Britain’s economy is deeply imbalanced. Too many areas of the country are characterised by low quality jobs, weak productivity and slow growth, while, elsewhere, stronger economic performance comes at the price of rising costs of living. And inequalities – of class, race, and gender – are stark as, in an economy owned and run by corporate interests, wealth flows to the already wealthy or is extracted by external investors.

Until recently, policy responses have been based on the highly discredited theory that economic growth will mean wealth trickles down. Or that it doesn’t matter where growth happens, because its proceeds can be redistributed – a solution becoming less realistic with the growing strains under which our welfare state is put.

Labour’s response – restructure and democratise

Labour’s response is distinct in seeking solutions to our economic malaise, not just in more radical forms of redistribution – though that is needed – but in the restructuring of production and the democratisation of ownership and control.

The purpose of restructuring production is to improve the quality of the jobs our economy creates by changing what is produced, how, and by who. Our industrial strategy targets the location and nature of economic activity, seeking to drive up productivity, in part by expanding more productive sectors. But advanced manufacturing and high tech industries cannot be our only solution. In some areas – especially the 1000+ towns across Britain – changing the scale and structure of production processes, particularly by encouraging social and cooperative enterprise and local small business activity, are more realistic and far-reaching ways to improve economic well-being.

The democratisation of ownership and control is based on the principle that the democracy that defines our civic identity shouldn’t stop at the borders of the economy. An economy owned and governed by the local community will serve that community rather than distant corporate interests. It follows that rectifying the imbalance in ownership and control is an important way of rectifying the imbalances in our economy.

Some of our ideas for restructuring production and extending democracy to the economy are set out in our Alternative Models of Ownership report. The Community Wealth Building Unit is our vehicle for delivering these ideas on a local level – helping local governments and communities to shape and secure their economic future by building and retaining wealth, and ensuring it is shared. 

Insourcing and wider community wealth building

One way of making economic development work for local communities is through taking direct responsibility for providing local public services. The outsourcing of many of councils’ functions to the private sector, has taken money out of local areas and given it to large and often remote corporations. This has come with loss of accountability, lower service quality, and a deterioration of the terms and conditions of the workforce. Taking services back in house makes those providing them more accountable, particularly if accompanied by more democratic participation in local authority structures by council employees and the wider community. It also allows provision to be shaped by public policy objectives and social value, for example, by considering quality and not just reducing costs. Insourcing can create good local jobs, with a strong role for trade unions, which can improve service quality by cultivating a public sector ethos, as well as bolstering local economies.

The public sector can also be a driver of change beyond directly providing public services. Other ways of extending community control over local economies include: spending public money locally; giving new opportunities to local suppliers and expanding local demand through a multiplier effect; encouraging employers to adopt the Real Living Wage; democratising collective assets, such as pension funds or community-owned local banks, and using them to support local economic development; and harnessing the power of anchor institutions to improve local labour markets. Municipal enterprise, worker cooperatives, energy democracy and credit unions also help expand democracy in the private sector while ensuring that wealth is better shared. All these wider community wealth building strategies not only improve local economic development, but do so in ways that give local business and local communities a bigger share and stake in the local economy.

The Role of the Unit

The local scale of these approaches means that, unlike our plans for the national economy, Labour can start implementing them right now. Labour Mayors and councils across the country are working hard to protect local services in the face of Tory cuts, with many adopting the strategies just described. The Unit will help Labour councils to build on this experience and support more councils in implementing these strategies through sharing best practice and providing information and hands on advice. Our work will not only make immediate improvements to people’s lives, it will also showcase how Labour will transform the economy for the many not the few, wherever we are in power.

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