What is “new municipalism”, and can it really combat austerity?

Councils, city mayors and social movements are working to reshape local economies. Without central funding, is this a lost cause?

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At De Montfort University in Leicester last week, councillors, activists, academics and city mayors from across the UK and Europe met to talk about trends in local government that have been growing since the financial crisis: “new municipalism”, “community wealth building” and “municipal socialism”. Embraced by social movements in Europe, as well as by the Labour Party (which has established a Community Wealth Building Unit), these terms describe local responses to austerity and the centralising tendencies of national government.

Last year Preston city council, an early trailblazer of municipalism in the UK, made headlines after the city dubbed the “poster child of Corbynomics” by The Economist was named the country’s most improved urban area to live and work in research carried out by PricewaterhouseCoopers.

Matthew Brown, the leader of Preston council, told the conference that “the first thing we did was to become a living wage employer – the first authority in the North of England to do so.” The following year, the council “brought a credit union back to Preston” in a bid to combat the proliferation of payday lenders and loan sharks. As austerity deepened, the council set about finding other ways to invest locally. “We got the public sector pension fund to invest in the local economy. A small amount was taken out of global equities, and put back into investing in property within Preston.”

But “by far the biggest thing we’ve done”, Brown continued, “is with procurement. Over £1bn was going through the books through the local public sector, being spent on goods and services.” By handing contracts to local businesses and cooperatives “we managed to bring back £200m to Lancashire, and £75m to Preston, within a year. The vast majority of the wealth we brought back to Preston and Lancashire hasn’t been at the expense of small businesses,” he added. “It’s been large corporations that are headquartered in the City of London.”

New municipalism uses local government procurement as a powerful tool for reshaping local economies, as councils and public sector institutions such as universities and hospitals are encouraged to prioritise buying goods and services from local businesses and workers’ co-operatives over corporate outsourcing giants. As local government deals with both the continued imposition of budget constraints, the burden of PFI contracts and the demise of outsourcing providers such as Carillion and Interserve, the municipalist approach is seen by many as more affordable, sustainable and socially beneficial.

Asima Shaikh, executive member for inclusive economy and jobs at Islington Borough Council, said that her own council had adopted many of the policies of the “Preston model”. “We made a commitment to bring services back in house, because we knew that they weren’t delivering for local people,” she said. “The three largest contracts were housing management, education services, and refuse collection and street cleaning.” Like other councils, Islington has set up a municipal energy company, and in 2012, Islington and Lewisham became London Living Wage-accredited local authorities. “As a direct employer we pay the living wage,” said Shaikh, “but also we ask that anybody who has a contract with us has to pay the London Living Wage.” Islington also places an emphasis on social housing; “we demand that if you’re a developer building over 10 units of housing you have to provide 50 per cent of that as genuinely affordable at social rent. That is our planning policy.”

Two participants from one of the centres of the municipalist movement, Catalonia, told the conference about the importance of participatory governance and citizen engagement in making new municipalism work. Dolors Sabater and Jose Tellez, the former city mayor and deputy city mayor of Badalona, described how over 7,000 citizens participated in a city-wide process to shape the city’s municipal budget through public meetings, assemblies and online voting.

Matthew Brown summed up by saying that much of the appeal of new municipalism is in this transfer of control. The people who decisions at a local level, he said, are too often “not the people you vote for at the ballot box. Often they’re outside investors, big corporations, the people who Tony Benn said were unaccountable and you can’t get rid of. Sadly,” he continued, “too many people in the Labour Party have acquiesced to those quite powerful economic forces that want to extract wealth from our local communities.” New municipalism, he concluded, “is about doing what’s in the Labour tradition.”