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The Economic Justice Action Network pulls focus on community wealth-building and how we might amplify this approach in our efforts to tackle the root causes of economic injustice.  

Introduction 

In our Action Network meeting on 4 October we adopted the lens of community wealth-building as a route to engage with the topic of economic justice. We began the session in small groups, orienting ourselves around how we might collectively define economic justice. These included:  

• Equality of opportunity and access to services and resources 
• Allowing people to function in a society regardless of their circumstances 
• The importance of treating people as of equal worth – everyone has value and insights 
• ‘Allocative efficiency’ – using resources fairly and wisely 
• Economic justice must link to other areas of justice  
• No matter who you are you should have dignity and a fair life 

(These contributions and definitions will be collated and shared publicly as part of our suite of Action Network resources).

We then moved onto the topic of community wealth-building, where I introduced this progressive approach and its potential to re-model the economy in the city of Birmingham. During the meeting, many questions surfaced about community wealth-building (CWB). I have tried to provide some answers to those questions in this blog. 

What is community wealth-building? 

Community wealth-building is a progressive approach to economic development which sets out to retain more wealth and opportunity for the benefit of local people. It is a system-changing approach that works to produce a greater sharing of economic prosperity by ensuring that a greater proportion of wealth is retained and re-circulated in the local economies so that everybody benefits (also known as the ‘Local Multiplier Effect’, see below).  

This approach is an alternative to simply letting money drain away into the pockets of distant shareholders and the vaults of off shore banks. It is also an approach that recognises that there is more to the economy than the private sector. Community wealth-building sees the public sector, voluntary sector, social care sector and all other ‘sectors’ as having equal importance to the private sector, in terms of both keeping the economy moving and creating economic opportunities we can all benefit from.  

Why community wealth-building? 

I would argue we need CWB because we live in a city with some of the most disadvantaged neighbourhoods in the country, some of the highest levels of unemployment nationally, plus a multitude of other significant indicators of economic inequality. This is despite Birmingham experiencing almost uninterrupted economic growth for the past 20 years. In fact, if you could take Birmingham’s GDP (gross domestic product – read the previous blog for reference) and divide it amongst every working person in the city it would result in an average income over £58k per person whereas the real average income is more like £28k per person*! This suggests that about half the wealth created in Birmingham is then leaving it. Where does it go? Mainly to shareholders, profits for big businesses, people who work in Birmingham but live and spend their money elsewhere, and the inflated salaries of the already super rich. Or, to put it another way, the problem underpinning Birmingham’s economic injustice is not a problem of needing to create yet more wealth, but a problem of where that wealth flows. That is why we need Community Wealth Building. * *Economic Output in Birmingham 2020, Birmingham City Council. 

What is the ‘Local Multiplier Effect’? 

The local multiplier effect is the additional economic benefit generated for an area by increasing the amount of money spent, and is then recirculated, in that local economy. For example, it occurs when money is spent through local businesses and then those businesses, in turn, use that money to either buy locally themselves or pay wages to local people. In other words, a chain reaction in local economic activity.  

How does community wealth-building work in practice? 

CWB works in practice by thinking a bit harder about the economic assets we have at our disposal and then working (‘sweating’) those assets harder to create greater local benefit. For example, the largest employment sector in the city is health with over 91,000 jobs* and yet we rarely look at the NHS as an economic asset. In addition, University Hospitals Trust Birmingham alone spends £1.5b a year on goods and services.  

A community wealth-building approach asks the questions: 

• How can we help these organisations become economic assets for the city?  
• How do we direct more jobs within these organisations to communities where they will make the biggest difference?  
• How do we direct more of these organisations’ spend to local businesses, thereby adding the greatest social value? 

*Workplace Employment in Birmingham 2021, Birmingham City Council 

What are the other benefits? 

As well as all the recognised wider social benefits of addressing poverty (improved health, reduced crime etc.) the CWB approach also aims to develop much stronger local economic ecosystems which, in turn, can help build stronger communities, and create greater social cohesion and stability. In addition, by actively working to source jobs and spend locally it reduces the carbon miles spent on travelling to work and increases the likelihood of participation in ‘active travel’ – both of which are good for the environment. 

How do we measure community wealth-building? 

