Could Preston provide a new economic model for Britain’s cities?

Preston bus station. Image: Getty.

Could a blueprint for a self-sufficient local economy worked out by a Lancashire council struggling with poverty and austerity signpost the future for municipalities across England and Wales?

Preston City Council’s work towards developing an economic ecosystem rooted in co-operative principles informed elements of the programme on which Labour fought June’s general election. It’s also at the heart of a major new report, seeking to establish a philosophy to guide the party’s economic policy at local and national level.

The foundations of the Preston Model were laid in 2013, as the Labour-run council cast around for ideas to rebuild the economy of a city ranked in the bottom 20 per cent of the deprivation index, and facing the near-halving of its central government grant from £30m to £18m.

The council looked across the Atlantic to find a possible way forward. It found it in the example of Cleveland, a rust-belt city that has pioneered initiatives to consolidate and widen the circulation of wealth within its economic orbit.

Cleveland’s ’community wealth building’ project emphasises the role large institutions rooted in a municipality such as hospitals, airports, colleges, housing associations – and local authorities themselves – can play as ‘anchors’ around which regional economic ecosystems can stabilise and grow.

By allocating more of their spend budgets to local suppliers and producers, recruiting from the workforce on their doorsteps and incubating local businesses and community organisations, the anchors can keep wealth flowing in municipal economies.

The Cleveland philosophy overlaps with the Foundational Economy concept developed by Manchester University’s Centre for Research on Socio-Cultural Change (CRESC), which underlines the often overlooked importance of the ‘everyday’ economy. This is the backbone of the regional infrastructures that employ a third of the workforce in England and Wales, and encompasses sectors such as care, health, education, retail, hospitality and food processing.

The council worked with the Democracy Collaborative, a US consultancy closely associated with Cleveland’s reconstruction, and British think-tank the Centre for Local Economic Strategies (CLES) to identify anchors capable of bootstrapping Preston’s economy.

It found that, of the £1.2bn spent annually by major city institutions – including the city and county councils, the university, the constabulary, the hospital and the housing association – only a fraction went to Preston businesses and organisations.

The council worked with its partners to encourage the anchors they identified to reconfigure their spending patterns. A £600,000 printing contract tendered by the constabulary was kept in Preston, and the £1.6m council food budget was broken into lots and awarded to farmers in the region. Since 2013 the council has spent an additional £4m locally, up from 14 per ecnt of its budget in 2012 to 28% in 2016.

As the project has gathered momentum, Preston has established a social value framework to inform all aspects of the local procurement cycle, as well as a city wide credit union as part of a financial inclusion strategy.

Councillor Matthew Brown – Preston’s cabinet Member for  social justice and inclusion policy – says the council is working towards building a tightly integrated ecosystem of co-operative enterprises around the city’s anchor institutions. In this, it is following the example of Cleveland’s Evergreen Co-operatives network and Spain’s Mondragon federation:

“We’re trying to promote public ownership at a local level. So there’s the idea of establishing a community bank. There’s the idea of promoting credit unions and community development funds. There’s the possibility of using the council’s pension fund for investment in the local economy. We’re looking at establishing municipal energy partnerships. And there are possibilities around creating co-ops where there are gaps in the supply chain – we’re working with the university on that now.”

Preston’s move towards self-sufficiency has helped the city achieve the second biggest shift in its multiple deprivation index ranking between 2010 and 2015. It also beat Manchester and Liverpool to win recognition in the 2016 Good Growth for Cities index as the best city in north-west England in which to live and work, according to criteria including jobs, income, work-life balance, transport, the environment and the house-price-to-earnings ratio. Brown said:

“You can see it all comes together to form quite a powerful post-capitalist framework. This is very challenging to the economics we’ve had over the last 40 years, and it’s that cultural issue which is probably the biggest thing we need to break down.”

The council’s efforts to feel its way towards a robust co-operative economic framework have been the subject of studies by the CLES and the Co-operative Party, and soon gained the attention of the Labour leadership after Jeremy Corbyn was elected on a mandate to explore ideas for new economic models.

Shadow Chancellor John McDonnell chose Preston to deliver a major speech on the cooperative economy in early 2016, in which he declared an aspiration to extend principles of “decentralised ownership and democratised wealth” across regional economies and the wider national economy.


“I know John is very keen on how we can work together in future,” said Brown. “There are plans to roll out this kind of model nationwide, to get as many local authorities and senior councillors involved in it as possible.”

Elements of the Preston Model could be discerned in the party’s 2017 manifesto commitments to introduce new procurement requirements for national and local government suppliers, and to double the size of the co-operative sector by making funding available through national and regional investment banks and granting employees the ‘right of buyer of first refusal’ if the company they work for comes up for sale.

