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Policy Blog #21: Economic democracy for all?

Blog post

James Wright
Written by
James Wright
19th April 2021
Co-op development
Fan-owned football club

Community ownership has been one of the biggest democratising forces in our economy, from farming to football. The UK government’s new Community Ownership Fund could help spread the benefits further, including into more disadvantaged and marginalised communities. But to succeed, government will need to be more flexible in its approach.

The Community Ownership Fund

Rishi Sunak’s recent Budget included the £150 million Community Ownership Fund - a long awaited manifesto pledge that we’ve been lobbying to see the light of day. Community groups will be able to bid for matched-funding to help them buy or take over ‘at risk’ community assets, including football clubs. We are currently working with government on the details of this fund, with a focus on the role of community shares.  

> Read our key positions on the Community Ownership Fund

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A key strength of community shares is how poorer communities can raise additional funds from the wealthy, without ceding local, democratic control.
– James Wright

Economic democracy for all?

One of the most striking findings of last year’s community shares research was how the model democratises ownership and control. Over half of community shares investors earn £35,000 or less and 41 per cent are women (compared to just 9 per cent of angel investors). Those who can afford to contribute more money share power equally with those who can’t, because communal benefit trumps return on investment.

A key strength of community shares is how poorer communities can raise additional funds from the wealthy, without ceding local, democratic control.  

But while community shares investors may not fit the stereotypical high net worth investor profile, the majority benefit from other structural privileges, such as being white or university graduates. And there is a marked drop off in community shares activity in the most deprived areas UK-wide. 

In providing cash that boosts the financial power of disadvantaged communities, while leveraging in other private funds, the Community Ownership Fund could help spread community ownership into areas of disadvantage and deprivation.

The government’s current preference appears to be for 50:50 match funding across the board, awarded via competitive bidding rounds. While this might look good for bookkeepers in the Treasury, it has significant potential to put deprived communities at a greater disadvantage. Co-operatives UK is one of many voices urging government to prioritise funding for high-deprivation communities and offer them more than 50% match or the flexibility to be creative with the approach as not all communities are the same.

And while match funding will be a great help, on its own it will not be enough.

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Unfortunately, this isn’t the kind of highly visible investment in stuff you can put a Union Flag on.
– James Wright

Money isn’t everything

People will need specialised and often culturally appropriate information and support, to help them make a success of community ownership. For example, Co-operatives UK is exploring the potential for community share offers to be recognized as Shariah compliant. We are also working in seven high-deprivation neighbourhoods to support long-term, community-led economic development. Such work will be critical to ensuring interventions like the Community Ownership Fund benefit a diversity of communities, but it all needs resourcing. 

Unfortunately, this isn’t the kind of highly visible investment in stuff you can put a Union Flag on. Though to be fair, government has indicated that some money will be available to help disadvantaged communities with ‘feasibility studies’ and ‘capacity building’. We are urging government to ensure the provision of accompanying support for organisations is an integral part of the package.

A means to an end

Government is keen to help communities buy buildings that act as ‘social infrastructure’. At the same time, it only wants to fund projects with a prospect of long-term viability in community ownership.

For our part, it’s the human activity that physical assets are used for - the socialising, the organising, and in its right place, the co-operative enterprise – that’s actually important. This is where the long term benefits and viability will actually come from.

A lot of communal activity only thrives when economic inequalities and commerce don’t intrude. This can preclude the use of an asset in any kind of business model. That’s why we need the state. And perhaps a 21 century version of the commons

In many other cases, what is needed is a savvy approach to generating revenue that doesn’t undermine communal value. Think of a modern community hub that tries to serve everyone, while meeting costs through a combination of unintrusive social business models.

And sometimes an asset provides the biggest communal benefit, by enabling the kinds of commercial activity that create good livelihoods, enhance wellbeing and distribute wealth and power. This could be a community organisation trading from an asset, like the Jazz Co-op in Newcastle. Or acting as a landlord for other local businesses, including co-ops and social enterprise, like Midsteeple Quarter in Dumfries. Or a fan-owned football club like FC United of Manchester.

It’s at this end of the spectrum that community shares really comes into its own. As last year’s research clearly showed, when an asset is used as part of a revenue-generating social business model, community shares increase long-term financial viability and enhance local participation.  

This is where the Community Ownership Fund and community shares will be a winning combination. That’s why we’ve spent more than a year talking to government about how the two can come together.

High hopes

We have great hopes to the Community Ownership Fund, if:

  • match funding prioritises disadvantaged and marginalised communities and provides a degree of flexibility
  • funding is accompanying by specialised support before, during and after community buyouts
  • the scope of assets includes those that have some economic as well as social potential for communities
  • the fund works in combination with community shares, including through match equity investment