We believe that most communities in 21st century Britain have the skills, resources, and wherewithal to meet their own needs if their various stakeholders are connected in the right ways. 

We think that, where these connections do not work properly now, it is at least partly due to a financial system which emphasises the efficient use of capital – maximising financial returns – over the creation of new economic and social value. 

Company management, particularly those working for firms that have external shareholders, is incentivised to focus on delivering profits and maximising return on capital. In this context, capital is usually defined in a very narrow way – financial assets, manufactured capital, and inventory. Or, more colloquially, money, machines and materials. There is no place in conventional accounting for recognising the overall value-creating capability of a company’s workforce or of citizens in society. As a result, human capital is often viewed in accounting terms as a cost to be minimised rather than as an asset, the value of which can be enhanced by appropriate investment in skills, knowledge, and experience. 

This means that many individuals get left behind in a system which is constantly seeking to drive down cost, while innovations that could significantly improve social outcomes or generate new growth struggle to get off the ground due to lack of funding. There is a direct cost to society both in monetary terms through the higher cost of benefit claims and loss of tax revenues, and socially as those who find themselves at the bottom end of the labour market or excluded from it altogether can become stuck, sometimes over multiple generations, with disastrous consequences for their personal well-being and their ability to contribute to society. It results in an economy which is operating at less than its full potential and increasing social need. 

And yet, studies that have attempted to account for the value of human capital, including by the Office of National Statistics, show that it amounts to around 70% of the total asset base of the UK economy. If the key decisions about how to allocate scarce resources are being made based on less than 1/3rd of the economy (actually it is even less than that because no account is taken of the value of natural assets either) then it perhaps should not come as a surprise that many of those decisions turn out to be less than optimal for society in general. 

Only by treating individuals as the human beings that they are, with capabilities to be achieved and potential to be reached when provided with appropriate investment and support, will we be able to aspire to an economy that optimises return on all forms of capital – financial, fixed, natural, human, and social. 

It is this more rounded approach which Seebohm Hill seeks to achieve. 

What is needed to reach this goal are new ways for businesses and communities to connect for the mutual benefit of all. A change in attitudes and behaviour for everyone to be given the opportunity to realise their potential. A realisation that any business is a member of the community in which it operates, and it is in everyone’s interests that all members of that community can acquire the skills they need to seize opportunities and to shape their own destiny. 

The influence of a financial system which focuses on maximisation of return on capital, narrowly defined as financial and manufactured capital (i.e., those components that can easily be measured using monetary metrics) has led us to a growing mistrust of market forces and widening inequalities in income and wealth. It has failed to properly consider the need to ensure adequate “returns” on human, social and natural capital. Funding of growth opportunities by a system which focuses exclusively on the narrowly defined version of capital has meant that we now face a severe and rising problem of underinvestment in human and social capital, and we lack an effective way of accounting for depletion of natural capital. As a result, we face growing inequalities in wealth and income and a need for radical changes in behaviour if we are to protect our natural resources for future generations. 

We need to ensure that we get the best out of all resources at our disposal if our society is to thrive in a healthy and sustainable way. That means using our savings to invest in human, social and natural capital as well as financial and tangible assets.  

By understanding the limitations of our current system, applying an analytical approach to understanding what is required and mobilising the resources of those who have benefited from a system which, it is now clear, is not designed to meet the most pressing needs of society, Seebohm Hill will deliver new and more effective ways of allocating capital to the enterprises that are able to use it in the best way for society as a whole.