Building economies that work for people

By Marcus Johns | 23 June 2020

COVID-19 presents an existential challenge to our economic system. Parallels are often drawn to the world wars of the 20th Century and the radical economic changes that followed. But there has been no precedent for the deliberate shutting down of an economy by Government as most developed nations have done in 2020. Lockdown, while necessary, has led to profound change and laid bare many of the failures of recent growth.

This crisis has highlighted our collective dependence on the many workers who are poorly paid but without whom society would cease to function. Once referred to as ‘low skilled, low paid’, they are now called ‘essential’ and ‘key’. This is a shift in our outlook that we need to heed.

As we start to lay the plans for our economic recovery from this crisis, we should remember the quality of life crisis that has long rumbled under the surface for those maintaining our essential services. In recent years, a centrally driven, national focus on productivity has not created an economy where all feel the benefits. It has not been accompanied by growing incomes across the board—meaning the benefits of growth are not being felt by workers.

Indeed, the UK faces an ongoing job quality crisis with many experiencing a long-term earnings squeeze, lack of opportunities for training and progression, and high levels of job insecurity. In 2019, we found that one in four workers in the north, and one in three women, were paid less than the real living wage—calculated as the minimum needed for people to get by.

The 2008 recession deepened these challenges and now, the economic crisis because of COVID-19 threatens widespread redundancy and massive churn in the labour market.

Recently, IPPR North has been working with the Local Government Association to set out how local government can build inclusive economies. Councils can help solve the economic exclusion that we have seen during previous booms, spurring on recovery, and making their economies more resilient to shocks.

Many local authorities are doing this now. Our research has shown many examples of innovative practice, with lessons for how local authorities can build their own approaches. Councils have substantial influence over their local economies, via their levers as direct employers, spending power, regulatory orbit, assets, and soft power.

As employers, councils can focus on being exemplary. Those paying living wages to all staff, providing flexible hours, and opportunities for development and progression, for instance, ensure they have happy, productive staff and act as beacons of good practice to the public and private sectors in their local economy.

In 2017/18, local government saw £79 billion in revenue and £19 billion in capital expenditure, which can be funnelled into growing local businesses, supporting co-operatives and social enterprises, and creating training and employment opportunities for those long excluded from the labour market. The use of social value in commissioning and procurement is an increasingly successful tool that authorities like Manchester have used to route benefits to their citizens. Councils are also increasingly using soft power to convene and influence anchor institutions, who in turn can make sure their activity and procurement spending bolsters an inclusive local economy. For instance, Gloucester CC working in partnership with a local housing provider are linking the delivery of affordable housing with jobs, apprenticeships, and investment in local community projects.

Using regulatory influence is another area of increasing activity for councils innovating to build inclusive economies. For example, Islington has used the Section 106 planning process to increase the supply of affordable workspaces. Its policies have in turn targeted these workspaces at groups who have been excluded from economic growth and crowded out by high rents, for instance, supporting an emerging garment making industry among predominantly ethnic minority women.

Meanwhile, Preston is targeting access to finance for its citizens and businesses. It has helped to grow a credit union and it is now collaborating with other local authorities to bring forward a regional community bank, responding to the decline in bank branches and increasing difficulties for small businesses and co-operatives in accessing finance.

Overall, councils that have successfully nurtured inclusive economic thinking implement impactful policies like these by building strong internal approaches. These are often driven by strong leadership and vision—politically and officially—working across departments to convince all wings of the council as to the benefits of embedding inclusive economic thinking. This also helps to map out the many levers at the council’s disposal to build inclusive economies, and is often supported with a specific strategy that prioritises their use.

These approaches offer a foundation and coherence that encourage innovations. They are characterised as being consensus based—including a clear accessible definition of what a local inclusive economy ought to be—focused on local challenges, and embrace partnership working. The effective use of evidence is also crucial in terms of building a definition of, designing, implementing, and evaluating inclusive economic policy.

As we look to the future and our recovery from COVID-19, there is a compelling need to build economies which work for people. Accelerating this agenda and building on existing best practice is key for local authorities responding to the COVID-19 crisis. With the risk of increasing unemployment, in-work poverty, and poor working conditions, bold and innovative policy for inclusive economies in our villages, towns, and cities is the only sustainable way forward in the challenging years ahead.

Marcus Johns is a researcher at IPPR North

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