Local Government and the Everyday Economy

The growing national political interest in how to improve job quality and performance in the ‘everyday’ economy where most people live and work is long overdue. Sectors such as health and social care, childcare, food, housing, retail and utilities are not only significant employers in communities across the UK, but also provide the essential goods and services we all rely on to support a decent quality of life. The nature of these sectors matters.

For the Treasury, the key economic success indicator is gross domestic product (GDP), driven largely by consumption. Accordingly, national economic policy has for many decades been organised to support thriving property, finance and professional services sectors, with occasional calls for action on the UK’s long-running trade deficit in goods through support for advanced manufacturing.

The starting point for many local authorities, in contrast, is how to make the economy work for their residents. Measures of success include whether there are enough secure jobs at decent wages and whether people have local, affordable and good quality access to the parts of the economy that meet their critical needs. This citizen-centred lens means the importance of the so-called foundational sectors is obvious to many in local government and has resulted in a very different approach to economic development compared with the one pursued by successive national government administrations.

Postindustrial places and communities in particular have been grappling with this question for decades, as unmanaged industrial decline and a laissez-faire approach to the economy led to entrenched levels of unemployment, inactivity and low pay. The cost of living crisis that began with the global financial crisis nearly fifteen years ago increased the appetite within many local councils to intervene in the economy. While many councils had long provided employment and skills support for unemployed residents, some also started to experiment with how they could use their procurement, planning and convening powers to influence local business practices in ways that benefitted local people. The mandate to do so has become more urgent with each subsequent wave of crisis that has hit communities, from wage stagnation to the pandemic, to today’s crippling food and energy price rises.

This article looks at local government efforts to support and shape their economies and explores what they can do to shape the foundational sectors that underpin quality of life in any given place. We draw on the experience of Barking and Dagenham, where we have been involved in the efforts to drive a more inclusive and sustainable economy in one of London’s most deprived boroughs. Finally, we look at the lessons for national government economic development strategy, setting out how it could better reflect and support improvements in household living standards.

The postindustrial challenge

In many parts of London, inequality is the key challenge. High skill, high pay jobs and sectors are visible, but remain out of reach for many deprived communities. This is true to some extent for Barking and Dagenham. With the borough just a short train ride away from central London’s steel and glass skyline, good and affordable transport links are crucial. But in many ways, the borough has more in common with other postindustrial economies and peripheral towns in the Midlands and the North than it does with the rest of London.

The area is best known for its association with Ford Motor Company, which employed over 50,000 people at its height in the 1950s. After a series of closures, Ford’s workforce shrank to about 3,000. Other factories have long since left. The vast majority of businesses are now sole traders and micro enterprises employing fewer than ten people, many of them operating in low skill, low pay markets in the domestically traded service sectors. Rates of low pay, unemployment and inactivity are higher than average when compared to other London boroughs. This is despite the borough having a relatively young population that has benefitted from improvements in schools and educational attainment in recent years.

The need for a new approach to the economy was clear in Barking and Dagenham long before it was debated by national politicians. Several years before the global financial crisis—at a time of relatively strong national economic growth—far right groups were able to capitalise on concerns about rapid demographic change, the lack of good jobs and the rising cost of living in order to sow division and disillusionment with the political establishment. The British National Party (BNP) won twelve seats on the council in 2006 and in 2010 the national leader Nick Griffin stood against Margaret Hodge MP in Barking. The BNP’s vote went up in 2010, but they were defeated decisively through a successful voter mobilisation campaign and commitments to address community concerns. This was followed, however, by deep cuts by national government to local authority budgets. As funding fell, the council sought to improve services, while reducing demand pressures. Efforts to increase the resilience of the population have combined experiments in service delivery—including preventative interventions and place-based community partnerships—with work to tackle the structural economic issues in the borough.

The challenge in places like Barking and Dagenham is not how to recreate their industrial heyday, which was often associated with damage to the health of the local population as well as the planet. Instead, the question is how to support a move towards a cleaner, more sustainable economy that provides the meaningful job opportunities and quality goods and services that people need to meet their basic needs. This is partly about seeking to attract newer, better paid, lower carbon jobs and sectors to the borough, but it also requires support for existing businesses in the everyday economy to grow and improve.

The next section sets out some of the approaches from other councils facing similar challenges that Barking and Dagenham has drawn on.

