The Preston Model, which has seen the Lancashire town rise from the bottom 20 per cent of the deprivation index to be named the UK’s most improved city, has become the poster child for an insurgent economic approach known as “local wealth building”. This uses the levers of the local state to reorganise the economy away from neoliberalism and towards local economies rooted in social, economic and environmental justice.
While the programme’s success in Preston is obvious from the widespread interest it has received among policy makers, politicians and commentators, local wealth building is also being explored elsewhere to confront economic failure, social hardship, wealth extraction and environmental degradation.
In Manchester, the programme first began in 2008, pioneered by the Centre for Local Economic Strategies (CLES) and Manchester City Council. Together they grew the number of organisations based in the city that were competing and winning contracts from the city government by 50 per cent.
From this early work on procurement, local wealth building initiatives began to focus on the idea of “predistribution”, a counterpoint to the redistributive policies, such as ”inclusive growth”, a current zeitgeist among policy makers that advocates a weak form of redistributing wealth through taxes and benefits after the fact of its creation. Local wealth building instead aims to construct an inclusive economy where wealth is generated by and for all citizens. In doing so, it slays the neoliberal dragon of trickle-down economics and rebuilds wealth from the bottom-up rather than the top-down.
To achieve this, local wealth building follows a model based on “anchor institutions”, where local businesses and socially-focused enterprises outside the local area compete for commercial contracts from institutions such as housing organisations, universities, schools and hospitals. These institutions hold a unique position in the local economy, as they employ people, buy things, hold property and assets and are unlikely to relocate from the local area.
The Preston Model is a welcome indication that this anchor approach can work. But in places beyond Preston, this agenda has taken diverse forms; what unites these places is five central principles. These are:
- Plural ownership of the economy – deepening the relationship between the production of wealth and those who benefit from it. This means returning public services to direct democratic control by insourcing public goods and services. It’s also about developing cooperatives and locally owned or socially focussed enterprises in the public and commercial economy.
- Making financial power work for local places – increasing flows of investment within local economies by, for example, directing the funds from local authority pensions away from global markets and towards local schemes and community-owned banks and credit unions.
- Fair employment and just labour markets – working within large anchor institutions and their human resource departments to pay the living wage, adopt inclusive employment practices, recruit from lower income areas, build secure progression routes for workers and ensure union recognition.
- Progressive procurement of goods and services – developing a dense local supply chain of local enterprises, employee-owned businesses, social enterprises, cooperatives and other forms of social ownership that can provide goods and services to large local anchor organisations.
- Socially productive use of land and property – ensuring that local assets including those held by anchor organisations are owned, managed and developed equitably, so that local communities can harness any financial gain from these assets.
This movement is growing rapidly; CLES is working with Gateshead, Sunderland, Darlington, Hartlepool, Wakefield, Leeds, Calderdale, Kirklees, Oldham, Wigan, Salford, Birmingham, Lewisham, Wirral and Southampton to adopt local wealth building initiatives involving a range of anchors.
In London, Islington is deepening its progressive procurement practices and examining ways to tackle the rentier economy and speculative land and property ownership. In Gateshead, the council has a longstanding process of insourcing. In Wales the first Minister has made a commitment to ensure a programme of local wealth building, and in Scotland, local government is establishing a pilot linking local wealth building to a growth deal. Elsewhere, the NHS has adopted the anchor approach as part of its long term plan.
In the coming years as this movement becomes more embedded in regions across the UK, the “Gateshead model” or the “Wirral model” should achieve as much attention as the pioneers of Preston. The Labour Party has established a community wealth building unit and the ongoing work of the government’s inclusive economic partnership magnifies the local wealth building agenda. In the age of experiments, the lessons of Preston, Gateshead, Islington and elsewhere must become a new mainstream for all forms of local economic development.
Jonty Leibowitz is a researcher and Neil McInroy is the chief executive at the Centre for Local Economic Strategies (CLES), the think and do tank working on progressive economics for people and places.