Austerity has been devolved to local councils and, perversely, areas with higher levels of poverty have been hit hardest, councils have on average faced 40% cuts in their budgets.
In the face of adversity councils such as Preston have responded by bringing together anchor institutions and working with them to drive through a local programme of economic transformation. The government’s Commission for Employment and Skills defines an ‘anchor institution’ as “one that, alongside its main function, plays a significant and recognised role in a locality by making a strategic contribution to the local economy” and ‘tending’ to be non-profit.
By changing their procurement policies, these anchor institutions were able to drive up spending locally protecting businesses and jobs. They are looking at the council pension fund to see if its investment can support local businesses keeping the money circulating in their town.
A study by the Centre for Local Economic Strategies found that six of the anchor institutions in the area are now spending 18% of their budget in Preston, up from 5% in 2013. So an extra £75 million a year is being spent within the city, with the top 300 local suppliers creating an extra 800 jobs last year alone. And others are watching: Manchester city council has now increased its local spend from 44% of its budget to 70%; Lowestoft and Salford are also interested.
Last year this blog reported that Birmingham City Council was to work with Centre for Local Economic Strategies, with funding from the Barrow Cadbury Trust and support from Localise West Midlands, to see how anchor institutions in the non-profit and private sectors, including Birmingham University, Pioneer Housing and the QE hospital, could use their spending power to increase economic opportunities for Birmingham’s communities, businesses and citizens. Read more on the council website here.
In a separate project, Localise West Midlands has been working with the Midland Metropolitan Hospital (under construction, artist’s impression) which will be the closest adult hospital to the centre of Birmingham. The Sandwell & West Birmingham NHS Trust and LWM are partners in Urban Innovative Actions supporting the development of the local economy. The Trust hopes to spend 2% of the new hospital’s annual budget with local suppliers, adding £5-8m to the local economy. It will provide locally sourced meals and the builder has a target of 70% local employment, aiming to source 80% of construction materials locally.
Alice Thomson in The Times pointed out that making a legal requirement that councils buy and hire goods and services locally is banned by EU law at the moment, so it should be noted that the Preston project operates on a voluntary basis.
She commented: “The government should take the idea and encourage it, particularly in hollowed-out market towns where out of town shopping centres have crushed their sense of identity” adding “But (procurement policies) could also be used for more high-profile programmes such as the rebuilding of Big Ben, where the steel has had to come from Brazil, Germany and the United Arab Emirates, or the V&A which showcases Britain’s greatest designs but where the tiles for the new forecourt came from Holland”.