Local Growth in an Age of Austerity

These aspirations go to the heart of the Labour vision of the project: a desire not just to create greater amounts of wealth, but to also build a more inclusive, accessible and cooperative economy that would tackle society’s diseases of despair.

Promoting local growth and maintaining vital services is an increasingly difficult challenge all Labour councillors are familiar with, and one felt no less keenly in England’s former industrial heartlands. Even before the age of austerity, these councils faced the growing ills of the post-industrial decline. But when added to these long-term local trends, austerity has greatly exacerbated the need for ambitious and effective councils, while only further constraining them.

Faced with declining private investment and decreasing capacity for direct funding, such councils are unable to rely on traditional growth models. These challenging conditions have, however, provoked innovative new approaches by some councils. The Preston Model, pioneered in the UK by its City Council in 2013, aims to find a new source of regeneration capital by encouraging reinvestment back into the local economy. Inspired by similar attempts in Cleveland, Ohio, council leaders approached quasi-public organisations, ranging from the police force, to the social housing association, and Lancashire County Council. These largely-publicly funded institutions agreed to increase their Preston and Lancashire procurement budgets as a proportion of their total spending, from a low base of just 5%. This retention of a greater proportion of public money in the local economy was designed to replace the seed funding that would ordinarily be sought from outside private investment or council spending. Through this, the Council hoped to harness a Keynesian multiplier effect, and spark a local regeneration that would more than offset the potentially greater prices of local service providers.

The scheme also aimed for more than a blind redirection of funds. Beyond the desire to see a growing economy, the participating councils agreed new procurement frameworks, which focussed not only on traditional value for money, but also the social value of their spending. These frameworks brought, among others, potential to reduce unemployment, inequality, and raise living standards into the procurement process, helping to ensure not just growth, but progressive growth. To drive this further and place a resolutely Labour stamp on the project, the council also hoped to kick-start new co-operatives, encourage the sale of businesses to employees rather than outside individuals, found local banks, and many other diversifying reforms to the business climate. These aspirations go to the heart of the Labour vision of the project: a desire not just to create greater amounts of wealth, but to also build a more inclusive, accessible and cooperative economy that would tackle society’s diseases of despair.

The project has since been markedly expanded, adding a local university, neighbouring city councils, and more. There have been notable successes: by 2015 spending on local Preston suppliers had doubled. The longer-term social effects are yet to be proven, however, and will prove the true test of the model.

The ingenuity of this plan offers a potent opportunity for Labour at the local level. We do not have to drearily march into local elections able to offer nothing but handling cuts more humanely than the Tories. While many voters may understand and accept this position, and while cuts are unavoidable, anyone who has campaigned in a local election knows voters are crying out for a more positive vision from their councils. Yet more importantly, this approach may finally offer a way to rebuild community spirit in ways beyond just the economic. By showing people that the work and money they put does make a difference, and can be drivers for local growth, we rebuild long-lost investment and faith in our communities. Labour, and Labour alone, can offer this when it works innovatively with its local businesses and institutions, and is ambitious about the role of councils in the local economy.

But this is not a replacement for a Labour government. The local business reforms have proved exceedingly difficult under the constraints of the local government settlement, and yet more ambitious attempts are far beyond councils’ current limits. While similar new approaches may provide a ray of hope for communities and local services in the age of austerity, they are no substitute for bringing it to an end.

 

Joe Adams is a Young Fabians member

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