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Neoliberal growth or community wealth: which path will Labour choose?

How the tensions between different models of local development are resolved will define the UK’s economic future.

By Jack Shaw

When the British geographer Doreen Massey described freeports as an experiment in statecraft rather than economics, she was not describing the two dozen freeports and investment zones recently announced by Jeremy Hunt. Instead, she was referring to the eleven freeports announced by then chancellor Geoffrey Howe in 1979.

The introduction of these special economic zones – which have also been dubbed “extraterritorial islands” because they are subject to bespoke taxation and regulatory regimes – have often been a response to sluggish economic growth or in a time of crisis. In the UK, they are favoured by politicians on the right and have been promoted by Margaret Thatcher, and more recently Liz Truss. And they have grown in popularity: in 1986 there were 176 worldwide but by 2018 their number had increased 30-fold, to 5,400.

A central tenet to this vision of economic growth is opacity. Reducing democratic oversight or “red tape” is thought to be growth-enhancing, enabling decision-makers to streamline regeneration. In many cases, access to private capital is easier, tax subsidies are not subject to the same degree of scrutiny, and planning policies can be overridden. In this context, communities – conceived as barriers to growth – are locked out of decision-making.

Criticism has already been levelled at Teesworks, England’s largest freeport, overseen by the mayor of Tees Valley, Ben Houchen. Accusations abound over its supposed “democratic deficit” and poor governance, and an independent inquiry was established by the government which is expected to report soon.

But there is a tension between this neoliberal vision of growth, and a model in which communities play a leading role in shaping the economy. Despite this renaissance in less transparent, free-market forms of governance, other paradigms are also gaining traction: community wealth-building, participatory budgeting, citizens’ assemblies and social enterprises are becoming a permanent part of local growth strategies. Reconciling these two competing trajectories of local economic policy will be a challenge the next government will need to navigate.

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Our contemporary politics of discontent is partly fuelled by a concern that economic growth is too concentrated, and that too many places are being left behind. The disconnect between communities and decision-makers remains overwhelming and threatens to polarise our politics and political institutions further.

The government has responded to this challenge by introducing a programme to tackle regional inequalities. There are some green shoots, suggesting it recognises that the legitimacy of the current economic model requires greater community ownership and agency. At the margins, replacing local enterprise partnerships and giving local authorities democratic oversight over their economic functions is noteworthy. It follows the decision to make the police accountable to their elected mayors. The government’s forthcoming Street Votes policy is designed, at least in theory, to give communities a greater voice over place-making, and the Community Ownership Fund is providing seed capital to for grassroots community groups to take ownership of community infrastructure that is at risk of closure. These interventions alone, however, do not rearrange the current tensions – perceived and real – between communities and growth.

While the government has made progress on devolution, it is also curious that “double devolution” – that is, devolution to communities rather than political bodies made up of regional politicians – has not featured in the settlements the government has struck. There is, for example, no quid pro quo to give communities greater ownership over their assets, despite local authorities selling them off at an unprecedented rate so they can continue to provide services. Nor has an emphasis been placed on encouraging authorities to develop strategies to promote democratic forms of growth, or to provide adequate investment to realise those strategies where they do exist.

Some authorities have taken the initiative, but many have not. This democratisation of growth is a progressive approach to solving our current stagflationary dilemma, and appears to be more attractive to Labour-led local authorities such as Camden, Wigan and Preston, source of the much-lauded “Preston model” – in which deeply integrated community wealth strategies favour cooperative and local ownership, as well as ethical employers, in the progressive procurement processes of local government and a network of partnered anchor institutions. This may come to be a clear dividing line between the Conservative Party and Labour at the next election.

In the US, the $10bn Community Revitalisation Fund was introduced to support “community-led” infrastructure and community wealth, establish shared amenities, and strengthen social cohesion. Its scale dwarfs what the UK government has in place. And President Joe Biden’s visit to autoworkers’ picket lines to encourage “employee power” is radical in the US context.

Similar to Bidenomics, Labour has also begun to set out how its “securonomics” approach will democratise the economy if the party wins the next general election. Labour will need to take further action. Its plans so far include: £1bn per year to invest in community-owned energy via Great British Energy; doubling the size of cooperative economy, which includes employee-owned firms such as John Lewis, Waitrose and Mole Valley Farmers; and a “tack back control” bill that, though light on detail, is expected to give communities new powers and access to policy levers. Labour has not taken a position on freeports and investment zones, but if it wishes to avoid regressive forms of growth it should not pursue them in their current form, once the current tranche has come to an end.

If Labour wins the next election, how it navigates these two poles – between attempting to streamline growth through regeneration vehicles with limited democratic oversight, to giving communities the chance to shape their own economies – will define the relationship it has with the private sector and the type of growth we might expect to see in the future.

There is a need to renew how communities participate in growth. Failing to do so will only polarise our political system further and exacerbate long-standing inequalities.

[See also: Council bankruptcy tracker: authorities under increasing financial strain]

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