After a decade of austerity, Hartepool is looking to Preston for a new economic model

Hartlepool. Image: Getty.

Since the Lancashire city of Preston was named “most improved urban area” last November, the “Preston Model” has been attracting excitement in the Labour party and local government circles. Before this accolade, The Economist had reported from the city in October – labelling it “Jeremy Corbyn’s model town” and an “unlikely laboratory for Corbynomics”.

In the spotlight was Preston’s new local economic programme, led by the Labour-run city council and pioneered by its leader Matthew Brown, who my colleague George Eaton interviewed last year

The idea is called “community wealth building”, and basically sets up the local economy to keep as much money local as possible. It came about in Preston when a planned £700m city centre redevelopment fell through through in 2011. After this, the council decided to build an alternative growth model, based on local procurement, rather than its usual approach of chasing inward investment from large multinationals, which it argues leads to money leaking from a local area.

Beginning in 2013, and with help from the Centre for Local Economic Strategies think tank, Brown persuaded six “anchor institutions” – bodies tied to an area, like universities, colleges, housing associations, which cannot relocate – to spend their procurement budgets on Preston-based businesses, rather than outsourcing to companies headquartered in other parts of the country.

These six local public bodies went from spending £38m in Preston in 2013 to £111m by 2017. The proportion of their spending in Lancashire doubled from 39 per cent to 79 per cent. Preston city council has doubled the money it spends locally: from 14 per cent of its budget in 2012 to 28 per cent in 2016. None of this increases local spending – it simply redistributes it.

Preston city council became the first living wage employer in the north, founded a not-for-profit energy firm, established a credit union, and encourages local businesses to become co-operatives and public bodies to deal with more co-operatives. There are plans for a Lancashire-wide community bank, too.

These changes came long before Jeremy Corbyn became leader, but shadow chancellor John McDonnell has aligned himself with Preston’s innovation. He has established a Community Wealth Building Unit last February to export the Preston Model to other areas, announced a proposal for worker “ownership funds” in private companies at the last Labour conference, and featured Preston’s story in a pamphlet entitled “Alternative Models of Ownership” ahead of the 2017 election.

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Now the north east coastal town of Hartlepool is in touching distance of being next in line to the Preston Model. The Hartlepool Fabians – set up by members of the local Labour party in early 2018, and including prospective councillors, sitting councillors and trade unionists – have consulted Preston’s Matthew Brown and produced a fully fleshed-out policy proposal for a “Hartlepool Model”.

They are part of a majority of Hartlepool Constituency Labour Party delegates –described by one councillor, since resigned, as “power crazy individuals”- who want to see a change of leadership on the Labour-controlled council, and attempted unsuccessfully to oust Hartlepool Borough Council’s leader Christopher Akers-Belcher in a vote of no-confidence last November.

They have, however, deselected four sitting councillors, including the mayor, and expect their faction to dominate the council after the local elections in May, so that they can carry out their plan.

A23-page document entitled “The Hartlepool Model of Community Wealth Creation” has not yet been published, but has been seen by the New Statesman. It posits that residents’ prospects will be improved by “inward-facing” investment and procurement, and looks to “forge a future in which they benefit fully from as much of the town’s economic activity as possible”.

The plan includes approaching private “anchor institutions” like the offshore engineering company Heerema, Camerons Brewery and electronics manufacturer Stadium Group PLC to alter their procurement practices, and to group smaller firms together into “purchasing blocks”. It also outlines how to encourage more worker-owned firms, suggesting favourable business rates, a town-wide credit union and a community bank.

The paper reveals the number of unoccupied commercial and industrial properties in the town (1,727 and 430, respectively) available for use. And it proposes using Hartlepool’s “heritage and identity” as a unique selling point to attract entrepreneurs, partly by shifting more investment into arts and culture in the town, partly by promoting other positives: “Low rents, cheap costs of living, the inherent benefits of coastal life: all could be well-marketed to attract a new breed of skilled professional.”

Although it will be a “gradual shift”, the paper’s authors conclude that, “real and rapid gains can be made: through no additional expense or expenditure, money can be injected into Hartlepool’s economy, almost immediately”.

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Hartlepool has been hit hard by austerity, with spending levels slashed by 33 per cent from 2010-17 – the 24th highest in the country – and central government funding expected to fall by 45 per cent by 2020. Seaside towns are among the most deprived communities in the UK, with Hartlepool one of ten local authorities in Great Britain with the highest unemployment rate in 2017.

This is why the new economic plan is “essential”, according to a local English teacher and Labour member Gary Wootton, who founded the Hartlepool Fabians last year. “Hartlepool – typical of northern, coastal, post-industrial and predominantly white working-class towns – has been neglected during decades of economic policy focused on generating wealth elsewhere,” he tells me.


“Austerity politics and London-centric economic policy is shortening lives in places like Hartlepool. They must be afforded the opportunity to attempt innovative economic models, premised on cooperative models of ownership and socially responsible corporate behaviour.”

