Supporting co-operative communities and regional growth – Co-operative Party

Local and sub-regional government

As the tier of government closest to residents and communities, local councils are at the forefront of helping residents respond to today’s economic and social challenges, from the rising costs of housing to financial exclusion. They are the providers and commissioners of the services that sustain our local infrastructure – homes, schools, roads – and how they choose to do this has a direct impact on the local economy.

While councils are working hard to ensure that services remain reliable and local areas thrive, local government is facing increasing pressure, with growing levels of demand at a time of significantly reduced levels of funding.

The Co-operative Party believes that local councils should be properly funded to ensure they can continue to deliver the services that people rely on. The Party also sees a need for a radical change in the way that local government works if it is to remain effective, relevant and accountable in this time of cuts in spending and changing expectations.

Support should be given to councils committed to supporting the growth and development of existing local co-operative and mutual enterprises; involving service users in commissioning, design and delivery of services; promoting co-operative start-ups; and developing collective action and control over local assets.

When power is passed simply from Whitehall to the Town Hall without a real community stake in new settlements we miss an opportunity. Our co-operative devolution agenda is not about just moving centralised power from Whitehall to the Town Hall, but also about placing power directly in the hands of people and communities.

Combined authorities and Metro Mayors

The Co-operative Party believes that combined authorities and Metro Mayors have the opportunity to use their new powers and responsibilities to develop more co-operative communities. The Co-operative Party has laid out its vision in ‘By Us, For Us – A Co-operative Agenda for City and County Regions’.

Devolution of economic power

In order to unlock the growth potential of every community, more support should be given to Combined Authorities, Economic Prosperity Boards and Local Enterprise Partnerships (LEPs), to facilitate the devolution of further significant powers over the Work Programme, adult skills and infrastructure.

Transferring power and assets to communities

Community-based and new mutual organisations have a vital role to play in preserving and running local services; tackling crime and anti-social behaviour; supporting families; engaging young people; and regenerating rundown neighbourhoods. When local authorities decide to externalise services, there should be a ‘right to try’ for employees, service users and the wider community, giving them the option and a timeframe of six months to consider taking over the service by establishing a co-operative or social enterprise.

Where local assets are transferred, it is vital that they remain in the interests of the community being served. Therefore, they must have open membership and be democratically accountable to a widely-defined group. There should also be an asset lock to guard against dissolution and ensure that resources can only be transferred to other organisations with a similar commitment to serving the community.

Right to recall

The government should introduce a Public Service Users Bill to further improve accountability of services. This new legislation would give people more voice and power over all public services, including the right to recall a provider in the case of a serious breach of trust, the ability to trigger investigations and the right to choose their own provider in certain circumstances.

Local tender evaluations

Local tender evaluations should be required to include whether a bidder is transparent about its tax arrangements, meets Fair Tax Mark standards, pays the Living Wage and meets appropriate standards on apprenticeships.

Strengthen the Localism Act 2011

The community deserves to play a key role to play in the preservation and delivery of local assets and services outside of local authority control. The Localism Act contains important powers for local communities to do just this and the co-operative movement has had significant success in applying localism powers to protect pubs under threat, for example. To date, 1,250 pubs have been listed as assets of community value, and as of July 2016 there were 42 co-operative pubs open and trading, with many more in the pipeline.

However, we believe the Act needs to be strengthened, as the regulation and timetables can still result in barriers for communities. In particular, it is still a real challenge for them to mobilise quickly enough when a local asset is under threat, especially when the owner of the asset refuses to engage in a constructive dialogue.

The government needs to review the existing rights and strengthen the legislative framework to effectively change the balance of power, by extending the protected period within which communities can mobilise to nine months, with a further extension where the asset owner refuses to speak to interested groups.

Further, Community Interest Groups (CIGs) that have successfully listed assets should be given a ‘first right of refusal’ to purchase the asset, making the right a real ‘right to buy’ not simply a ‘right to bid’.

Finally, central and local government should recognise that for the localism agenda to reach its full potential, communities need better advice and practical support as well as these legislative changes.

Co-operative Councils

Councils like Oldham, Edinburgh and Glasgow, under Labour and Co-operative leadership, have pioneered new working relationships with neighbourhoods and residents, underpinned by a genuine commitment to working with communities rather than merely doing things to them. The government should support co-operative councils like these to test new ideas and to develop models of collaborative working that can be rolled out in other parts of the UK.

Community wealth building

Communities need the right tools to tackle the challenges they face together. A place-based approach to economic regeneration can enable communities to create and retain wealth locally.

Public sector procurement offers huge opportunities to shape the economy, but there is a tendency for the same big firms to dominate the market, as institutions seek bigger contracts and frameworks. In Cleveland, Ohio, a new approach has been pioneered where anchor institutions award significant contracts locally to new worker-owned co-operative businesses, ensuring wealth stays within the community.

Preston City Council have learnt from ‘the Cleveland model’, and the council is already changing the way they use their capital and resources, seeing an extra £4 million invested in their city and new co-operative businesses being established. Similarly, in Manchester the City Council has increased the proportion of its resources spent locally from 44% to 70% of its budget.

