Hard times require a hardwiring of economic change

The economic debate in Britain has long been preoccupied with puzzles over stagnant productivity and anaemic growth. But all this consternation masks the real problem: that the choices we make about how our economy operates systematically generate inequality and poverty.

Under our current model growth does not benefit everyone

Take Greater Manchester. The city region’s economy has doubled in size over the last 25 years, and in the last decade, the most affluent quarter of households have got a lot wealthier. Across Greater Manchester, the average wealth of residents (including property) is £84,400 whilst the eleven richest individuals have a combined wealth of over £9.3 billion. The gap between poorest and wealthiest in the city is growing; in 2010/11 the gap between median and mean wealth was £108,000 whilst now it is £147,000. A third of the city region’s children live in poverty, and there are 16,000 live applications for social housing.

If recent history teaches us anything it is that, even when growth is achieved, it doesn’t automatically benefit everyone; indeed, it can go alongside life getting worse for many. The problems are plainly structural rather than cyclical, and yet the Government offers nothing but piecemeal mitigation: a bewildering range of special funds targeted at geographies of need in specific thematic areas such as town centres and transport. We shrink from preventing harm at source, and instead merely compensate for harm once it has happened. To make matters worse, whatever relief is available pales into insignificance when compared with the 27% real-terms cut in core spending power of local government since 2010.

There are inspiring examples of innovation

We need a wholesale change in our economic model, rewiring it so that it generates good lives instead of growth for the few and inequality for many. To do this we need to think about wealth differently: how we accumulate assets in the first place, and who has the chance to own them, is just as important as efforts to redistribute wealth after the fact. Many are already beginning to make the mental switch required: local councils, metro mayors and the NHS to name but a few. These ‘anchor’ organisations have been quietly getting on with retrofitting our economic system with a healthier logic, despite working under extreme pressure with desperately scarce resources.

Take the I Can project in Birmingham, for example. Faced with a recruitment crisis, the local NHS has worked with partners via an anchor network, including a housing association in the city’s east, to rethink their whole recruitment pipeline. The starting point for filling open roles is no longer adverts or word of mouth amongst those already in the know. Instead it has become an active process reaching across an entire community where decent jobs are in scarce supply. The old 17-page application form has been replaced by a simple expression of interest and the formal interview with a chat over a coffee. By making these changes, I Can supports unemployed people in the most disadvantaged communities into entry-level NHS careers. Not only does this help loosen the grip of poverty on people’s lives but, over time as workers gain experience, it builds a more capable labour force, not only for the public sector but for the private sector too.

Or consider Manchester, where seemingly dry reforms to the Council’s procurement process are sparking a quiet revolution. The town hall is using their social value framework to raise the standards of businesses, both as local employers and as partners of other businesses in their supply chains. Young people who were previously on insecure contracts somewhere within the supply chain rank among the many winners. They are now receiving the Real Living Wage, and moreover have a clear path for progression for the first time in their lives.

In Islington, the Council is negotiating hard to leverage high local land values to secure long-term benefits from developers for the area’s most disadvantaged communities. When developers want to build commercial premises in Islington, as part of the planning process they are asked to provide workspace at a peppercorn rate to the Council to support local businesses and social enterprise. This has enabled the Council to secure 5,429 sqm of workspace to date at a value of £1.24 million. This supports a diversity of different local businesses across the Borough from fashion and design through to tech and digital start-ups.

What is needed for innovation to spread

There are many similar examples across the UK of organisations working to reshape their economy by integrating solutions to hardship and poverty into their core, rather than satisfying themselves by letting the old system break down, and then picking up the pieces. Despite a national Government which veers between indifference and open hostility to such local radicalism, councils and their partners have found a way to innovate and make real change happen. Imagine the kind of economy we could build if we committed to applying the same sort of radical principles nationwide.

To realise the full potential of this opportunity requires two key things nationally: investment and agency. We know that investment in local state institutions is in a perilous state. We have councils going bust, hospital waiting lists going through the roof and the most vulnerable children and older people dependent on services which are delivered by companies who are profiteering from misery. We need to restore investment in the basics to ensure that councils, hospitals and schools can deliver services while, at the same time, using this to help support the economy to recover. This is not just money for services, it’s investment in local economies. If the Government takes the decision to invest then we need to ensure that we are maximising the local economic and social value of this spend.

Moreover, we need a restoration, not just of investment, but of trust in the local state, trust in its ability to build solutions locally without meddling from Westminster. As recent testimony from metro mayors at the Covid enquiry has shown, the levels of trust in the relationship between national and local government is at an all-time low. In an increasingly complex world where crisis and uncertainty have become mainstream, we cannot rely on solutions from Westminster. We need local places to be able to think on their feet, build relationships and share power with their residents. Devolution is part of the solution, but not if it simply replicates the limitations of the Treasury.

There’s a need to stop puzzling and start delivering. Give councils the funding and the trust so that they can intervene with intent. Only in this way can we begin to rebuild and rewire local economies to enable wealth to flow, circulate and be owned within communities.