The big picture for CWB is to measure how much money is being retained in the local economy. I currently estimate that about half the wealth created in Birmingham leaves the city, amounting to  approximately £15b a year. An increase in the wealth retained by the city of just 10% would mean an extra £1.5b for the Birmingham economy, which translates (very roughly!) to about 50,000 more jobs. A different way to measure is to look at the spend and recruitment patterns of large institutions (health trusts, local authority, universities, colleges, housing associations) to see what proportion is ‘staying local’ and whether this proportion is increasing.  

How do we monitor the social value of community wealth-building? 

I would advocate for a simple approach. So for jobs I would monitor whether recruitment rates are increasing in communities where people are traditionally seen as being trapped in low income and insecure employment. Then, we need a rebalancing in the workforce with more people in work from traditionally under-represented groups in terms of age, gender, disability, ethnicity etc. As for spend, I would track whether an increase in local spend is also being reflected in an increase in spend-through to businesses that represent greater social value by their very nature – i.e. small or micro businesses, social enterprises, co-operatives, etc. 

Which cities are doing community wealth-building well?  

CWB has been adopted as national policy by the devolved governments in Scotland, Wales and N. Ireland. In England it is being adopted at local authority level with two of the leading authorities being seen as Preston and Greater Manchester Council. In Europe I would recommend taking a look at Rotterdam in the Netherlands. But the real home of CWB is actually Cleveland, Ohio in the USA. Here is a link to Cleveland’s Evergreen initiative, where the aim is to create meaningful jobs, employee ownership and profit-sharing opportunities in the locality.  

How do new arrivals into areas impact community wealth-building? 

I cannot claim to be an expert on this issue but from my own experience I think new arrivals frequently add a real dynamism to a local economy by creating businesses that serve the specific needs of that community (food, fashion, legal services, etc.). They can also bring much needed skills. I was involved in a project that in just three years found 350 new arrivals in Birmingham with overseas health qualifications such as nurses, midwives, paediatricians and even an eye surgeon.  

Where in Birmingham feels ready for action and change on community wealth-building capacity? 

I have written about the need to look at the big institutions in the city (hospitals, universities, colleges etc) as economic assets. These are sometimes referred to as ‘anchor institutions’ because they are not going anywhere. However, to unlock these assets for a local community it is essential to also have ‘community anchor institutions’ that can act as the link between local people and opportunities that exist within big institutions. By ‘community anchor institution’ I mean the type of local organisation that has the reach and trust in local communities that big institutions do not have. Therefore, areas in Birmingham that are ready for CWB are those areas that are rich in local community anchor institutions. 

You can read more about community wealth-building here and you can contact Conrad if you’d like to discuss community wealth-building further via email. If any of this content piques your interest then you can join us at the next Action Network meeting, taking place on Wednesday 29 November, 11.30-2.30pm in Birmingham. Refreshments and lunch will be provided. Please sign up via this link if you would like to attend. 

Individuals and communities in Birmingham are coalescing around the theme of economic justice and seeking to build a local economy that truly serves the people says Anna Garlands of Huddlecraft – the Network’s facilitator – in this cross-posted blog.

As summer drew to a close this year, a group of bold and curious individuals came together in a room in Birmingham to participate in a “Kick Off” session for the Economic Justice Action Network. This Network, initiated and curated by Barrow Cadbury Trust and facilitated by Huddlecraft, seeks to tackle the root causes of economic injustice in Birmingham and beyond, pulling focus on the systems that perpetuate and amplify inequality within the city. The room was packed out with folks with varying associations with the theme of economic justice, all eager for meaningful change, all ready for action and all keen to learn more about how the Action Network could facilitate the systemic shifts we want and need to see.

When we talk about economic justice within this space, we are referring to a sense of economic fairness. Everyone having enough money to live. Everyone having access to the essentials of life: clean air, good public services, suitable housing, positive health care experiences, access to green spaces and, ultimately, equal life chances. Economic justice is about changing our social and economic structures so that people aren’t disadvantaged by their position in society, for example gender, ethnicity, class or disability. Economic justice is ensuring that the decisions that are made by those with power and the money that is generated in Birmingham, benefit everyone, not just those with power. It is about protecting the environment for future generations and it is halting the trend of the growing gap between rich and poor.

The Action Network has emerged because we recognise that the way Birmingham’s economy is structured does not deliver economic justice. There are areas of persistent poverty, wide disparities between the most and least affluent sections of the population and, as in other areas, structural racism, sexism and other–isms prevent many people attaining a decent standard of living and others being ill-rewarded for the work they do. Statutory agencies recognise the long-standing problems of economic exclusion and their strategies reflect a desire for change. However, things are not moving far or fast enough, and new solutions are needed.