Local economic interventions

The number of local authorities seeking to shape and improve their local economies has grown significantly over the past decade, fuelled by rising need and reduced funding following the global financial crisis. This local economic experimentation has involved different tools, tactics and approaches, some of which have now been replicated in various forms across a wide range of progressive local authorities interested in tackling inequality and stimulating inclusive economies.

The so-called Preston Model is perhaps the most well-known example. Inspired originally by ideas from the Democracy Collaborative in the US and supported by the Centre for Local Economic Strategies (CLES) in the UK, Preston City Council has built an alliance of local anchor institutions to collectively adopt and promote ‘community wealth building’. This approach seeks to re-design local economic development away from extractive investment and developer-led regeneration and instead retain more wealth in the local economy in ways that increase community benefit and control. This means committing to pay a real living wage that meets the cost of living, hiring and buying locally, promoting cooperative and employee-owned business models and asking their major contractors and other anchor institutions to do the same.

As Preston City Council emphasises, it is not the only local authority to have sought to secure wealth for the community. Procurement and commissioning are now recognised as fundamental levers that local councils are able to wield to stimulate and drive change in their supply chains. Similarly, planning powers are routinely used by local authorities to ask those investing in their areas to hire and train local people, support local businesses and invest funding and resources in wider social and community infrastructure. Like Preston, many councils start by setting an example through their own employment practices. Others are also using their roles as commercial landlords, investors and enforcement bodies to attract firms and sectors offering better jobs and to crack down on those with dangerous or exploitative practices.

To support change in the parts of the economy they cannot easily influence, councils have also developed initiatives that promote the real living wage, apprenticeship training and other inclusive employment practices. Salford City Council was one of the first to develop a charter to recognise and promote responsible employers offering good pay, conditions and opportunities for local people. This inspired Greater Manchester and other combined authorities to establish similar accreditation schemes. While most of these campaigns incentivise change by celebrating good practice, others are seeking to lock in commitments, such as by linking charter standards to eligibility criteria for funding and investment.

Sometimes instead of, sometimes alongside the local and regional government-led frameworks, are a range of community-led campaigns and networks to drive momentum and build alliances for change. For example, a community-led Social Value Alliance in Salford asks all organisations in the borough to pledge support to ‘Make Salford ten per cent better’ across a range of metrics. And in 2019, Dundee in Scotland became the first city to be recognised under the Living Wage Foundation’s Living Wage Cities campaign, which celebrates place-based alliances that are driving local take up of the real living wage. In the capital, London Anchor Institutions Network brings major institutions together to commit to supporting a sustainable recovery from the pandemic.

Shaping the everyday economy

Barking and Dagenham has sought to draw on the ideas and experiments across the country, strengthening its levers to promote good practice wherever possible. The council has worked to attract higher skill, higher wage sectors to the borough—most notably, buying the site of a former pharmaceutical factory to enable the creation of new film studios in the borough. Drawing on examples such as Bottle Yard Studios in Bristol, which is owned by the local authority, an operator was chosen that committed to working in partnership to create structured pathways to ensure local people and businesses benefit from the associated new job and supply chain opportunities.

For the vast majority of people, however, their connection to their local economy—as employees, citizens and consumers—is through its foundational sectors. The quality and affordability of housing, energy, care and food, in particular, are essential to household living standards. These sectors hold the key to major social and environmental issues such as the need for sustainable sources of energy; affordable and secure housing; dignity in old age; and action to tackle health inequalities and food insecurity. They are also major employers across all parts of the UK, with disproportionate importance outside of the urban centres.

Despite their importance, these sectors are all in crisis. They are characterised by a lack of investment, high costs, poor quality and a reliance on a low paid, insecure workforce. This situation is often a direct result of national policy approaches and is exacerbated by extractive business models and unhealthy concentrations of power. As well as applying the general approaches set out above to these, Barking and Dagenham council has experimented with new local institutions and partnerships to drive change.

Housing

Access to cheap credit and rising property prices have been leading drivers of the UK’s consumption-led growth model. But these same factors have dramatically increased the proportion of household income taken up by housing costs. As in other areas, demand for affordable housing far outstrips supply in Barking and Dagenham and lengthy waiting lists mean social housing is restricted to those with the highest levels of need.

