16 Jun 2015
The inspiring tale of the re imagining of Preston’s economy.
We are often asked “what would a Transition local government look like?” It’s a complex question, but one Council taking a pioneering approach to its local economy is Preston in Lancashire. Preston City Council, working with Centre for Local Economic Strategies (CLES) recently published ‘Creating a Good Local Economy: the role of anchor institutions‘, a remarkable document. To find out more, I spoke to Matthew Jackson, deputy chief executive at CLES and Cllr Matthew Brown, Executive Member for Social Justice, Inclusion and Policy at Preston CC. “The game’s up for the old system”, he told me, “if you want to do something really transformative and really radical, it means doing something really new and really creative”. So they did. It’s a deeply fascinating, and inspirational story.
Cllr. Matthew Brown (MB): Traditionally it seems to me we just tried to act as a magnet for outside institutional investments to come in, but with this economic crisis we’re seeing that that’s not working any more. A lot of the investment we had in the last 10-15 years is just not happening. So it’s more of a systemic issue in the economy that needs to be tackled. One way of doing that is to make sure that the wealth of the locality is maintained by the people that live here.
Matthew Jackson (MJ): Local government doesn’t necessarily understand its local market and the types of organisations that are available to deliver the goods and services it requires. So there’s a need for a more intelligent relationship between the public, the commercial and the social sector put in place to enable organisations to be delivering more services.
MB: If you look at what’s happening across America, you see that capitalism is not producing the outcomes that it needs to, so people are looking at locally-directed alternatives to it. It’s not just procuring, it’s also pension fund investments, American citizens’ university endowments which go in the local economies’ criteria, it’s credit unions, it’s Community Land Trusts, it’s local currencies, municipal enterprise, co-operative generation of energy: there’s all kinds of creative responses to what is a systemic problem and the fact that the current economic model is not producing the outcomes it needs for the majority.
Historically, when you have one system, over a period of time and decades of it falling out of favour with a majority of people, that is the precursor to the beginnings of a new system over the next few decades. We could be seeing that happening over here in the United Kingdom as well.
MJ: We’ve worked with a number of local authorities to measure the impact of their procurement spending in their local economy in terms of job creation, supply chains, development of apprenticeships, issues around addressing challenges associated with the local environment. Through all of that, we’ve done a range of looking at the multiplier type analysis, working strategically with local authorities to change their procurement so it brings a wider range of benefits for their places.
MB: We still have the issue of people working longer, the issue of inequality: we are heading towards a Medieval distribution of wealth. The top 1% probably have as much wealth as the bottom 40% and that’s similar to what happened in Medieval Europe. We’re seeing all these trends heading in a certain direction and once you continue to exaggerate, that’s when people think “I’ve had enough of this, I’m going to start looking at something new to progress us upwards”. We could be seeing that now.
MJ: About 2 years ago we realised that there was a whole host of other institutions within a place that had procurement spend and which could also derive a wider set of benefits to the local economy. We chose Preston as a bit of a guinea pig really and began to look at the supply chains of other institutions in Preston. We’ve been working with the University, with further education colleges, with housing associations, the police, and also two major local authorities.
It was important from the outset to engage with key stakeholders with each of those institutions, so we effectively went to sell the project to the leaders and chief executives of the local authorities: so Preston City Council obviously, and Lancashire County Council. But also there were discussions with the chief executives of the other institutions. From that, there was buy-in to the project and what we’re trying to achieve. But what we also wanted those organisations to do was effectively open their books and give us access to their procurement data.
MB: It goes back to a discussion we had within the ruling Labour group while we produced our manifesto. Myself, in particular, I wanted to try to look at certain alternatives that had emerged such as in Spain and Italy at the time. That was most notably Mondragon in the Basque region of Spain, also Emilio Romana in Italy. Within those two areas they managed to transform the private sector economy where they actually managed to provide an alternative to the capitalism they saw around Europe within the local economy. That’s what was the inspiration. That was what we started investigating doing when our administration took control a few years back.
MJ: For each of the six institutions we requested their procurement spend for the financial year 2012-2013 and specifically their top three suppliers by value. What we wanted to do with that information was understand the extent to which those organisations spend within the Preston economy and the extent to which they spend within the wider Lancashire economy because it’s effectively a 2-tier area.
What we found collectively across all those anchor institutions was that they spent over £750 million a year buying goods and services and from that only 5% of that was spent with businesses based in Preston and only 39% was spent with organisations based in wider Lancashire.