Because we are all part of the economy, we should have a say in how it works and be able to challenge those in power on their economic choices and values. But what do we actually mean when we talk about ‘the economy’?

In his presentation at the Kick Off event, Joe Earle from People’s Economy shared that the economy is a relatively modern invention. It gives value to items that fit into the gross domestic product (GDP) framework — a monetary measure of the market value of all the final goods and services produced in a specific time period by a country or countries. Within this GDP framework, much essential work is ignored, for example unpaid care work, key workers and ‘low skilled’ workers. GDP also fails to provide a good measure of health, wellbeing or justice. It is crucial that we broaden our view and consider the economy as a system. It is about resources; money, buildings, land, food, energy, people’s time, it is about how they are used for different purposes, and how decisions about distribution of those resources are made.

It is also crucial for us to consider interconnected economic systems at different scales. How and where is the Birmingham economy impacted by broader UK economic systems? How do global economic systems affect the UK? We need to understand and examine how Birmingham’s economic system is shaped by government and corporate decisions, as well as by cultures and behaviours formed and developed outside of the city.

Birmingham’s economic system is like an iceberg. The unjust outcomes are visible but much of how the system operates and the conditions that uphold it, are hidden below the surface. In order to create the change we want to see, we first need to understand the system to explain why the system operates in a particular way and then develop interventions which can bring about change.

When thinking about the entrenched power and ideas which uphold Birmingham’s economic system, working for change can feel like a daunting and unlikely prospect. The good news is that systems are not static, they are changing all the time, and there are already many people doing important work to change our economic systems in all sorts of ways. We want to amplify and build upon this work.

The Action Network is a place for alliance-building, learning, developing ideas for change and action.

The Action Network is folk coming together to build a shared, working understanding of the economy - learning about how the current system perpetuates inequality; how adopting an intersectionality lens can widen our approach; how alternative economic models and systems can be imagined and implemented in Birmingham. The Action Network is people coming together to dissect, examine and map out the existing economic landscape in the city, identifying and engaging levers of change. The Action Network is seeding and cultivating an interconnected web of citizens, grassroots activists, change-makers and disruptors from across the city, all sharing a common view that change is possible and the need is urgent.

We recognise that no single sector  -  the public sector, private business or civil society  –  can change things alone, but that we need to work together, harnessing the ideas, experience and energy of individuals and organisations to make Birmingham a city that works for everyone.

The Action Network is open to anyone with an interest in making our economy work better for local people. What you will have in common is:

• a willingness to have conversations and work with a variety of people who you otherwise may never encounter;
• an energy and excitement for learning about the economy and how we can imagine design fairer, regenerative and distributive economic systems;
• an appetite for action and creating change within the spheres you are affiliated with;
• the ability to attend Action Network meetings every other month, where possible.

We have been delighted to see so many people from a broad range of sectors and backgrounds attend the Taster event (July) and the Kick Off meeting (August). There is clearly an appetite for spaces to connect, learn and explore these issues and we will be welcoming new members throughout the coming six months.

The next meeting will be taking place on Wednesday 4 October and we would be delighted to see you there. Refreshments and lunch will be provided. Please sign up via this link if you would like to join.

Trustees anticipate a programme budget of approximately £500k p.a., though budgets are agreed annually so this may change. The current strategic period continues to March 2027. We wish to recruit a Learning Partner to work with us for the remainder of our current five year strategic period (to end March 2027), supporting us and our partners to learn from and help us iterate the programme as we go along, so it has maximum impact.  Find out more.

• Manufacturing is a traditional strength of the Black Country’s local economy, where 14% of jobs are in the industry, compared to a national average of 8%.
• Net Zero to Level Up comes in the wake of the government’s ‘trailblazer devolution deal’ which gave the West Midlands Combined Authority (WMCA) enhanced powers to influence the region’s economy
• The report predicts that if the new powers are used correctly, up to 20,000 net zero jobs could be created by 2032 in the Black Country, opening up new employment opportunities for residents, and that the 12,000 manufacturing jobs could be saved
• The report sets out recommendations for how local and regional institutions should use their powers to secure a just transition, defending existing jobs and maximising the new opportunities of net zero
• Recommendations include targeted support for vulnerable SMEs in manufacturing, and creating pathways for local residents to get the training they need to access new net zero jobs.