To address this, the council has set up its own wholly-owned development and housing management companies, with a commitment to build 3,000 new homes. The homes are not sold on for profit, but instead are rented at 65–80 per cent of the market rate to people who are in work, but can’t afford to buy or rent privately. This provides an ethical competitor to private sector landlords, alongside action to tackle poor standards through London’s first borough-wide landlord licensing scheme. In 2019 the borough became the first in London to sign up to the Unite Construction Charter, ensuring the new homes are delivered by contractors that pay the London living wage and create job and apprenticeship opportunities for local people. The council has used its planning powers to ensure all major developers in the borough do the same.

Energy and the environment

London’s poor air quality causes thousands of deaths and respiratory conditions each year, with the highest number of deaths recorded in outer-London boroughs. The current devastating energy price rises further highlight the need to reduce carbon emissions and find more sustainable sources of energy. The UK’s targets on carbon reduction are world-leading, but practical change has been hampered by a lack of serious investment, regulation or support from central government.

Over 200 councils have declared a climate emergency and committed to working towards net zero. Across the country they are working to insulate publicly owned buildings and homes to make them warmer and reduce energy bills, support the transition to electric vehicles, increase tree canopy and biodiversity and install solar photovoltaics (PV) and other sources of sustainable energy where possible. Alongside these measures, Barking and Dagenham has led innovations in ‘deep retrofit’ and established a district energy provider to offer locally produced, low carbon energy at fair prices, although practical challenges remain. Elsewhere, councils are building networks of local champions and brokering deals to bring down the costs of retrofit and sustainable energy investments for local businesses.

Health and social care

The pandemic laid bare the crisis in social care, driven by rising demand and limited central government funding. This has left families navigating a complicated, expensive system delivered by an underpaid and insecure workforce. In Barking and Dagenham, the care sector accounts for 9 per cent of all local employment. Of the estimated 7,400 local jobs in adult social care, only 5 per cent are directly employed within the local authority. Nearly three-quarters of local care workers are paid less than the real living wage, and over half of home care workers are on zero-hours contracts. Low levels of training, limited time and high staff absence and turnover drive problems with quality and continuity of care.

Local authority commissioning powers provide an opportunity to influence, for better or worse, the pay, standards and sustainability of the sector. In Barking and Dagenham, the council is working with care providers, health commissioners and other local partners to design and implement new workforce development, technological and business support interventions. One focus is how to support more care workers in their use of digital technology to provide early assessments and avoid hospitalisations, with training and pay that reflects the increased responsibility. The aim is to draw on wider health budgets to support a real living wage care sector that also delivers better outcomes for service users and the healthcare sector.

Food

The country is facing a crisis of national and local food insecurity, with serious shortages in the UK’s just-in-time food supply chain and shameful levels of food bank use (see the article by Alex Colas and Jason Edwards on food and the everyday economy in this special collection). Barking and Dagenham has twenty active food banks. The borough also faces high levels of obesity, as high calorie food with low nutritional value is faster and cheaper for people who lack the time or money to buy and prepare fresh food.

It is decades since the national government had a comprehensive food strategy, and yet an increasing number of councils are doing just that. Alongside an increase in emergency support to tackle the current cost of living crisis, Barking and Dagenham is developing a ‘good food economy’ plan in partnership with residents and community stakeholders to identify how to increase access to nutritious, affordable and sustainable food. The council also has a trading company that provides an ethical catering service to schools, meeting the Soil Association’s recognised Food for Life standards in nutrition and sustainability and providing London living wage jobs to school catering staff.

These and similar institutional experiments by councils require entrepreneurialism and investment, and as such are not without risk. Some local investments in energy generation, for example, have been unreliable and in some cases unsustainable. But, in the absence of action by central government or the market to address the issues of most importance to local communities, they seek to provide ethical, local alternatives. In a context where the interests of employees, the wider community and the planet are often presented as being in conflict, the goal is to align them by bringing together citizens’ needs for affordable, high quality and sustainable goods with the need for well paid, meaningful work.

Involving local people in change

An important critique of national and local government-led efforts to drive economic justice is that change tends to be done to people, not with people. The ‘new municipalism’ (as it has been termed in academic circles) focusses on the ends—fairer pay, higher standards—not the means, with little involvement or ownership from grassroots movements. Critics argue that this has limited the opportunity to address disillusionment in places and communities that feel neglected by mainstream growth strategies.

