Rip off Britain rears its ugly head

A charity I’m working with called me yesterday to say that they had just had a call from the telecoms company they have a mobile phone contract with telling them their bill for this month had just gone over £10,000. The usual monthly cost of this mobile phone is £48 a month. To say they were shocked is a bit of an under estimation.


It transpires that what had happened was that someone in the office was having problems connecting their computer to the WiFi. A colleague helpfully suggested they use the mobile to connect, by tethering to a hotspot. They did that, but not realising how it worked they didn’t disconnect their phone and the computer was left on overnight backing up a drive to the cloud. Now that was silly, but it wasn’t a dramatic mistake in the scheme of things…or so you’d think. They apparently – and unwittingly – used between 20gb-30gb of data. It’s a fair amount but nothing too outrageous.

By the following morning the bill stood at £10,000.

That’s right. In just one evening, using just 30gb, they were being charged £10,000.

I pay £5 a month for 2gb of data. But if I paid £10 I could have unlimited data. Or if they’d bought an unlimited data supply for one day it probably would have been just a couple of pounds. They are effectively being charged £9,990 more for the data than if they might have been.

That is extortionate. Staggeringly, ridiculously extortionate.

Secondly, the fact that they allowed £10,000 of charges to be racked up in a single day – on a usual bill of less than £50 a month – is unbelievable. You might think perhaps they didn’t know the costs were mounting up, and it just ‘slipped beneath their radar’. Errr, no. They sent a text message to the phone around 2am saying that the limit on the data package had been exceeded and costs were being incurred. So they knew, but were perfectly happy to let the meter tick away and the costs go up.

They are essentially providing credit without any idea of whether the client can afford it. Unaffordable credit is something that has been in the news a fair amount recently, with numerous stories emerging of payday lenders giving credit at exorbitant levels of interest to people who cannot afford to pay.

Put together the extortionate charges – 1000 times the amount you might expect to pay – plus the unaffordable credit and it sounds an awful lot like the sort of insidious practice that the likes of Wonga have come under fire for.

My advice to the charity in question is to wait until the bill comes and then tell them not to pay and that you’ll see them at Ofcom. Oh and not to do it again – of course. I think they should offer to pay the price of one day’s unlimited data and not a penny more. The member of staff responsible has – as you would imagine – been incredibly stressed about the situation and a great deal of charitable time has already been wasted fretting over what happened. But, as a gesture of goodwill, I think the charity should say they will forgo any claim for distress caused and the costs of wasted charitable time spent sorting it out.

Perhaps the company in question will realise that what has happened and waive the bill. I have seen a similar situation – where a volunteer racked up a large bill calling premium rate numbers back in the early 90s – and the company took the amount of the bill when we complained. Maybe that’s what will happen here.

But I can’t believe this is an isolated case and I am sure that not everyone would be quite so prepared to challenge the charges and would end up paying.

A while back there was a lot of talk about ‘rip off Britain’. Although it’s been less talked about, it seems like it’s still going on.


Update 1st May 2015:

After a fair amount of to-ing and fro-ing and a bit of a wait, BT (for they were the telecomms company concerned) have informed us that they are waiving all the data charges as a gesture of good will. I did have to point out that this was a charity and it was a mistake but they did come good in the end.

A happy ending after all.


How can we disrupt markets to better serve low income consumers?

The interests of low income consumers are being failed by markets across a wide range of sectors and the State has too often failed to intervene. We should not be under any illusion as to the impact of this market and state failure on society as a whole and low income households in particular. You don’t have to be an advocate of the Spirit Level (which says inequality is bad for all of us) to recognize the challenges and problems caused by this:

The recent financial crisis resulted in billions of pounds of State guarantees and bailouts, a huge increase in national debt and a slashing of public spending and essential services that poor people rely on.

Research from Joseph Rowntree Foundation shows that recent inflation has risen much faster for those on lower incomes. In-work poverty, food poverty, fuel poverty and financial exclusion are not going away. On top of this we have a continuing ‘poverty premium’ that means cost of living for lower income households is much higher than the more affluent.

Perhaps that is just ‘the market functioning efficiently’, but what are mere externalities for financial service providers, energy companies or the food sector, are huge challenges to the State, consumers and communities.

If banks want to cherry-pick who they offer affordable financial services to, that’s their prerogative…but let’s be clear about this: It is society (and tax payers) that must bear the burden in terms of the costs of their financial exclusion.

Of course it would be naïve of me to suggest that everything is getting worse. It’s not. There are some notable exceptions to this bleak picture of market and state failure.

We’ve seen increasing competition in the telecoms sector (or parts of it) that have offered consumers cheaper goods and services. In the groceries market, we’ve seen prices stay incredibly low, or even fall in real terms for a number of years. This is despite a very small number of retailers dominating the market.

However even these consumer benefits come at a cost. These costs are externalities for the retailers but they must be borne by the State and communities. Giant supermarkets increase food miles, squeeze producers margins and can have an adverse effect on local high streets and retail. The social, environmental and economic costs are significant and government spends considerable amounts of money attempt to alleviate their effects.

By contrast, local, community led (or based), initiatives are far better equipped to understand and respond to local needs and serve the interests of the whole community. They offer significant added value and retention of wealth within local communities and where assets are locked in (through cooperatives, charities and social enterprise structures) they place consumer interests above shareholder returns. Some argue this approach is inefficient as it lacks the economies of scale that huge multi-nationals bring, but that overlooks the externalities which the state ends up footing the bill for and the added value community-based services can offer.

