Community economies: the quiet revolution

We need to find ways to reverse this. The economy must start working for the people rather than the other way around.

This is the thinking behind the community economy movement which is burgeoning in England and has been adopted as Labour Party policy. Successful models are already out there. Northern Ireland has great potential – and there is no reason why it cannot be done here.

This week  Development Trusts NI (DTNI) published a report Time to Build an Inclusive Local Economy. Developed with the  Centre for Local Economic Strategies, it maps out how this can be achieved.  

The report is inspired by what happened in Preston, Lancashire.   

A decade ago, Preston was in dire need of economic regeneration but, following the credit crunch in 2008, plans for re-development – based on significant inward investment - slowly withered.  Fresh thinking was required.

Instead of chasing further outside investment, the council decided to harness local spending, as far as possible, working with economists to come up with a model based on social value, which has seen the city thrive.

The model relies on several steps to work. One consists of getting major local enterprises - "anchor institutions" that are based in the area (such as hospitals, local public services, universities, sports teams, etc) to spend their money using the metric of social value, rather than simply lowest price.

Social value means considering the wider implications of the money spent. It tends to result in a lot more money being spent locally as that will then stay in the community's economy (and ultimately benefit these anchor institutions too). The local authority also provides funding to boost co-operative businesses in the area, and to deliver goods and services to the anchor institutions.

The idea has been taken up by other local authorities across England. One of the best explanations of how it could ultimately develop is provided by the Co-operative Party’s paper 6 Steps to Build Community Wealth

The DTNI report is inspired by this movement and lays out what needs to happen in Northern Ireland in order to create an economy that works for people here.

It defines the end goal as improving quality of life (often called wellbeing)  and is based on the unarguable premise that social, environmental and economic issues are interconnected. It would involve local agencies, organisations and businesses across all sectors supporting and developing each other.

It all sounds reasonable and achievable. But as the report points out: “A key aspect of building an inclusive economy is a change of mindset. We must think less about what we can attract or construct through external investment and more about what we already have and how we build from within.

This is crucial. We’re often led to believe that Northern Ireland’s economic destiny lies in attracting companies from elsewhere. But evidence suggests that if we were to focus instead on what we already have this would be more likely to retain and recirculate wealth within localities; create local economic multipliers; bring greater social returns, and build long-lasting prosperity.

The report lays out a route map to achieving this.

First it wants to see  more power at a local level. This includes rebalancing the relationship between government and local authorities.

For example less than 4% (£738m) of public spending in Northern Ireland came from local authorities in 2015/16, compared with 27% in Scotland and Wales.

This is also reflected in local authorities powers. Housing and education are just two examples of areas which the report would like to see devolved to a more local level, closer to communities

In addition it wants more resource for social and community enterprises so that they can “develop and strengthen their capacity to adapt to changing circumstances and environments.”

 It goes further:  “Social and community enterprises have developed great resources, expertise and knowledge to improve people’s lives. However, the continuing trend towards outsourcing services to large private companies and UK-wide charitable organisations is undermining local development. Public money leaves local areas before it is of benefit to communities.”

 The report also calls for a Community Rights Act which would give community organisation the right to bid for, buy and to challenge decisions around the use of public land and buildings.

It gives examples of anchor institutions: local councils, universities and colleges, health trusts and hospitals, housing associations, credit unions, education boards, schools. All of these have budgets with which they buy goods and services. It concludes:  “We should harness this spending power to buy from local and socially progressive businesses and create supply chains within communities. These institutions should also employ more people from poorer areas and make sure their land and property assets benefit the local economy.”

One great strength of Northern Ireland, according to the report, is the fact that proportionately it has more public sector resources than other parts of the UK and Ireland. And in a passage that will have great resonance within the community and voluntary sectors it adds: “However, commissioning and procurement practice is dominated by a risk averse culture and constrained by seemingly rigid protocols governing the management of public finance. Commissioning often does take account of local service user voices, but procurement practice tends to preclude them from delivering. Furthermore, there has been a move away from Service Level Agreements and grant-funded programmes in favour of competitive tendering. This favours private sector providers, with preference given to the most economically advantageous tender, not necessarily the one that offers greatest social value.”

Another issue of concern to the Third Sector is also identified – the short term nature of grants and contracts. Organisations living from hand to mouth in this way have no breathing space to become self-sustaining and social and community enterprises cannot grow to reach their full potential.

It is also inefficient – generating additional burdens on government departments through endless cycles of commissioning and procurement.

There is criticism of the government’s current focus on attracting on “privately owned investment with distant shareholders” and calls for local resources to support local activity.

It  also recognises the potential of Credit Unions as engines of the local economy. Credit Unions in Northern Ireland have significant surpluses but currently are unable to loan for social purposes  – instead they have to put these monies in banks. Removing the regulatory barriers would unlock this.

The document is well argued and thought-through. An exciting aspect is that although some of what is proposed would take legislation much of it can be progressed without delay. The people of Preston just got on with it, and Northern Ireland could too. The most important change needed is one of mindset – to reject the notion that wealth somehow “trickles down” when it clearly doesn’t. Instead we need to work together to build on what we already have.