How to build community wealth

Five principles underpin community wealth building in the UK context.

1. Plural ownership of the economy

Challenge

The UK is the fifth most unequal country in the world, according to the OECD. Financial wealth is held by a small minority, 44% of the UK’s wealth owned by just 10% of the population, five times the total wealth held by the poorest half. More than a fifth of the population live on incomes below the poverty line despite the majority  of these households being in work.

At a local level, this means that the wealth generated by workers, local people, communities, local enterprise and business in our towns and cities does not flow back to them, but instead is extracted by distant shareholders as profits and dividends.

Data from OECD in 2017 identified that the UK was the only developed economy where wages has fallen in real terms while the economy grew. Over the last 30 years we have seen the severing of the links between wages and economic growth, which has fuelled further this inequality and led to a hollowing out of local economies.

Solution

Rebuilding the connection between the people and the places that create wealth and those who benefit from it is at the heart of community wealth building. We know that locally owned or socially minded enterprises are more likely to employ, buy and invest locally. This means that rather than extracting wealth they contribute to local economic development. For this reason, community wealth building seeks to promote locally owned and socially minded enterprises.

To further strengthen the link, community wealth building promotes various models of enterprise ownership. These include public sector insourcing, municipal enterprises, worker ownership, co-operatives, community ownership and local private ownership. These models enable wealth created by users, workers and local communities to be held by them, rather than flowing out as profits to shareholders.

2. Making financial power work for local places

Challenge

The UK banking sector is orientated to global markets rather than local investment and economic development. Over recent years, we’ve seen a stagnation of lending to small business and the closing of many local branches, reducing the connection between lenders and their local communities. Access to credit is the life blood of many small businesses without which they struggle to operate and compete with larger firms to provide goods and services.

Solution

Community wealth building seeks to increase flows of investment within local economies. It does this by harnessing the wealth that exists locally, rather than by seeking to attract national or international capital. For example, local authority pension funds are encouraged to redirect investment from global markets to local schemes. Mutually owned banks are supported to grow, and regional banking charged with enabling local economic development are established.

All of these are ideally placed to channel investment to local communities while still delivering a steady financial return for investors.

3. Fair employment and just labour markets

Challenge

Continuing stagnation of real wages, the erosion of job security and rise of zero hour contracts, job loss driven by automation, mean that the reality of employment for many in the UK is increasingly precarious, with many working full time jobs unable to make ends meet. In 2018 Joseph Rowntree said number of workers in poverty had 4 million meaning that about 1 in 8 people are now classed as working poor.

Solution

Community wealth building not only aims to improve employment opportunities but also worker rights by, for example, promoting recruitment from lower income areas, inclusive employment practices, committing employers to paying living wage and building progression routes for employees.

Often the biggest employers in a place, the approach anchor institutions take to employment can have a defining effect on the employment prospects and incomes of local people. Working with human resource departments within anchor institutions to stimulate the local economy through progressive employment and local labour market activities has proved a powerful tool.

4. Progressive procurement of goods and services

Challenge

When it comes to how money is spent and services commissioned by anchor institutions, cost is often the dominant determining factor in who gets the contract. Environmental credentials, social value and decent employment conditions tend to be weaker considerations.

Solution

Community wealth building promotes the progressive procurement of goods and services, as this spending power can be a means through which greater economic, social and environmental benefits can be achieved.

By adapting their procurement processes and decision making, anchor institutions can create dense local supply chains and ecosystems of local enterprises, SMEs, employee owned businesses, social enterprises, cooperatives and other forms of community ownership. This is important because these types of businesses are more likely to support local employment and have a greater tendency to recirculate wealth and surplus locally.

5. Socially just use of land and property

Challenge

How land and property assets are owned and managed are key features of any local economy. Land ownership matters because it is an expression of economic and political power, and in the UK the ownership of land is concentrated in the hands of the very few while the least wealthy 30% have no net property wealth at all. The current state of landownership is a major driver of inequality, as a few private owners benefit from speculation on property markets whilst the majority suffer the consequences of unaffordable house prices.

A huge amount of wealth is held through the land and property assets of anchor institutions, and in the past anchors would act to ensure that publicly owned land secured benefits for the local community, for example municipal town halls and local parks. However in recent decades over 2 million hectares of public land has been sold off to private interests, often with little scrutiny or accountability. This has meant that the wealth previously generated in the interest of local communities has increasingly been enclosed and captured by elites.

These trends have been exacerbated by conditions of austerity, with local authorities especially under pressure to sell off land and property assets rather than investing in their social, economic, and environmental value for the local community.

Solution

Local land and property assets represent a base from which local wealth can be accrued through equitable forms of ownership, management, and development. Through a community wealth building approach , these assets are owned and managed in ways which ensure that they generate wealth for local citizens, rather than enclosed by private interests.

The goal here is not simply for a local authority or anchor institution to ‘own more land’, but instead to ensure that they land they do own is run by and for the people. This can be understood through the concept of ‘the commons’- the idea that the land held by public institutions is owned by all of us, together. To achieve this, public land owners should develop governance and management structures where communities can take direct control of common assets, for example through transferring under-utilised assets to Community Land Trusts, or working through Public-Commons Partnerships. The local state should engage citizen groups to get involved in the governance and management of municipal assets at every level.

By advancing a ‘commons’ approach to public land and assets, anchors can ensure that our shared buildings, parks, and other land holdings helps to create good local economies, ensure sensible environmental stewardship, and advance social justice.

Anchor Institutions

The term ‘anchor institutions’ is used to refer to organisations which have an important presence in a place, usually through a combination of: being largescale employers, the largest purchasers of goods and services in the locality, controlling large areas of land and having relatively fixed assets.

Anchor Institutions are often tied to a particular place by their mission, histories, physical assets and local relationships.Examples include local authorities, NHS trusts, universities, trade unions, large local businesses, the combined activities of the community and voluntary sector and housing associations.

Guided by Community Wealth Building principles, anchor institutions can play a defining role in creating and reinforcing local economic ties.

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