (fishing) when Britain joined the EU in the 1970s, from which many of the city’s social difficulties stem.

How has prosperity improved with changing wealth?

Nevertheless, if Britain can sit third for prosperity delivery when it is not delivering for a large part of its population, imagine what would be possible if it did. A nation that frees individuals to rise as far at their talents can take them is limited only by the ingenuity and aspirations of its people. Despite her success, Britain remains limited by an absence of aspiration. If the lost potential of those in Hull and others around the country who have been left behind by the UK’s rising prosperity can be realised, then Britain has a very prosperous future ahead.