Wootton, who hopes the council will pursue the plans after new councillors are elected in May, calls the model “pragmatic socialism”. He adds that it took its inspiration from the “Cleveland Model” in the US – a pioneer for this type of economic programme, in which an industrial-scale laundry was set up as a co-operative in 2009 – as well as Preston.

Globally, from the American rust belt to the north east of England, it looks as if in-sourcing, competitive co-operatives and democratising local economies are gaining traction as a response to inequality and decline.

From a British political perspective, the Hartlepool story is unusual, as its local Labour party’s attempted coup is not a result of Momentum or a surge of Corbynite members. Here, it’s the Fabians making life difficult for their council. The Preston Model began before the term “Corbynomics” existed, and the Hartlepool Model policy proposal eschews that description:

“It moves beyond dominant Labour contemporary thought, and builds on an under-developed aspect of Ed Miliband’s proposals, reflecting the very real potential that public procurement has as a means of promoting and furthering social justice.”

Hartlepool will, however, provide the Labour leadership with more ammunition for its ideas of radicalising local economies.

Hartlepool Borough Council has been approached for a response.

UPDATE

A day after it was informed about these plans, a Hartlepool Borough Council spokesperson told me that the council itself has been exploring changes to its economic model, working with the Centre for Local Economic Strategies think tank that helped develop the Preston Model.

They told me: “The Council and Hartlepool’s Health and Wellbeing Board is working with the Centre for Local Economic Strategies to further develop ways in which we can use public sector spending to invest in our local economy.”

There are no further details forthcoming, but it seems pressure from local activists as well as inspiration from Preston and elsewhere means Hartlepool is the place to watch for the next “laboratory for Corbynomics”.

This article first appeared on our sister site the New Statesman.

 
 
 
 

“Without rent control we can’t hope to solve London’s housing crisis”

You BET! Oh GOD. Image: Getty.

Today, the mayor of London called for new powers to introduce rent controls in London. With ever increasing rents swallowing more of people’s income and driving poverty, the free market has clearly failed to provide affordable homes for Londoners. 

Created in 1988, the modern private rented sector was designed primarily to attract investment, with the balance of power weighted almost entirely in landlords’ favour. As social housing stock has been eroded, with more than 1 million fewer social rented homes today compared to 1980, and as the financialisation of homes has driven up house prices, more and more people are getting trapped private renting. In 1990 just 11 per cent of households in London rented privately, but by 2017 this figure had grown to 27 per cent; it is also home to an increasing number of families and older people. 

When I first moved to London, I spent years spending well over 50 per cent of my income on rent. Even without any dependent to support, after essentials my disposable income was vanishingly small. London has the highest rent to income ratio of any region, and the highest proportion of households spending over a third of their income on rent. High rents limit people’s lives, and in London this has become a major driver of poverty and inequality. In the three years leading up to 2015-16, 960,000 private renters were living in poverty, and over half of children growing up in private rented housing are living in poverty.

So carefully designed rent controls therefore have the potential to reduce poverty and may also contribute over time to the reduction of the housing benefit bill (although any housing bill reductions have to come after an expansion of the system, which has been subject to brutal cuts over the last decade). Rent controls may also support London’s employers, two-thirds of whom are struggling to recruit entry-level staff because of the shortage of affordable homes. 

It’s obvious that London rents are far too high, and now an increasing number of voices are calling for rent controls as part of the solution: 68 per cent of Londoners are in favour, and a growing renters’ movement has emerged. Groups like the London Renters Union have already secured a massive victory in the outlawing of section 21 ‘no fault’ evictions. But without rent control, landlords can still unfairly get rid of tenants by jacking up rents.


At the New Economics Foundation we’ve been working with the Mayor of London and the Greater London Authority to research what kind of rent control would work in London. Rent controls are often polarising in the UK but are commonplace elsewhere. New York controls rents on many properties, and Berlin has just introduced a five year “rental lid”, with the mayor citing a desire to not become “like London” as a motivation for the policy. 

A rent control that helps to solve London’s housing crisis would need to meet several criteria. Since rents have risen three times faster than average wages since 2010, rent control should initially brings rents down. Our research found that a 1 per cent reduction in rents for four years could lead to 20 per cent cheaper rents compared to where they would be otherwise. London also needs a rent control both within and between tenancies because otherwise landlords can just reset rents when tenancies end.

Without rent control we can’t hope to solve London’s housing crisis – but it’s not without risk. Decreases in landlord profits could encourage current landlords to exit the sector and discourage new ones from entering it. And a sharp reduction in the supply of privately rented homes would severely reduce housing options for Londoners, whilst reducing incentives for landlords to maintain and improve their properties.

Rent controls should be introduced in a stepped way to minimise risks for tenants. And we need more information on landlords, rents, and their business models in order to design a rent control which avoids unintended consequences.

Rent controls are also not a silver bullet. They need to be part of a package of solutions to London’s housing affordability crisis, including a large scale increase in social housebuilding and an improvement in housing benefit. However, private renting will be part of London’s housing system for some time to come, and the scale of the affordability crisis in London means that the question of rent controls is no longer “if”, but increasingly “how”. 

Joe Beswick is head of housing & land at the New Economics Foundation.