Neil McInroy

Chief Executive, Centre for Local Economic Strategies

Grace Brown

Researcher, Centre for Local Economic Strategies

The rise of community wealth building presents an opportunity for local authorities – working alongside other anchor institutions – to lead the way in creating economies that work for local people.

A progressive approach to procurement is central to this agenda – but it does not stop there. Community wealth building is a suite of activities which seeks to reorganise the local economy and build greater levels of economic and social justice.

 

Our economies are failing too many people. Four million workers in the UK live in poverty. Life expectancy between rich and poor is widening. Between April 2018 and March 2019, 1.6 million three-day emergency food parcels were supplied to people in crisis – with more than half a million of these going to children. At the same time, climate catastrophe looms, bringing with it an urgent need to decarbonise. Amongst this, local economic development is locked into a narrow frame, with a tight focus on economic growth through inward investment and a small set of industrial sectors.

Some parts of our economy are performing well in terms of overall economic growth and GDP, attracting inward investment, with property-led development and new spaces of consumption. However, this is the exception rather than the rule, and social ills persist in these places too. In Britain, 52% of our wealth is held by the top 10%, and the Sunday Times Rich List revealed that just 10 people in the UK have a combined wealth of £143.6bn. This figure is staggering on its own but becomes a damning indictment of the state of the current economic system when considering that the UK’s deficit in 2009, used to justify the subsequent decade of austerity, was just £50bn.

However, the rise of community wealth building (CWB) represents an antidote for this local economic development which has lost its way. It represents an opportunity for local authorities, alongside other anchor institutions, to lead the way in driving improvements to create more socially just economies that work for communities and local people.

Community wealth building is practical strategy and action. Instead of narrowly focussing on redistributing some growth “after the fact” of its creation, it seeks to restructure the composition of the economy itself so that the production of wealth is widely held, shared and democratised. In doing so, it represents a fundamental challenge to how wealth is presently conceptualised and used under market liberalism.

Work by the Centre for Local Economic Strategies has been at the vanguard of the community wealth building movement in the UK and Europe since 2006. We’ve been working in partnership with a number of national and regional governments, local authorities and other local anchor institutions to develop this agenda.

Anchor institutions are large organisations which are often tied to a place by their mission, histories, physical assets and local relationships. Examples include local authorities, NHS Trusts, universities and large local businesses, housing associations and the combined activities of the community and voluntary sector.

1. Anchor purchasing

There are five principles of community wealth building, the first of which is concerned with anchor purchasing. Procurement is one aspect of community wealth building, as it is a means through which greater local economic, social and environmental benefits can be achieved for local places and people. As organisations with large annual budgets, local authorities can have a significant impact on their local economies by harnessing the power of their spend.

Community wealth building is practical strategy and action. Instead of narrowly focussing on redistributing some growth “after the fact” of its creation, it seeks to restructure the composition of the economy itself.

Community wealth building promotes the progressive procurement of goods and services. By adapting their procurement processes and decision making, anchor institutions can create dense local supply chains and ecosystems of local enterprises, SMEs, employee-owned businesses, social enterprises, cooperatives and other forms of community ownership.

This is important because these types of businesses are more likely to support local employment and have a greater tendency to recirculate wealth and surplus socially and locally.

CLES’ work with Manchester City Council over the last 10 years has been trailblazing in shifting the way in which a local authority undertakes procurement. Over 5,000 jobs have been created, 61.7% of procurement spend is now with SMEs, and 71.3%, or £307 million, of spend in 2017/18 was spent with Manchester-based organisations.

However, while procurement is a powerful way in for anchors such as local authorities, community wealth building is not simply about increasing local spend. Rather, community wealth building is a suite of activities which seek to socialise the economy, as captured in the four equally important remaining principles.

2. Fair employment and just labour markets

The second principle of community wealth building is fair employment and just labour markets.  Often the biggest employers in a place, the approach anchor institutions take to employment can have a defining effect on the employment prospects and incomes of local people. Working within human resource departments to stimulate the local economy through progressive employment practices – such as but not limited to the adoption of living wage policies – and local labour market activities has proved a powerful tool. Refocussing the purchasing of anchors to only those suppliers who adopt the above progressive workplace practices is also key.