Demos has urged West Midlands Combined Authority (WMCA) Mayor Andy Street to use the new powers in the recently-announced ‘trailblazer devolution deal’ to secure a just transition to net zero in the Black Country – defending existing jobs in manufacturing and maximising new employment opportunities connected to net zero.
According to Demos’s research, a significant number of small businesses in manufacturing will face enormous challenges as a result of the transition to net zero. The think tank has sought to define a framework for achieving a just transition – one that increases opportunity while reducing deprivation – that can be replicated across the UK. The Black Country is a key geographical area for the government’s levelling up agenda, with all four local authorities identified as ‘priority 1’ for the Levelling Up Fund.

The report, Net Zero to Level Up, highlights the high number of energy-intensive businesses selling into threatened supply chains such as internal combustion engine markets, despite the transition to electric vehicles already being well under way, with 20% of UK car sales in 2022 either battery electric or plug-in hybrid vehicles. It also points to an existing business support system which fails to reach many small companies as another leading cause for concern.

Net Zero to Level Up also references age demographics, outlining that future investors are unlikely to employ a large number of older workers, even if they replace some of the jobs lost. With two thirds of the manufacturing workforce in the Black Country already over 40, they may struggle to find jobs of comparable quality if made redundant, the report warns.

Despite the risk of job losses, the report finds that a just transition is achievable: the 12,000 manufacturing jobs could be saved and up to 20,000 new jobs in industries such as housing and transport could be created, provided the necessary action is taken and that pathways are set up to enable people from disadvantaged backgrounds to access some of the new jobs.

To support a just transition in the Black Country, Net Zero to Level Up has produced a number of policy recommendations for regional institutions to implement, including the WMCA, the Black Country local authorities and the Black Country Chamber of Commerce. These include, but are not limited to:
1. Distributing government funded business support products through the Black Country Chamber of Commerce, alongside the banks, solicitors, accountancy firms and brokers that businesses have existing relationships with
2. A regional mergers and acquisitions service to facilitate purchase of firms which are too small to respond effectively to the challenge of net zero by larger firms with greater human and financial resources
3. Communication to businesses of the likely future demand for low-carbon infrastructure, including what any development of central government policy will mean for the West Midlands
4. Active co-ordination of public and private sector investment

As part of its new Birmingham-based Economic Justice programme, the Trust will be launching an Economic Justice Action Network in the summer. We are looking for a Birmingham-based facilitator to lead its meetings. You should be expert in bringing people together to forge productive alliances, and with practice rooted in equalities and anti-racist approaches. Deadline for submissions is 23 March 2023  More information and how to apply.

Read the report and find out more about our economic justice programme.

Local councils across the UK have made it clear: these tough times are no obstacle to doing the right thing on tax. Three more – the City of Lincoln Council, the City of Edinburgh Council and Trafford Council – have made significant commitments in support of responsible tax conduct, joining the six already signed up.

Lincoln and Trafford have both approved the Fair Tax Mark’s Councils for Fair Tax Declaration, committing them to lead by example on their own tax conduct, demand greater transparency from suppliers, and, call for more meaningful powers to tackle tax avoidance amongst suppliers. In Trafford, the motion passed with unanimous, cross-party support.

Separately, Edinburgh is championing fair tax by calling on businesses it works with to gain Fair Tax Mark accreditation. The Council has approved a target to promote the Mark to its suppliers through the Council’s Business Gateway. Edinburgh is the first council in Scotland to make such a commitment.

Elsewhere, significant support for the Fair Tax Mark as a local social value consideration is expected in coming weeks.

Cllr Tom Ross, Executive Member for Finance and Investment at Trafford Council said: “One of the many consequences of the past few months is the growing wish for a fairer society and to avoid going back to how things were before the pandemic changed our world forever. A key change would be to join other authorities – of different political colours, including Oxford, Oldham, Edinburgh, Peterborough and Lincoln – in signing this declaration that celebrates and supports companies that pay their taxes in full.”

Mary Patel, Networks Manager at the Fair Tax Mark, said: “With everything that local councils are dealing with, supporting fair tax practices remains a priority. We know that people want a fairer recovery: polling we conducted earlier this year showed a new ‘Lockdown mindset’ with more Brits calling for greater accountability for businesses on tax avoidance and social responsibility. Local areas can and are making a stand.”

Find out more about how your council can support responsible tax conduct by approving the Councils for Fair Tax Declaration here.

