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Last week, the New Weather Institute – a co-operative think tank – launched its book ‘People Powered Prosperity’. It sets out a narrative for very local economics, based on local financial and enterprise institutions.

It is an important intervention that kickstarts a vital debate, examining why mainstream policymakers are so suspicious of devolving power to revitalise local economies.

Reforms and solutions

The New Weather Institute proposes two reforms. First, the Treasury needs to develop a body of practical knowledge about ultra-local economic solutions and local economic resilience. It should set up an ultra-local policy and delivery unit, learning the lessons from the experience of those local authorities that are succeeding in developing working solutions to their economic difficulties.

Second, as small businesses earn 51 per cent of value added in the UK economy, they should correspondingly receive a similar proportion of the business investment available in the UK

Empirical research by the Community Development Finance Association (CDFA) found that there could be as much as £6.5 billion in potential annual demand for community finance in the UK from businesses, civil society organisations and individuals. Yet alternatives such as Community Development Finance Institutions (CDFIs) were able to lend just a small fraction of this in 2014 (£72 million).

This clearly demonstrates serious market failure and requires intermediaries and institutions that can make this possible. The Government must provide physical and technological infrastructure support to the community finance sector (including credit unions and CDFIs), as well as injecting capital into the sector, with the ultimate goal of enabling local authorities to take responsibility for this. However, in the interim, the Government should track these numbers regularly – comparing profitability and investment by size of business – and to report on them.

Working with communities to improve quality of life

At CDF, we have worked with communities, who have harnessed local information and local institutions to improve the quality of local life. The £80 million Community First programme – delivered by CDF on behalf of the UK Government – illustrated the capability and willingness of communities to come together to identify their strengths, plan for their future and become more resilient.

For example, Bestwood Advice Centre in Nottingham used their £2,000 grant to build financial resilience, connecting local organisations and local activists to prevent people from falling into a revolving door of debt and financial vulnerability. Similarly in Kent, the Medway First community group used their grant to train residents to take control of their finances and budgeting skills, with sessions introducing basic current and savings accounts, welfare benefit support and the steps to tackle debt.

Campaigning for sustainable growth

The Community Investment Coalition – of which CDF is a member – campaigns for sustainable local economic growth with a greater share of locally generated income remaining within communities. That is why we support the New Weather in generating a debate on this issue.

If politicians are serious about devolving power, they must enable cities, towns and local areas to take more control of their own economic destinies. This will require a shift of thinking amongst government departments, but it is a shift that is long overdue.

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