The 2016 vote to leave the European Union gave voice to this discontent, as millions made clear their desire to have more control over their local economy and community. As in Barking and Dagenham a decade earlier, the political vacuum also allowed extremists to sow social division and led to a rise in hate crimes against racially minoritised communities.

There is no easy blueprint for addressing these issues, but it suggests the need to combine economic justice and representative democracy with opportunities for divided communities to collaborate and participate in the decisions that affect their lives. Some councils are responding with efforts to share or create decision-making power. This ranges from efforts to improve consultation, transparency and accountability, to the use of citizens’ juries, participatory budgeting and democratic forums that give local people a voice at the table when decisions about their communities are being made.

In Barking and Dagenham, the focus has been on strengthening and creating civic institutions that build local participation. A collective of leading local voluntary and community sector organisations was established to inform council decision making and build the capacity of the sector. This partnership formed the basis of the response to the pandemic and is playing a key role in the evolving approach to the current cost of living crisis. The council has also incubated and spun out a community-led institution to direct investment to local priorities. Among other things, BD Giving has supported resident panels to decide how the council invests levies secured from new developments to build neighbourhood community infrastructure.

These examples are, ultimately, still being created and facilitated by local government. In most cases, local authorities decide which issues they are willing to involve people in, and where and how they want to devolve power. They cannot, therefore, be assumed to represent participation and political justice. In creating and facilitating more shared or devolved decision-making forums, however, councils can support self-determination, collective voice and collaboration across diverse communities. This may, in turn, create momentum and lead to more pressure from communities to ensure that state institutions work better in their interests.

Lessons for national government

Local authorities have demonstrated they have the insight, ambition and ability to drive innovation in reshaping how the local economy functions. But there are some fundamental structural limitations they are working within:

Limited resources

Local government funding has been cut dramatically in the past decade, and most are now trying to run services and tackle rising need on a fraction of the resources required. This situation is causing serious pressure on statutory services. It also makes it even harder to put resources into non-statutory priorities such as the economic interventions required to support sustainable improvements in household wellbeing.

Lack of investment

Related, but separate to the funding cuts, is the ongoing shortfall in available investment to tackle the major challenges of our times. From the transition to a lower carbon economy and energy retrofitting of homes, to the need to meet the needs of an ageing society in social care and respond to global and local issues in food security and supply, levels of national investment and engagement fail to meet the scale of the challenge.

Tackling national and international challenges with local tools

Local government is operating within a wider socioeconomic context over which it has limited control. The impact of the pandemic is a case in point: between January and December 2021, unemployment in Barking and Dagenham rose to the highest in the country at 8.5 per cent. Levels of economic inactivity rose from a quarter to nearly a third of the population. This situation, alongside current energy and food price rises, threatens any progress the council has been able to make in driving up local living standards in recent years. And all councils are in a continuous process of responding and reacting to how changing priorities in national policies affect their residents.

In this context, local change is often slow and difficult. However ambitious, local government cannot drive change in the everyday economy alone. We draw out three critical learning points national government could take from local government approaches that could fundamentally shift their scale, ambition and impact:

Re-think the question

How would a national approach to industrial strategy look if the primary question was how to improve household living standards in different regions, rather than increase productivity? Which sectors would it prioritise? What kinds of intervention, investment and powers would it require? Seen through this lens, the focus shifts to the parts of the economy that are critical because of the goods and services they deliver, not the profit they can turn. Higher wages, full employment and access to high quality, sustainable and affordable care, housing, energy, food and transport become the critical measures of success. Productivity is still part of the answer, but it serves these goals.

Ensure local government and devolved authorities have the resources and powers they need to deliver

Most obviously, there is still a huge shortfall in the funding and powers that local authorities require to address the issues that affect household living standards. Councils are required to navigate lengthy processes to unlock small slices of programme funding from central government, often with short deadlines and prescriptive priorities and processes to follow. As well as the drip-drip nature of this funding, the timescale is often too short to design meaningful long-term plans easily. Programmes generally run between one and three years, driven by the desire to point to outcomes delivered ahead of the next election cycle and a reluctance to invest in outcomes and institutions that may only become visible under a subsequent administration.

The lack of coordination across different central government funds and strategies means local authorities have to reinvent the wheel in each place by aligning myriad different funds from different departments—each targeting different national priorities, with different timescales, goals and conditions—into a locally coherent economic development strategy.

