The Bank of Preston, democratic companies and other ways for communities to retain their own wealth

A new initiative - but also a return to tradition. See here.

We’re enthusiastic about the movement towards “community-wealth building” that’s buzzing on both sides of the Atlantic, led by combinations of dynamic local groups and strategically far-sighted local councils. The Preston Model (which itself copied the Cleveland Model) has been well-profiled in these pages.

The principle challenge they answer is: how can the benefits of local economic activity be kept with those same communities? Through a combination of policies - locally procuring services as councils, encouraging “anchor” institutions to do so, and encouraging cooperative and collaborative businesses - the Prestonites have raised spirits and incomes in their town.

And now, they’ve decided they need a Bank to try and provide liquidity to the new sectors of local and social enterprise that they’ve encourage. Called, straightforwardly, The Bank of Preston. See this report below from the Lancashire Post:

As austerity continues to bite, Preston has come up with a radical budget solution –  investing more than £1m in a community bank and local co-operatives.

Preston Council’s next budget proposes setting aside £1m to invest into a community bank and putting £100k towards co-operative projects.

Working with councils across the North West, Preston believes that it can set up a community bank to lend money to local people and create jobs within the county.

As part of the project, there are plans to open dozens of branches on high streets across the region – with a small number in Preston, possible in branches of shutdown traditional banks.

Council leader Matthew Brown said: “We want there to be a physical presence, whether that is reopening in branches that have closed down, or in new locations. Some will be manned and others will be automated. It will help a lot of local businesses, who often have to travel a long way to pay money in at the end of the day.”

…The RSA’s Tony Needham commented: “Regional banks by their nature reinvest existing money that is already in the region back into the local economy. For example, SMEs deposit far more into banks than they get out in loans.

“In Lancashire this would amount to billions of pounds that SMEs are depositing into banks but less than 60 per cent of that will be going back into the county. The rest will be lost to London. That is money that should be reinvested back into the local economy. So the irony is that there is plenty of money in the region, but it is just not being used effectively.”

That’s one institution which can help keep the wealth generated by a community in that community. But the idea of how this is practically done is being explored by many.

Take Mathew Lawrence of the IPPR, who has written a concise blog on how more democratic company structures might also be a way to get capital flowing closer to the people:

The company is the government of our economic lives. It controls our movements, our speech, our time. And yet many of us lack voice in that government, or a fair share in the rewards of our collective labour. The power of exit is no compensation or effective balancing to our lack of voice or power at work.

This is not just due to our damagingly low rates of collective bargaining. It is also rooted in how narrowly our companies are owned and governed. 

The wealthiest 10% own almost five times the combined wealth of the bottom 50% and dominate ownership of financial assets that provide income and control rights over business.

Meanwhile, the UK comes near the bottom of the EU in terms of the extent to which our economic institutions guarantee voice for ordinary workers, from board-level representation to strong bargaining rights. 

Given this, if we are content to only tinker with existing patterns of ownership, we all but guarantee the continuation of deep inequalities and accelerating climate breakdown.

This is all the more true in an age of automation, a broken land economy and platform monopolies; absent policy intervention, capital’s high share of national income risks rising even further in future.

If capital were widely distributed, this wouldn’t necessarily matter. Given this is not the case, rising capital share will drive increasing inequality. Alternatively, in the face of a systemic crisis, we can respond with transformative solutions that redistribute wealth and power.

….The challenge is to continue to develop and popularise an ownership agenda capable of reshaping the contours of our economy so that it bends toward justice and prosperity.

This requires strategies for broadening company ownership and reshaping governance. It also requires new approaches, from the national to the neighbourhood, to how we own and govern our shared assets.

From data to land, financial institutions to digital infrastructures, how can we scale institutions that build a democratic, inclusive and creative commons, where we all have a stake and a say? 

More here. All we would add is that “policy intervention”, as Mathew puts it, would be best shaped if it meets an already active, imaginative and enterprising citizenry. Just like the Prestonites.