Danny Alexander started all this. He asked me, back one day in 2012, about how local economies could find levers to regenerate themselves – rather than waiting around hopelessly for outside investment that never came (that isn’t how he put it).
The result was a dialogue between the Treasury and the local economic regeneration activists – local bankers, local energy organisers, local procurement advocates, local currencies – which revealed, it’s fair to say, something of a gulf between them.
As a result, and thanks to some funding from the Friends Provident Foundation, I have been organising a project to translate between the two – so that they at least understand each other.
I hope it will also form a narrative, once cities and places have more power, which can support their own economic efforts. If you devolve powers from Whitehall, it makes no sense for them to carry on handling your whole economic destiny on your behalf.
The result has been a short book, published now, People Powered Prosperity, written with my co-author Tony Greenham. Danny has written a foreword and I hope it marks the end of a dialogue of the deaf in our history, and the beginning of a creative period of local imagination and innovation.
But I have come to the conclusion, as a result of this project, that the word ‘local’ is misleading. It suggests borders and protection, when actually it ought to mean the reverse. It isn’t local that’s important, it is small.
And once you realise that, the full horror of the market failure that has been holding the UK back becomes clear.
Small business now earns 51 per cent of value added in the UK economy. They should therefore be getting a similar proportion of the business investment available in the UK. If they are not doing so, then it is a sign of serious market failure and we need to provide the intermediaries and institutions which could make this possible.
But we all know that that the vast bulk of business investment goes into big business. That is not the market; it is an inefficient distortion which is one of the root causes of an unbalanced economy. It is a result of serious failures of financial institutions, which have no skills or knowledge with dealing with the real economy at local level.
In the interim, future governments need to track these numbers regularly – comparing profitability and investment by size of business – and to report on them.
The Treasury also needs to develop a body of practical knowledge about ultra-local economic solutions and local economic resilience. It must set up an ultra-local/ultra-small policy and delivery unit, learning the lessons from the experience of those local authorities in urban and rural areas which are succeeding in developing working solutions to their economic difficulties.
People Powered Prosperity, by David Boyle and Tony Greenham, is published by the New Weather Institute.
* David Boyle is a former Lib Dem parliamentary candidate and the author of Tickbox (Little, Brown). You can buy the book from Hive or Amazon.
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3 Comments
Just a small omission: The book is available as a free download, just follow the links David provides in the article.
As ever David is asking interesting questions. In a sense though it isn’t a failure of the market that institutions don’t invest in small business, it’s more that small business is invisible to the market. I run a small business, employing four people plus myself and my partner. We turn over about £400k, so fairly typical of the 51% that David mentions. We no longer qualify for a business manager at the bank so there is no one in a position of any authority who knows that I have run the business responsibly for 35 years, and if we need to raise money for investment then I would have to put my house on the line as security. I don’t want to get rich, but I want to provide secure employment for a few people, do as good a job as I possibly can for my customers, be responsible to and active in the local community, and have as little environmental impact as I can. I can’t work for most governmental organisations these days because they require expensive certification to prove that I am doing things that I was doing years before they had thought about it. I’m not paranoid or a conspiracist, but it does seem that there are dynamics operating in the macro market that, whether by commission or omission, are suffocating the vitality of micro market.
Small sounds promising. So does communities irrespective of borders.
I have lived on the edge of three boroughs for years. There is a natural community which spills over local Council borders. Getting anything done which involves all three is a nightmare.