The Co-operative Party believes that there should be further devolution of public spending and changes to procurement law in light of Brexit. A strengthening of the Social Value Act, in order to give local and regional government the tools they need to generate sustainable local wealth, is also urgently required.

Anchor institutions

Organisations like hospitals, universities and local authorities have strong ties to their local region. By leveraging their supply chain, it is possible to make significant contributions to the local economy, generating community wealth that remains in the area rather than being extracted by big businesses and their shareholders.

Local and regional authorities should be encouraged and supported to partner with anchor institutions to spend their money with local supply chains. Where an anchor institution is an arm of government, there should be targets setting out expectations on local spend.

Anchor institutions should be encouraged to use their expertise and capital to invest in the development of local employee-owned, co-operative and social enterprises so that the money spent through their local procurement is reinvested in local jobs creation and the local community.

Local co-operative development

As democratic, member-owned organisations, co-operatives play a critical role in generating and keeping wealth in local communities. Since most members are local residents, they are likely to make decisions in the interests of their community rather than shareholders. Equally, instead of going into shareholder pockets, profits are reinvested in developing the business, creating local jobs or as dividends to members, who are likely to shop locally and keep wealth circulating in the local economy.

In Cleveland, Ohio, the Evergreen Co-operative Development Fund has developed a network of new worker-owned co-operatives to take on significant contracts from local anchor institutions, from laundry to energy. Closer to home, the Wales Co-operative Centre, established by the Wales TUC and funded by the Welsh Government, supports co-operative and social businesses in Wales to grow.

To ensure that community wealth generation genuinely transforms the lives of local people and economies of every region, the government needs to learn from the example set by Wales to support similar organisations to develop across the UK.

Procurement rules

The devolution of resources and the changes to procurement rules that may arise as a result of Brexit provide significant opportunities to rewrite the rules of the system to better reflect public and community value in spending. New procurement rules should acknowledge the benefits of co-operative and social enterprise procurement.

The government should ensure that the implementation of any new rules allows contracting authorities to reserve some contracts for not-for-profit enterprises. There needs to be strong and clear guidance on the types of co-operative, mutual and social enterprise models covered to ensure that they deliver the social value intended and do not allow for privatisations via the back door.

Social value

The government should review the operation of the Social Value Act and consider whether, in the context of Brexit, this could be enhanced to give public sector bodies a wider scope to procure for social value rather than on the basis of a narrow, short-term value for money judgment.

Public sector commissioners should have a duty to ‘account for’ rather than merely ‘consider’ social value and the government should set measurable targets for their use of social value. The government should also further strengthen the legislation by requiring public bodies to publish their social value priorities and weighting of contracts toward them, and to outline the steps they will take if social value targets are missed. The government should also consider extending the scope of the Social Value Act to apply to goods and service contracts of a lower value.

Regional banking

Businesses that put money back into the local economy – through hiring local people, spending money in their region, and reinvesting profit instead of paying shareholder bonuses – are best placed to drive local economic growth. The UK’s small and medium size enterprises employ over 24.3 million people across the UK, and the social and co-operative sector has outperformed the rest of the economy in terms of growth since the financial crisis in 2008.

Despite the social, co-operative and SME sectors’ crucial role in our economy, they face a number of barriers to growth through difficulty in getting investment from high street lenders and a high cost of credit. And this lack of engagement from Britain’s banks is hardly surprising – four of our five large banks are located within a five-square mile area of Central London.

Germany, on the other hand, has thousands of individual banks across the country, including over 400 local savings banks (Sparkassen), each independently and locally managed, as well as 1,000 co-operative banks, owned by their members and run on the principle of one member one vote.

The German regional banking system is run prudently, serving sub-regional areas and specialising in local SME investment. In fact, local and co-operative banks have been able to continue high levels of local lending through the financial crash and beyond.

Duties placed on Sparkassen to lend to SME businesses ensures that German businesses are better able to invest in machinery, equipment, new technology and other means of increasing wealth in each region. The result is one of the most productive economies in the world, with an average German worker producing in four days what a UK worker does in five.

For regional, bottom-up growth to succeed, a new banking system – similar to that of Germany’s – is needed to put power and decision-making on local investment back into every region of the UK.

Network of regional banks

The government should work with city and local authorities to establish a network of regional mutual banks tasked with lending to co-operatives, social enterprises and small and medium sized businesses in their regions. This would require the devolution or creation of the financial infrastructure needed to create this network.

Sustainable co-operative models

Regional banks should be encouraged to take a co-operative form of ownership, ensuring that they are inclusive and helping them return benefits to their locality to reinforce local economic growth.

In order for these banks to benefit from shared knowledge and economies of scale, inter-cooperation should be encouraged and supported. This should include delivering the back-office technologies required for each individual bank collectively, embedding economies of scale from day one, and establishing a system of checks, balances and shared risk that ensures financial sustainability.