Given the vast size of the UK’s defined benefit pension funds, it is perhaps no surprise that, since the financial crisis, governments in the UK have looked to funds to contribute to efforts to enable economic recovery, and ‘rebalance’ the economy in geographical and sectoral terms. Assets in UK pension funds are equivalent to more than 120 per cent of UK GDP; within this, local authority funds hold assets worth more than £200 billion.

The May government’s recent ‘patient capital’ review considered whether pension funds were being prohibited by regulation from investing in a manner which supported economic growth as well as fund performance, and the earlier review by John Kay under the coalition government considered whether over-intermediation in the investment chain was having a similar impact.

In terms of local authority funds, the coalition government lifted restrictions on private equity, and the May government is (tentatively) taking forward former Chancellor George Osborne’s agenda to create a small number of mega-funds within the LGPS.

My recent report for the Barrow Cadbury Trust, Localising Pension Fund Investments, considered the specific issue of whether pension fund investment strategies can be localised as part of this broader agenda. Some local authority funds, notably the Greater Manchester Pension Fund, have begun to demonstrate an appetite for, and emerging track record in, local investments.

In general, however, pension funds are invested for the benefit of scheme members, and there are legitimate concerns about the ‘double exposure’ associated with local investment, whereby a local economic downturn might also be reflected in reduced returns on pension investments. However, the concentration of investment hitherto in London-centred capital markets has created similar risk dynamics, whereby a financial crisis led to a deep, national recession, as well as impacting conventional asset values very negatively. Furthermore, the growth of the City of London, partly assisted by pension fund investment practice, arguably contributed to the finance sector over-heating in the first place.

So the risks to members in partially localising investment might have been over-stated. What do we actually know about local investments among pension funds? Unfortunately, frustratingly little. Private sector and especially local authority funds are now allocating a larger portion of their funds to ‘alternative’ asset classes than before the crisis. In general, local authority funds have more scope to invest in alternatives, having not made the same move into gilts witnessed in private sector funds since the crisis. Interestingly, however, the allocation to alternatives for the largest local authority funds has slightly fallen in the last few years.

Within the alternative investments category, local authority pension funds remain far more likely to invest in private equity than assets such as infrastructure (although the two are not necessarily mutually exclusive). A consensus that the private equity industry, with attractively priced opportunities, will provide funds with above-average returns emerges very strongly from funds’  recent annual statements (whereas in the private sector, the move to alternative assets is largely explained by increased hedge fund investments).

An interest in private equity clearly suggests opportunities for the local economy, where investments might take a less conventional form. Yet generally speaking funds’ interest in private equity is part of a diversification strategy, associated with the need to hedge risks as scheme demographics mature. The compatibility with local investments cannot be assumed.

Nor can the apparent synergy between fund scale and localisation. While merged funds might have the capacity to make longer-term, riskier investments, my conversations with stakeholders, summarised in the Barrow Cadbury report, demonstrate that pooled funds are more efficient precisely because they can make larger investments, even if on average the returns are lower. But local investments are small investments, more likely to be attractive to smaller investors. Pooling initiatives risk further detaching investment strategies from local economies.

This issue notwithstanding, the report suggests that the creation of metro-mayors does increase the scope for local authority pension funds to be elected a little more strategically, without compromising the focus on member interests. However, it may be that the localisation agenda should focus rather more on how local authorities can encourage private funds to invest more in their local economy.

Metro-mayors should be looking to mediate between private sector pension funds and potential investees in the local economy, and to create the kind of long-term economic strategies – if central government will let them! – that institutional investors can rely upon in planning their investments.

There is also growing support for the notion that local authorities require greater fiscal powers in order to share investment risks with pension funds, or that national institutions which have such powers, like the British Business Bank, should have a much stronger mandate to support long-term investment in disadvantaged regions.

It is worth noting, finally, that any plan based on the assumption that defined benefit pensions provision will continue indefinitely is, sadly, bound to fail. We are only now beginning to contemplate the implications of the large-scale shift to defined contribution pensions saving in the private sector. Defined contribution investment strategies are generally even more conservative, because of the individualisation of risks. But they also, potentially, put more control into the hands of member over where their savings end up. Will a greater appetite for local investments emerge? If so, there will be lessons to learn for all forms of pensions provision, including LGPS.

Craig Berry is reader in political economy at Manchester Metropolitan University.  This blog was originally published on the Room 151 Blogs page.   Our thanks to them  for allowing us to repost.

The early warning system, created by CPAG, collects reports from welfare rights and other frontline advisers about the impact of social security reform and issues arising from the benefits system.

Read the report