What’s more, Preston’s example is central to a new Labour report – Alternative Models of Ownership, to which Brown contributed – that explores possibilities for extending co-operative forms of economic organisation across the British economy, at the levels of the individual firm, municipalities and state owned enterprises.

The report foregrounds Preston as primary case study for “the development of ownership models which circulate wealth rather than extract it”. It proposes that anchor institutions might be identified across all English and Welsh cities, and where necessary created, through the relocation of national institutions – such as OFSTED or the lottery – outside the capital.

The report follows Preston’s example in proposing an employment charter obliging employers to consider local workforces when recruiting, and a procurement law requiring public bodies to support local suppliers. It also suggests that Preston’s exploration of the potential of community energy schemes and co-operatives might be rolled out nationally by giving councils a share of receipts from environmental taxes such as the Climate Change Levy.

And there are proposals for community wealth building zones that extend the enterprise zone principle to create spaces for the flourishing of place based co-ops, community and voluntary sector groups.

“The whole idea is to put more democracy into the local economy and also to create wealth and make sure it’s captured by the local community. I think that’s what’s caught the imagination,” says Brown. “I just feel that we’re at the beginning of creating a movement that, if we can get it right, could be quite transformative.”

In today’s febrile political climate, with another election possible as Theresa May’s government seeks to negotiate Brexit with the most fragile of Parliamentary advantages – and with Labour ahead in the polls – Brown’s thesis may be tested sooner rather than later.

 
 
 
 

As EU funding is lost, “levelling up” needs investment, not just rhetoric

Oh, well. Image: Getty.

Regional inequality was the foundation of Boris Johnson’s election victory and has since become one of the main focuses of his government. However, the enthusiasm of ministers championing the “levelling up” agenda rings hollow when compared with their inertia in preparing a UK replacement for European structural funding. 

Local government, already bearing the brunt of severe funding cuts, relies on European funding to support projects that boost growth in struggling local economies and help people build skills and find secure work. Now that the UK has withdrawn its EU membership, councils’ concerns over how EU funds will be replaced from 2021 are becoming more pronounced.

Johnson’s government has committed to create a domestic structural funding programme, the UK Shared Prosperity Fund (UKSPF), to replace the European Structural and Investment Fund (ESIF). However, other than pledging that UKSPF will “reduce inequalities between communities”, it has offered few details on how funds will be allocated. A public consultation on UKSPF promised by May’s government in 2018 has yet to materialise.

The government’s continued silence on UKSPF is generating a growing sense of unease among councils, especially after the failure of successive governments to prioritise investment in regional development. Indeed, inequalities within the UK have been allowed to grow so much that the UK’s poorest region by EU standards (West Wales & the Valleys) has a GDP of 68 per cent of the average EU GDP, while the UK’s richest region (Inner London) has a GDP of 614 per cent of the EU average – an intra-national disparity that is unique in Europe. If the UK had remained a member of the EU, its number of ‘less developed’ regions in need of most structural funding support would have increased from two to five in 2021-27: South Yorkshire, Tees Valley & Durham and Lincolnshire joining Cornwall & Isles of Scilly and West Wales & the Valley. Ministers have not given guarantees that any region, whether ‘less developed’ or otherwise, will obtain the same amount of funding under UKSPF to which they would have been entitled under ESIF.


The government is reportedly contemplating changing the Treasury’s fiscal rules so public spending favours programmes that reduce regional inequalities as well as provide value for money, but this alone will not rebalance the economy. A shared prosperity fund like UKSPF has the potential to be the master key that unlocks inclusive growth throughout the country, particularly if it involves less bureaucracy than ESIF and aligns funding more effectively with the priorities of local people. 

In NLGN’s Community Commissioning report, we recommended that this funding should be devolved to communities directly to decide local priorities for the investment. By enabling community ownership of design and administration, the UK government would create an innovative domestic structural funding scheme that promotes inclusion in its process as well as its outcomes.

NLGN’s latest report, Cultivating Local Inclusive Growth: In Practice, highlights the range of policy levers and resources that councils can use to promote inclusive growth in their area. It demonstrates that, through collaboration with communities and cross-sector partners, councils are already doing sterling work to enhance economic and social inclusion. Their efforts could be further enhanced with a fund that learns lessons from ESIF’s successes and flaws: a UKSPF that is easier to access, designed and delivered by local communities, properly funded, and specifically targeted at promoting social and economic inclusion in regions that need it most. “Getting Brexit done” was meant to free up the government’s time to focus once more on pressing domestic priorities. “Getting inclusive growth done” should be at the top of any new to-do list.

Charlotte Morgan is senior researcher at the New Local Government Network.