MB: Cleveland in America had quite a lot of industry, and over the last few decades it’s disappeared totally. They got the place-based institutions to increase spend onto the local economy through the goods and services they procured. As well, increasing that upwards, creating jobs for local businesses. They also used that spend to create a network of worker-owned businesses known as Evergreen Co-operatives.
MJ: We’ve held workshops where we’ve developed a collaborative procurement charter across each of the anchor institutions, about encouraging them to use local suppliers and think about local issues as part of their procurement process. We’ve also done a series of gap analyses to try and understand the areas of contract for various services that potentially be delivered in the future by more local institutions. To give you an example, in terms of the Preston City Council spend, they identified it was potentially around £3 million which we’ve termed as ‘influencible spend’. That’s spend that’s not necessarily tied up in frameworks or not available in the local economy.
It’s things like catering or building maintenance or building cleaning. There’s scope for that money to potentially in the future to be delivered by more local organisations. We’ve identified that £3 million. We’ve identified businesses that can potentially deliver that activity in the future. It’s a case now of Preston City Council, when it comes to their procurement process, actually starting an early engagement process with those businesses to see if they have the capacity to potentially deliver those services.
MB: Obviously there’s a huge opportunity to increase our local spend upwards. The amount of wealth that’s leaching out is quite significant.
MJ: Our work in other places such as Manchester shows how local authorities can think strategically about their procurement. It also enables them to develop relationships with commissioners and other people within their local authorities to ensure the maximum benefit is achieved through the resources that remains under the control of that local authority.
MB: So you’ve seen a situation where the spend in Preston has gone up by about 3% to the Preston economy and to the Lancashire economy it’s now around 35%. We’re shifting spend to the local economy. You get a sort of multiplying effect in which wealth is retained and jobs are created.
MJ: A lot of local authorities currently have in their corporate strategy or their community strategy priorities around reducing worklessness, around raising aspiration in their population, around fostering private and social sector growth within their economy. Maximising the benefits and understanding more effectively that procurement spend is a way of achieving some of those wider outcomes.
It’s a way to sustainability and development of local business. That’s always been our key selling point, that the analysis that we undertake is effectively an evidence base as to how authorities can think through how they purchase, and also achieve wider corporate and indeed social outcomes through their procurement spend.
MB: We’ve had a number of successes, most notably with the County Council, where we managed to get a contract worth about £2 million on a fresh fruit project which has gone to a Preston company. In addition to that, Lancashire Constabulary, a printer contract has managed to go to a Lancashire company as well. The success is there, but in the long run there are a number of other things that we want to look at to create community wealth. We’re looking at things like local currencies as in Bristol. We’re backing the Move Your Money campaign so our own investments which are quite considerable, over £20 million, we’re looking at shifting that to the local economy to invest in more sustainable businesses and economic activity within the Preston boundary.
We’re also looking at the pension fund that we’re part of. That’s got £5 billion of our money invested and the majority of that is invested in equities that are abroad. If we could shift 10% of that to the Lancashire economy it would be a significant tool to localise the wealth and make sure the wealth stays local. We’ve also got back a Credit Union which is due to be launched next month, when our original one went under in 2007.
We’re also doing things with the Living Wage. We’ve got 50 Living Wage employees in Preston at the moment who signed up after we became the first officially accredited local authority in the North of England in 2012. I think we’re leading the way in that we are getting noticed by a lot of think tanks, just as we’ve got a quite distinctive approach.
MJ: Our objective was always to try and create something that was potentially replicable like the Cleveland and the Evergreen model. But it’s actually very difficult to do that in a UK context. The result of some of the restraints of procurement laws from Europe and also the fact that in terms of Evergreens, a significant amount of seed funding that has enabled those new enterprises to be developed.
What we have done in the Preston work is identified two types of gaps in spend. One is spend which exists in local organisations that can potentially deliver services and goods, and then we’ve undertaken an assessment of the market. The second is to look at areas where co-operatives and other forms of mutual enterprise can actually potentially deliver services as well.
MB: We’re experimenting with something new. On top of that as well, we have been promised significant investment in the past. Without naming any specific projects that just hasn’t happened, so we’re recovering a bit from that really. We were promised many moons ago that there would be significant inward investment and regeneration opportunities. We did everything we could and had a debate around whether that was the right thing to do or not, but ultimately the investors pulled out. There’s a realisation now that we’re in very difficult times. The old ways of doing things aren’t going to work anymore.