To give one example, Barking and Dagenham has managed to secure a three-year programme of energy retrofit work on council stock using various funding streams provided by the Department for Business, Energy and Industrial Strategy during the pandemic. The borough has woven this together with funding from the one-year Community Renewal Fund created by the Department for Levelling Up, Housing and Communities in 2021, small contributions secured from local developments using planning powers and efforts to align devolved adult education funding from the Greater London Authority for further education providers. The goal is to provide a basis for developing a local workforce with the green skill base to access retrofit and other green economy opportunities. But a far larger scale of funding is required to retrofit all properties in the borough, alongside a five to ten-year workforce development strategy to grow the local skills and labour to deliver.

How could central government departments think through how their separate objectives might knit together and play out locally, and design investment and funding streams to link together properly over meaningful timeframes? The devolution of more powers and funding to local areas over the last decade has sought to address these issues. Yet, the lineage of City Growth Deals, Devolution Deals, the development of Local Industrial Strategies and funding linked to the ‘levelling up’ agenda, have all asked local areas to increase local productivity rather than living standards. In doing so, they have also devolved the national government economic agenda. For a region with a low skill base, low historic investment, an under-capitalised business base and limited transport infrastructure to increase productivity rapidly, the logical response is to try to attract new industries and skilled workers from other parts of the country. The investment requirement will be in physical infrastructure, offices, higher-end housing, better transport links to London and the southeast, local airports and so forth. Yet, none of this reduces the costs of housing, energy or care. It doesn’t improve environmental sustainability or air quality. And it doesn’t support local populations to build up skills, grow local businesses, develop economic interaction between regions, travel locally to jobs, or move closer to economic centres.

This approach forces local government to attempt to reconcile two very different visions for what a healthy local economy looks like and delivers. It also leads to oversight of areas like Barking and Dagenham, characterised by a large number of low skill, low pay jobs, but considered to be within a wealthy wider geographic area.

Support local action with national and sectoral action.

The focus on the need for a less centralised UK political system through devolution is an important corrective. But, it must also be supported by national and sectoral action. Local authorities have relatively little control over the vast majority of private sector businesses operating in their areas. They cannot change employment law, and industry standards around the quality and environmental sustainability of products and services, occupational training requirements and associated wages can only meaningfully be held at national sector level. Investment and improvement programmes to support more innovative products, services and practices are also best coordinated across sectors.

These approaches are more common in other European countries and as a result, many jobs and sectors that are low paid in the UK are better paid and better skilled in these countries. While the UK cannot replicate the coordinated economies of elsewhere, we can learn from them. In the Nordic and German-speaking countries, for example, strong sector bodies are crucial. These bodies don’t just lobby government on behalf of their members. Governed by both employee and employer representatives, they have a mandate to raise standards and the power to set legal pay and training requirements and leverage collective resources for investment. The role of local partnership institutions (with local government representation) is, then, to support employers to meet these standards, alongside vocational colleges that promote local workforce development, training and innovation across all sectors.

This supportive institutional architecture is crucial to effective reform in the everyday economy. Alongside this, many other countries seek to balance the interests of employees, employers and the wider public in company strategies through more democratic corporate governance models and controls on shareholder power. At the same time, banks constrained to lend within particular places and sectors provide finance to support investment and innovation in line with the vision for a higher skill, higher value economy. Underpinning all this is a stronger framework of national regulatory floors to protect consumers and employees from shoddy and exploitative practices and support employers to avoid a race to the bottom on wages and skills.

Without attention to these three questions at national level, local government attempts to drive change and innovate locally will remain limited in scale and ambition, and subject to challenge from ongoing institutional meddling and shifting national priorities.

Conclusion

Local government economic experimentation demonstrates what national government could do. It provides a potential source of credibility for an electorate sceptical of politicians’ ability or desire to improve household living standards. And it forms the basis of coalitions for change, particularly where approaches seek to drive political as well as economic justice by giving local people a seat at the table. But it also demonstrates the limitations of localised action and the need for a wider, evolutionary institutional reform agenda that supports and elevates these approaches. The case for action is strongest in the everyday sectors of the economy where consumers have an interest in quality as well as cost, delivered by a motivated, well-trained workforce that is fairly paid. This agenda is not without tensions, particularly where higher taxes may be required to support change, but the opportunity lies in the promise of meaningful economic reform that brings together the interests of employees, citizens and the planet.

Disclaimer

The views and opinions expressed are our own and do not reflect those of the organisations we work for.