Why ownership matters

New ideas on economic policy are being applied in a practical way in Scotland, with a Labour Leadership which understands that ownership matters.

Head of Policy and Public Affairs at UNISON Scotland and Co-operative party member

Ownership gets too little attention in industrial policy and in public service reform. In his first conference speech as Scottish Labour Party Leader on Friday, Richard Leonard put some clear red water on ownership between him and current UK and Scottish government policy. That is the right approach because ownership does matter.

While Richard rightly highlights municipal socialism, this does not mean the adoption of a command and control model along the lines of Herbert Morrison in the 1940s. I was highlighting this point at the Scottish Co-operative fringe meeting on Saturday titled Ownership Matters: The case for more democratic control of the economy and for alternative ownership models.

This is an exciting time for the development of new thinking on economic policy and role of co-operatives. In a 2016 Red Paper publication, Richard Leonard and others set out a different industrial strategy with a strong role for co-operatives. My chapter in the same publication described how we can take a different approach, extending national policy to local economies—often described as the ‘foundational’ economy.

The ideas have been built from substantial evidence-based studies written by NEF, Centre for Local Economic Strategies, APSE and of course the Co-operative Party. Some of these ideas are being applied in practice in cities like Cleveland and Preston.

The foundational economy is built from the activities which provide the essential goods and services for everyday life, regardless of the social status of consumers. These include, for example, infrastructure; utilities; food processing; retailing and distribution; and health, education and welfare. They are generally provided by a mixture of the state (directly or through procurement); small and medium enterprises (SME); and much larger companies such as privatised utilities or branches of mobile companies such as the major supermarkets. These larger firms often originate from outside the local economy, and all too often are the first to flee when the economic cycle shifts.

It’s a complex idea, but The New Economics Foundation (NEF) in their handbook for local economies called ‘Plugging the Leaks’, describe the concept like this:

“Imagine the local economy as a bucket. If someone has £5 and spends it in the local grocers, the £5 stays in the bucket. But when they pay the electricity bill, it doesn’t stay in the bucket. Spending on electricity is like a leak in the bucket: the fiver leaks out as the supplier is a business outside the area.

But there are usually ways of stopping all of the five pounds from leaking out. Insulating the house will cut the electricity bill, for example. If there’s a local company to do the work, there’ll be even more in the bucket”

This is not about local protectionism, it’s about strengthening local linkages. It also generates a local multiplier – money spent locally gets spent again locally. This concept is particularly relevant in Scotland where disadvantaged communities often sit next to affluent communities. This can create an umbrella effect when money directed at poor areas too often sprays off the wealthy neighbours.

These ideas have been highlighted very recently by Shadow Chancellor John McDonnell. The Labour Party is setting up a Community Wealth Building Unit to support co-operatives and mutuals as a means of driving local economic growth. It is important to emphasise that this approach is part of economic and industrial policy, a point that has held back co-operative development in public policy for too long.

These are exciting times for those who believe that ownership matters.  As a long-standing co-operator Richard made clear his support for new co-operatives in the private sector as well as a substantial expansion of public ownership, including the railways, postal services, energy, social care, public housing and of course PFI contracts.

These are new ideas on economic policy, being applied in a practical way with a Labour Leadership in the UK and Scotland, which understands that ownership matters.