It’s time to democratise our economy


Democratising our economy is not just the right thing to do, it could help tackle the big challenges of our time.

Hands holding british pound coin and small money pouch.
Hands holding british pound coin and small money pouch.

Our current economic model needs renewal; whether it is climate change, the cost of living crisis or inequality, it is not helping us tackle the big challenges of our time. The debate surrounding the upcoming UK-wide budget on 15 March will likely be about how much to spend, and on what. It will undoubtedly miss a crucial question – who decides how money is spent? By not focusing on this question, we miss a crucial opportunity for central government to act as enabler of a more effective and fair UK economy.

There are increasing examples, both in the UK and across the world (1, 2, 3), of people using the power of democratic participation to drive economic improvements and ensure income, wealth and power is more widely shared across society. To do so is not just the right thing to do, but could help renew our economy to deliver what we desperately need in 2023 and beyond. Here are some examples of how some people and organisations are already getting on with the work of democratising our economy:

Community Wealth Building

Community wealth building is a people-centred approach to local economic development, which redirects wealth back into the local economy, and places control and benefits into the hands of local people. It’s the idea that underpinned the now renowned ‘Preston model’. Over the past 10 years, by partnering with ‘anchor institutions’ to encourage them to pay Living Wage and invest locally, develop collective owned economic assets such as co-operatives, and invest in land and buildings in a way that helps local people, Preston has made big moves to democratise its economy.

When done strategically, the results are striking. Money kept within the local economy rose from 5% to 18.2% within Preston and 39% to 79.2% within Lancashire, representing a rise of £74m in Preston and £200m in Lancashire as a whole. And politically, Preston city council was the only Labour-led authority in Lancashire to retain all its seats in the local elections (more here).

These successes have led to a wide range of other local authorities following in their footsteps, from North Ayrshire to Manchester, Newham to Wigan.

The Community Land Movement – buy land, they’re not making it anymore.

As the infamous quote from Mark Twain above suggests – land matters, and investment in it can be key to a better, fairer economy. And, there is a growing movement across the UK to see land owned democratically by local people, not by a distant landlord.

Whether it’s the London Community Land Trust (my former haunt…) delivering much needed permanently affordable homes for local people in London at around half price, Cornwall’s Community Land Trust efforts, or Granby 4 Streets regenerating a community in Liverpool, there are increasing examples of communities redeveloping where they live.

Some of the most impressive efforts to do this are in rural Scotland, where whole islands in the Hebrides have been bought by the local community and socially-minded supporters. Since owning the land beneath their homes, residents of the Island of Eigg have been able to stop dead the fears of eviction and economic decline, and see doubled visitor numbers, new homes built, and even claim to be the first place in the world to provide constant electricity from renewable wind, sun and hydro power. This is particularly poignant in communities that suffered the worst of the clearances; and have become a multi-generational effort to reclaim power over their home.

Participatory budgeting

Participatory budgeting involves citizens directly in making decisions about budget issues. This can take place on a small scale at the service or neighbourhood level, or it can be done at the city or state level.

In practice, the power delegated to the citizens in the decision processes varies, from providing decision-makers with information about citizen preferences to processes that place parts of the budget under direct citizen control. Generally,  the amount of power devolved has tended to be larger in Latin America where participatory budgeting was developed compared to in Europe and North America.

Porto Alegre, Brazil, is the best known example, with 17,200 citizens involved at its peak, and distributing around $160 million of public money. It has had powerful redistributive impacts, and was found to be particularly effective at mobilising those that had been politically marginalised. Paris, France, has split approximately €100m / annum into budgets for different neighbourhoods and themes (e.g. school projects).

While at a smaller scale, the exploration of participatory budgeting is particularly live in Scotland, where we’ve seen targets for 1% of local authority budgets set aside for participatory budgeting, and establishment of strategic working groups to improve and embed practice.

UK-wide politics seem to be flirting with the idea at present, but no real commitment just yet…

So there are examples of how to do this already in place, with a growing body of evidence to support the difference it can make. But what about UK-wide politics on the issue? Well, there are some hopeful signs…

Firstly, the current Conservative government has made clear their intention to shift power out from Westminster through their Levelling Up agenda. The extent to which this will be delivered remains to be seen, and delays in getting it going are certainly a concern. As are other questions about the politics of the decisions, and whether it truly pushes power out to local communities. But the political argument in support of redistributing power is clear.

As far Labour are concerned; Keir Starmer’s response to Gordon Brown’s Constitutional Review is instructive. Many understand his embrace of the recommendations are largely down to his belief that, particularly the elements around devolution, offer a route to economic growth that Labour will need to deliver on, if they come to power. But it’s too early to tell how committed to this idea the Party are, and similar themes were notably absent from the recent 5 missions announcement.

But what can central government do to help?

So how can we build this from a series of hopeful examples to a fundamental part of the debate around the budget and our economy?

Well, to start with, there are the examples above to build on and support. And further plans out there that could help grow this effort. From calls for a Community Wealth Fund, Community Power Act and Community Covenants, to existing examples of the Community Empowerment Act in Scotland, employee ownership in Wales, we are not short on examples of how to make this happen.

But fundamentally, this requires a shift in perspective, and the political will to build a shared practice across the UK in how to fundamentally democratise our economy. It requires a central government that sees themselves as enablers of an effective, fair economy, omnipotent figures empowered to condemn or save people through their decisions. And, it means placing power in the hands of regional and local authorities, and community organisations, in a collective endeavour to tackle the big challenges of our time.