Taking back control

At the Centre for Local Economies (CLES) 40th birthday party in April, Andy Burnham said that we needed to ‘call time on trickle-down’ when it comes to economic policy. Since then we’ve heard more about his vision of reversing decades of privatisation and placing the essentials of life back under public control. I think it’s more municipalism than Manchesterism but regardless, this could be a gamechanger for local government.

A national presumption in favour of public ownership could empower local government to disrupt the extraction of wealth from our local economies and rebuild essential services that address, rather than exacerbate, the cost of living crisis. In short, it would provide a licence to deliver the cornerstone of community wealth building – democratic ownership.

While privatisation is often talked about as national policy in relation to water, energy or trains, there is much less said about the fact that local government has had to deliver the dirty work of privatisation in places like Makerfield. So much of life’s essentials in our communities are in the hands of private finance, whether it’s the high street, social care, SEND transport or affordable housing. Even our schools are now run at arms-length through multi-academy chains.

More than a decade of austerity has sped up the drive for privatisation. Central government actively encouraged the outsourcing of more and more of local government work. This ‘innovation’ was based on a flawed argument that outsourcing would create efficiencies and economies of scale when in most cases it did neither. Instead it made public control and accountability more difficult and facilitated the extraction of wealth from public value to private profit.

“Privatisation is no longer simply a political idea but a way of life for local government. I don’t think it’s an exaggeration to say that at times, it creates a dependency culture where local government has become entirely reliant on private providers to get things done. Too few questions are asked about the types of organisation, the size of their profits and the mismatch of values and interests.”

More recently, local government reorganisation has been pitched as an opportunity to generate greater efficiencies through economies of scale, which no doubt will prompt some to propose an expansion of outsourcing, heightening the risk of financial extraction at scale.

Privatisation costs the local state more, not only because the interest rates on borrowing to invest for the private sector are higher, but because the state ends up paying for the financial complexity as well as the absolute requirement for profit. Recent research suggests that in three regions of England, more than £250m of profit was made on the back of social care with a large proportion disappearing into private equity and overseas tax havens.

At the same time, wages in social care have remained static, mostly below the real living wage, and largely delivered by women. Similarly, our recent research on onshore wind energy in Scotland has shown the dependence upon extraction to deliver Scotland’s renewable energy targets, with the profits and energy security moving offshore.

Privatisation is no longer simply a political idea but a way of life for local government. I don’t think it’s an exaggeration to say that at times, it creates a dependency culture where local government has become entirely reliant on private providers to get things done. Too few questions are asked about the types of organisation, the size of their profits and the mismatch of values and interests.

While efforts are made to regulate, procure effectively and better co-ordinate, without control through ownership, local government can only ever act at arm’s length, attempting to cajole and incentivise providers to ‘do the right thing’.

Take planning for example. Too few councils build and own affordable housing to address local need. Instead, the tactic is to negotiate, and persuade the private sector to build it instead, which is only possible where profits are high enough. If they aren’t, it’s back to the negotiating table.

Community wealth building is about rewiring an economy so it generates economic and social benefits before during and after fiscal redistribution. An invitation to deliver change, but without having to wait for the trickle down of growth.

Rediscovering the intrinsic value of public ownership and control is an exciting opportunity for local government to deliver that vision. Perhaps it’s not Manchesterism at all, simply local government rediscovering a set of powers it rather absentmindedly put down somewhere in the 1980s.

This article was originally published in the Municipal Journal.