By Gill Westcott of New Prosperity Devon
HOW IT IS
Much of what we buy funds jobs elsewhere. There is nothing particularly wrong with that but people often want to support their local businesses and jobs. In a globalised economy it can be unclear where our money is going. Utilities such as water, and public transport, such as railways, are often privately owned and making profits for large multinational companies. Increasingly this is true of health services too. Through PFI contacts our taxes can be used to pay huge interest payments to private companies who built health facilities.
Local authorities often look to foreign investors to build employment opportunities. This can result in cities and regions bidding against each other to give multinational companies the best tax breaks and financial incentives. Jobs funded in this way mean that profits leave the area, and big firms can easily uproot and move elsewhere if they find places with lower wages, lower taxes and bigger incentives. Global supply chains develop which use unsustainable fossil fuels and can be disrupted by weather catastrophes and financial or health related crises. They also result in goods travelling long distances with higher environmental costs and climate emissions.
Local businesses often find it hard to raise loans for businesses, because banks prefer funding asset purchases, not for business ventures which are more risky.
HOW IT COULD BE
Councils, other institutions, and all of us can help to keep wealth circulating locally. Locally based businesses re-spend more of their earnings in the local economy, and they provide more employment per pound spent.
In Preston, Lancashire, when John Lewis pulled out of their city centre recovery plans during the financial crisis, the Council instead got together with the University, Police and NHS Hospital trust to explore diverting more of their ordinary spending to local businesses. They also helped develop co-operatives, which share their income more equally among the workers who own and democratically control their company. A more secure, resilient, locally based economy has grown; Preston was voted the most improved place to live in 2018.
In the US and many European countries, local and regional banks provide much more faithful and long term support to local businesses than UK banks do. Like old fashioned bank managers they share risk, rather than giving loans only on security based on assets.
HOW WE MAKE IT HAPPEN
Local authorities and institutions can:
- Review their biggest procurement contracts to explore the scope for re-localisation, buying where possible from local businesses which pay a living wage, offer training and use sustainable methods. This can include ‘insourcing’, councils running services themselves instead of putting them out to tender for private companies to profit from.
- Review their procurement processes and break down some larger contracts to allow smaller local firms to bid
- Review their use of assets and how these could be used to support community activities and enterprise
- Encourage and support the development of co-ops and social enterprises
- Support regional banks
Individuals can buy local, especially from local independent suppliers
Community organisations and charities can set up co-ops and social enterprises to meet local needs
Local businesses can benefit from local marketing (eg farmers markets), building relationships with customers, and where relevant bid for local institutional contracts, seeking help if they need it.
WHERE IT’S HAPPENING
Torbay, and more about Community Wealth Building;