3. Local land and property assets

The third principle is progressive use of anchor local land and property assets. The assets owned by anchors represent a base from which local wealth can be accrued through equitable forms of ownership, management and development. Through a community wealth building approach, these assets are owned and managed in ways which ensure that they generate wealth for local citizens, rather than becoming enclosed by private interests.

The goal here is not simply for a local authority or anchor institution to “own more land”, but instead to ensure that they land the do own is run by and for the people. This can be understood through the concept of “the commons” – the idea that the land held by public institutions is owned by all of us, together. To achieve this, public land owners should develop governance and management structures where communities can take direct control of common assets, for example through transferring under-utilised assets to Community Land Trusts, or working through Public-Commons Partnerships. Though new to the UK, they are now beginning to be explored by CLES in locations such as Wirral.

Public-Commons Partnerships devolve power downwards and outwards. They can be used by the local state to engage citizen groups to get involved in the governance and management of municipal assets at every level. This can be seen with the Public-Commons Partnership developed in 2012 by the town of Wolfhagen, Germany. The municipality and a new cooperative became joint stakeholders in the town’s energy utility. This meant that both the ownership and the decision-making process of the town’s energy infrastructure was distributed outwards, with the municipality acting as a partner that guaranteed collective forms of decision making and participation over both assets and surpluses.

By advancing a “commons” approach to public land and assets, anchors can ensure that our shared buildings, parks, and other land holdings help to create good local economies, ensure sensible environmental stewardship, and advance social justice.

4. Plural ownership of the economy

The fourth principle is plural ownership of the economy. In this, the aim is to rebuild the connection between the people and the places that create wealth and those who benefit from it. We know that locally owned or socially minded enterprises are more likely to employ, buy and invest locally. Thus, community wealth building promotes various models of enterprise ownership, include public sector insourcing, municipal enterprises, worker ownership, co-operatives, community ownership and local private ownership. These models enable wealth created by users, workers and local communities to be held by them, rather than flowing out as profits to shareholders.

Local enterprises, SMEs, employee-owned businesses, social enterprises and cooperatives are more likely to support local employment and have a greater tendency to recirculate wealth and surplus socially and locally.

In Preston, for example, the council worked closely with academics at University of Central Lancashire (UCLan) to advance the cooperative sector in the city, establishing the Guild Cooperative Network and Preston Cooperative Development Network.

These initiatives have been helpful in developing worker owned cooperatives in the catering, tech, and digital sectors – for example, the food cooperative The Larder. Furthermore, UCLan, Preston City Council and Mondragon Corporation (a federation of worker owned cooperatives in the Basque Country region of Spain) will provide the training, business support and access to start-up finance to generate growth of cooperatives in the city.

5. Making financial power work for local places

The fifth principle is making financial power work for local places. Community wealth building seeks to increase flows of investment within local economies. It does this by harnessing the wealth that exists locally, rather than by seeking to attract national or international capital. For example, local authority pension funds are encouraged to redirect investment from global markets to local schemes, mutually owned banks are supported to grow, and regional banking charged with enabling local economic development are established. All of these are ideally placed to channel investment to local communities while still delivering a steady financial return for investors.

For example, through the Community Savings Bank movement there are plans to set up 18 regional banks with significant plans afoot to build a Lancashire Bank and Avon Mutual bank in the West of England. Furthermore, a number of local government pension schemes are already ensuring that some of their investments are used for local investible opportunities.

The Preston Model has become the poster child for community wealth building, with the Lancashire town rising from the bottom 20% of the deprivation index to be named the most improved city in the UK. However, the movement is growing rapidly and now extends far beyond Lancashire.

From North Ayrshire to North East Lincolnshire, Belfast to Southampton, and Wakefield to Islington, CLES are working with dozens of areas across the UK who all have a desire to reorganise the local economy and build greater levels of economic and social justice.

Community wealth building does this through practical action which is also fundamentally disruptive of the economic status quo.

 

Keep it Local is brought to you in partnership with Lloyds Bank Foundation for England and Wales which specialises in funding small, locally based charities tackling complex social problems.

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