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15 November 2017

Poach from Preston

In its Programme for Government, Scottish Government committed itself to ‘reviewing’ how local decisions are made and how local democracy is working. It’s the sort of exercise that could equally achieve next to nothing or become the catalyst that changes everything. At the end of the day, if real change is to happen, local government will have to be prepared to engage in a fundamental reappraisal of its role and the nature of its relationship to the local economy and the communities who live there. And if anyone’s looking for clues, all paths seem to be leading to Preston.

By The Economist

The evolution of Preston into the poster child of Corbynomics started years before Mr Corbyn was elected Labour’s leader, says Matthew Brown, who sits in the council’s cabinet and has spearheaded the programme. In 2011 a £700m redevelopment of the city centre collapsed after the economic downturn. So the council turned to other tactics to generate local investment.


First, it set about persuading local public institutions—colleges, the police, a housing association, the university—to consider spending more of their combined £1bn budget locally, as “anchor institutions”. Local suppliers were given advice on how to pitch for tenders that may have seemed out of reach. The Centre for Local Economic Strategies, a Manchester-based think-tank, audited the spending of six such institutions last month and found that they spent 18% of their most recent year’s budget in Preston, compared with 5% in 2013. In cash terms, this meant an extra £75m being spent in the city—around £530 per citizen. The share of their spending in Lancashire doubled from 39% to 79%. It required no extra money nor new legislation. “It’s about collaboration,” says Mr Brown. “You have to be clever in austerity.”


Preston’s anchor institutions feature in a 48-page pamphlet commissioned by Mr McDonnell on “alternative models of ownership”. Brexit, the report suggests, is a chance to rewrite procurement rules and force the public sector to buy some goods and services locally, which is banned by EU law. Labour’s manifesto also promised to use the government’s £200bn in procurement spending as a weapon to enforce social goals. Suppliers would have to maintain a pay ratio of under 20:1 between their highest- and lowest-paid employees, for example. Other wonks think Labour should go further. Joe Guinan of Democracy Collaborative, an organisation that has overseen a similar model to Preston in Cleveland, Ohio, has said the National Health Service could be “the mother of all anchoring institutions”.


Not all are so impressed. Getting institutions to buy locally amounts to municipal protectionism, with money that was once spent elsewhere in Britain spent locally, points out Colin Talbot, a public-policy expert at Cambridge University. “There is no value being added,” he says. An overly confined economy may reduce economies of scale and exacerbate the effects of any downturn. If the Park Hotel goes under, it may hit Preston’s pensioners, too.


Still, the Preston model is “a practical example of ‘taking back control’,” argues Tom Kibasi of IPPR, another think-tank. Like every district in Lancashire, Preston voted to leave the EU. Part of the feeling of lack of control stemmed from a lack of local ownership, argues Mr Brown. The council is trying to correct this. Last month it launched a not-for-profit energy firm, similar to those that Labour’s manifesto promised. It is cajoling the city’s anchor institutions to provide capital for a regional investment bank, much like the ones that Mr Corbyn has proposed.


The council has also encouraged local firms to consider becoming co-operatives—which are owned and controlled by their workers—and lobbied its anchor institutions to deal more with co-ops. Nationally, Labour wants to double the size of the co-operative sector, for instance by giving workers a “right to own” if a firm’s owners sell up. In a speech last week Mr Corbyn asked why Uber, the ride-hailing app, could not be replaced by a co-op. Labour’s obsession with them is window-dressing, believes Mr Talbot. “They do not want to appear to be ‘commanding heights’,” with their plan to nationalise utilities such as gas and electricity, “so they are talking about trendy co-op things as well,” he says.


For all the praise that Labour’s leaders heap on Preston, Mr Corbyn’s team bristles if the city is described as a crucible of Corbynism. Preston offers radicalism on a shoestring, with its council’s annual spending on services cut by a third since 2010, to £20m. A Corbyn government, they insist, would loosen funding constraints and let local authorities go further. But even if Mr Corbyn never reaches Downing Street, Corbynomics will thrive in one corner of Lancashire. “You can begin to democratise the economy, even with a Tory government,” says Mr Brown.


This article appeared in the Britain section of the print edition under the headline "Jeremy Corbyn’s model town"

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