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Co-op Policy Blog #8: Shared Prosperity

Policy Blog #8 calls for more attention to be paid to the current government's inclusive economy agenda. We're floating possible advocacy positions for the UK Shared Prosperity Fund and canvassing your views, with an online poll at the end. 

Labour has certainly catapulted inclusive economics into the headlines like never before, writes Policy Officer James Wright. And while it’s policies are not without controversy, they are at least prompting the likes of the CBI, the Economist and politicians from other parties to say positive things about worker ownership. Excitement among co-operators about Labour’s agenda for co-ops and inclusive ownership is understandable (read our briefing on our work in this area here) but we urgently need to drag our attention back to the current government’s inclusive economy agenda.

With our support, the Westminster government is backing community ownership and control in a big way (see our assessment of its Civil Society Strategy). And it is about to make massive decisions about post-Brexit local economic policy, which could determine just how inclusive our economy really is for many years to come.

Government is preparing to consult on proposals for the UK Shared Prosperity Fund, which will replace the €10.7 billion EU funds for local economic development and enterprise support, including in places for the social economy. Given the degree of political uncertainty just now, decisions government takes this autumn might have a shorter shelf-life than normal. But excluding the still unlikely scenario of Brexit being cancelled, the machinery of government will be set in motion and many of these decisions will stick regardless. There are big opportunities to change local political economy in ways that create a fertile environment for co-op growth. The Shared Prosperity Fund matters.

"The money-making machines in Canary Wharf do very little to benefit people in neighbouring Tower Hamlets."

Government priorities

The Conservative 2017 manifesto tied the Fund specifically to its inclusive economic ambitions. According to its statement to Parliament, government wants the Fund to boost productivity in parts of the country where it’s currently lagging. Makes sense, as firm productivity tends to be an important determinant of pay and standards of living and the UK’s most deprived places are also at the bottom of the productivity rankings. By boosting productivity in the regions, the government aims to rebalance wealth creation away from London and the South East and thus make the UK economy more inclusive.

So far so good, but there is more to inclusive economics than rebalancing regional productivity. Ideally the Fund should be designed to deliver clear inclusive economic outcomes, with a broader sharing of opportunity, influence, wealth and wellbeing between people as earners and asset owners, as well as between places. Boosting regional productivity might be one of the most important means to achieving these ends, but its not great policy to make it the end in itself.

There would be two big problems with this approach. Firstly, improved productivity in a private business is not in itself a public good, and public money shouldn’t pay for it. To deliver a public good – inclusive growth for example – policy has to consider how the benefits of improved productivity will be shared, both within a firm and the places it operates. And secondly, while the stark inequality between places is an important issue we must not ignore inequalities within places. London is top of the UK productivity table, in no small part because of the hyper-productive financial firms there. But the money-making machines in Canary Wharf do very little to benefit people in neighbouring Tower Hamlets. Inequality within London is at least as much of an ill as inequality between London and the North East. Indeed the proximity of elite wealth to deep-seated deprivation creates a particularly toxic cocktail of alienation, cynicism and hopelessness.

Yes, the Fund needs to support the clustering of productive businesses in every region, but these need to be inclusive businesses too; good at giving workers a voice and sharing the dividends of success, and with a positive relationship with place. And the Fund could also be a resource for boosting economic self-efficacy in neighbourhoods that might otherwise be left-behind within any resurgent region.

Possible advocacy positions  

Government won’t be budged from its emphasis on productivity. But we can and must insist on the principle of public money for public goods. We should suggest ways to ensure the productivity outcomes it pursues through the Fund are also inclusive economic outcomes. This is not straightforward as government also wants the Fund to be simpler than the EU Structural Funds it replaces and is unlikely to agree to anything that adds in too much complexity to this otherwise singular focus.

But while it is possible to criticise the implementation of EU  programmes, there are also some positive examples to learn from where past European programmes have operated in support of inclusive growth with an active role for the social economy (see here).

With this in mind we’re floating the following:

1. 10 percent top sliced for the social economy from the outset

Government could ensure 10 percent of the Fund is dedicated to boosting the productivity of businesses that by their very nature exist to deliver inclusive economic outcomes: co-ops and social enterprises. This policy would need to reflect that in the social economy productivity includes member benefit and social value, not just GVA. The focus could be on equipping people with the skills, knowledge and knowhow needed to make a social business succeed, as well as on productivity-enhancing capital and processes.  

2. Target 10 percent community controlled by 2025  

LEPs and their equivalents outside England could be set a strict target of devolving 10 percent of their Fund allocation to ‘community economic development partnerships’ by the middle of the next decade. With the Fund, people everywhere could have the opportunity to participate in high-impact community economic development focused on livelihoods, entrepreneurship and local aspirations. Priority could be given to funding and supporting community economic development in the most deprived, hard-to-reach neighbourhoods. These ultra-local partnerships of residents, businesses and civil society would need to be carefully nurtured and properly supported, using the learning from existing community economic development pilots in England and Scotland. This could be a significant onward devolution of power in local political economies, boosting economic self-efficacy in every neighbourhood. We could ask LEPs to do more than consult better. With help they could actively nurture and partner with other more community-led arrangements.

3. Local wealth approach

At the more traditional regional level, the Fund could be used with a ‘local wealth’ approach to economic development. A major aim for the Fund will probably be to support the clustering of productive businesses. But crucially this process could be driven by the agency and assets of local people and could create significant opportunity and benefit locally as well. While some inward investment will be essential in creating opportunities and improving productivity, it has to be one of a number of components in a broader approach that roots capital, opportunities and jobs in a place. This is both important and difficult in an era of mobile and itinerant capital and talent and is exactly the kind of tricky systemic challenge that pubic money should be used to address. In the local wealth approach, the Fund could support local entrepreneurship in a diversity of forms, better co-operation between local businesses and strategies to protect and grow local ownership for the long term, for example through supporting planned transitions to worker and community ownership.  

4. Inclusive impact tests

To ensure public money is spent on public goods, all Fund allocation and investment decisions could do with being guided by a framework for assessing how well the economic and social benefits of any expected productivity boost will be distributed, both within firms and in the places where they operate. To keep it simple for small businesses, all Fund assistance could be made dependant on paying the local living wage, or to committing to pay the local living wage once productivity improvements allow it, or to sharing the dividends of success in some other way, such as through profit sharing or co-ownership. Larger support packages could come with more comprehensive assessment and measurable outcomes covering things like distributional analysis, inequality effects and local economic impact.

What next?

Government could launch its consultation any time now. We need to be ready to respond as a movement and to make common cause with others working for a genuinely inclusive economy.

Click the link below to complete a quick online poll. This poll will close 31 October. 

tell us what you think

You can also email me direct or post on the Facebook discussion.

Thank you for supporting our policy work through your membership of Co-‑operatives UK

Written by James Wright*
Updated: 04/10/2018