That’s why we managed to go down this new approach. It is quite different to what the co-operative councils are doing. There is an element within that which is basically saying “we’re not that bothered about how the private sectors operate, but what we will do is mutualise the local swimming pool or other council run services”. For us, the council services we have are operated pretty well, there’s no need to privatise them or mutualise. We’re looking at a different approach where we try to influence the local economy, making it more fair, more democratic so that the wealth can be shared more evenly.
MJ: We’ve not been able to get to that position where co-operatives have been formed as part of this particular work. As we said right at the outset, this is a longer term bit of work, something I know that the councillors and members of Preston City Council want to achieve. We’ve always been clear that it takes time to do those sorts of things, and it does need that drive to develop that relationship across the council, the other anchor institutions and then other institutions which could potentially support the development of those worker-led co-operatives and indeed the community as well.
MB: It’s a reaction against the neo-liberal agenda we’ve seen imposed on us, it’s an alternative to it. I would say that, but a lot of it is very much common sense. A lot of the government agenda brought in around the Localism Act is very weak and is not going to make any meaningful change because they can bring in community rights and things like that, but accompanied by huge austerity measures and cuts to our budget, it’s difficult to implement any of that at a meaningful level.
We’ve been quite clever in the way we’ve responded to this. As well, because we’re the democratically elected council for the town, we’ve also got a Labour County Council, we’ve also got a Labour Police and Crime Commissioner. We’re all working together to respond to that.
We’ve also managed to persuade the housing associations, the university, colleges, other councils as well and other place-based institutions. We’ve persuaded them basically because we have democratic legitimacy, so our administration did get 32 out of 57 seats of the council so people did vote for us. That helps us persuade people in other institutions to back what we’re doing and the other institutions now are seeing that this quite creative approach is actually good for the institutions themselves.
If you look at the University or the Housing Association, they’re rooted in these communities and they’re now looking at how can they benefit people socially and economically, as well as just providing an education service or providing them with a house to rent. So we’ve managed to persuade a lot of people it’s the right thing to do.
I’m really heartened with the response we’ve had. I thought it might be difficult but it’s not been difficult. People have really jumped on board but if you want to do something really transformative and really radical, it does in many ways involve doing something really new and really creative. In many ways, we could tear up the old rule book and write a new one, but the amount of public wealth we have, whether that’s through what the public sector in Preston buys in goods and services, what we have to invest and also what we have in our pension fund money, it’s very transformative.
It’s very significant and in many ways we can actually create the economy we want to see through these institutions. That is the response you’ve seen in cities like Cleveland in America, because they had to do it because the private sector employees had disappeared. Often they disappeared because it’s more profitable to be elsewhere. When that happens, it then causes problems to the community through increased unemployment, increased poverty, the crime that arises from that.
We’re extremely excited about what we’re achieving. It is in its early stages, but the response we’ve had so far is looking pretty good.
MJ: Once that evidence base, I could see an economy in the future which is more based around local organisations delivering services and getting a wider range of outcomes from the delivery of that service in terms of jobs, in terms of some of the things that I’ve mentioned around skills, in terms of the local environment. But there needs to be more effective relationships between the public sector and other kinds of commissioners and services, and the organisations that potentially and are delivering those services that enable those outcomes to be achieved.
MB: I can understand people have had careers and done things for so long in a certain way. But with the huge systemic problems we have with the economy, we’re not going to see any return to growth in living standards for – if it does happen it will be decades, so I think they need to look at that.
My responsibility as an elected politician is directed at the people I represent, within the cabinet role I have, to the best of my ability. I can only do that if I’m honest about the challenge that we’ve got ahead of us and we have a severe problem with the economy in the way it is at the national level. But what we do have to respond to that at a local level is communities, institutions, people who have religious beliefs, people involved with trade unions, the voluntary sector. If you put all those together you’ve got quite a formidable group of people resourced to create a new model.
The game’s up for the old system. We’d better start moving towards the new one bit by bit, beginning with the grass roots and beginning locally. It’s like what Tony Benn said “first they ignore you, then they say you’re mad, then you’re bad, you’re dangerous, then look around and there’s not one person who disagrees with you.” It’s probably similar with this, we’re all at the early stages of something quite significant.