Consider the added value of, say, community food growing schemes. There is considerable evidence of their benefits to health and wellbeing…which is not something you can buy at your local supermarket.

They can increase physical activity and reducing the risk of obesity, increase healthy fruit and vegetable consumption, help people cope with physically challenging circumstances, such as intensive cancer treatment or learning how to live with chronic conditions such as asthma or severe allergies. They contribute to improved social interactions and community cohesion, reduce stress and associated depression. They can reduce reliance on medication and psychiatric services, whilst also improving alertness, cognitive abilities and social skills, alleviate symptoms of dementia and Alzheimer’s.

It’s a similar picture in other sectors such as energy and finance.

For example, Brixton Energy have installed hundreds of square metres of solar panels on housing estates in Lambeth, using community shares to raise capital and providing a 3% return on investment to investors. Any surplus they generate is ploughed back into energy efficiency programmes that benefit the local community and they reduce costs and carbon footprint and increase energy security.

Credit Unions and CDFIs like, such as Fair Finance in East London, offer a range of financial products and services designed to meet the needs of people who are financially excluded. Fair Finance offer access to bank accounts and affordable credit as well as free money advice. They have helped their customers deal with £300,000 of problematic debt and £120,000 of housing arrears.

These sorts of community led initiatives are taking hold up and down the country. They are small and fragile but they are growing and they have the potential to change things.

Whether these constitute market disruption or not I think is an interesting point…my feeling is probably not yet, but we should not underestimate their potential to do so.

It’s worth distinguishing between the sort of collective purchasing and switching initiatives we’ve seen over recent years and changing the source of production to such as community owned micro-renewables and CDFIs. Collective purchasing has tended to generate little added value to consumers, to date, though there are signs that this may be about to change. Nonetheless, collective purchasing can be a useful stepping stone to community based production, as was highlighted in Urban Forum’s 2010 research report ‘Community Power Empowers’.

But there is such vested interest in the status quo and the barriers to new entrants to these markets remain so high that they will remain peripheral (at a macro level) without state intervention. If we want to disrupt these markets and bring greater competition to them in order to better serve the interests of low income consumers then we need to look creatively at the role of regulation.

We should look to the State to create an effective regulatory framework that offers incentives for pro-social behaviour, without placing undue burden on providers. In the US the Community Reinvestment Act has had a major impact on supporting growth in the community finance sector.

The CRA didn’t compel banks to invest in CDFIs, but they quickly realized it was an efficient way to satisfy regulatory requirements to demonstrate pro-social practice. The effect of the CRA has been to encourage collaboration between larger mainstream providers and local community organisations that fosters understanding and mutual benefit.

We should also look at ways to make better use of capital and revenue streams – such as benefits and pension funds – to provide the necessary finance for ventures that reduce demand on public services, increase low income households finance or prevent longer down-stream cost, such as public health.

And to those who regard any form of state intervention and regulation as unhelpful, it’s worth reminding ourselves that even free-market advocates like Adam Smith recognized the need to intervene where the risks of not doing so posed a major risk to society at large.

Smith acknowledged that such regulations are “a manifest violation of that natural liberty which is the proper business of law. But…the natural liberty of a few individuals, which might endanger the security of the whole society, are, and ought to be, restrained by the laws of all governments… ”.

The societal risks of markets dominated by a tiny number of providers are plain to see. Perhaps we ought to start heeding Adam Smith’s suggestions and look at how we can make markets work for the whole of society.

This post is based on a presentation I gave at the Joseph Rowntree Foundation’s event ‘Making markets work for low income consumers’ held on 5th November.

Is the state starting to stand up to multi-national corporations?

The BBC have reported that the Serious Fraud Office have launched a criminal investigation into Tesco, in light of accounting irregularities…which resulted in them overstating their profits by a cool quarter of a billion pounds. This news, which has already resulted in the departure of Tesco Chairman Sir Richard Broadbent, just a few months after former CEO Philip Clarke resigned after a profits warning in the summer, has rocked the retail giant, but is it symptomatic of a wider change in the air?

Just a month ago Wonga, one of the leading pay day lending companies in the UK, wrote off debts of £220m owed by 330,000 customers in line with new regulation of lending. This came just a few weeks after the company was ordered to pay £2.6m compensation to customer following a deal struck with the Financial Conduct Authority. Last year payday lender, First Financial, were fined £175,000 by the Information Commissioner for sending millions of spam text messages.

And of course, in case you’d forgotten the scandal over the self-called ‘masters of the universe’ (that’s the investment bankers to you and me) fixing of the Libor interest-rate is still rumbling on. Investigations into how banks were manipulating the inter-bank lending rate have been on-going on both sides of the Atlantic since 2005.

In 2012 Barclays were fined £290m and both their Chief Executive and Chairman resigned. Since then over 20 major banks have been investigated by the Serious Fraud Office and their US counterparts. To date 17 of them, including Deutsche Bank, Lloyds, JP Morgan and UBS have been charged with fraud-related offences paying fines in excess of $3bn to British and American authorities. Just a couple of weeks ago a senior banker pleaded guilty to fraud charges relating to fixing the rate and now faces up to 10 years in prison. More prosecutions are in the pipeline and there’s every chance that further scandal will continue to emerge.

Does this all suggest that the tide is turning against the all-powerful multi-national corporations? Is the government beginning to flex its regulatory muscles?

The exposure a couple of years ago of the derisory corporation tax paid by companies like Starbucks and Amazon led to public outcry and raised interest in how the global behemoths conduct their affairs. And no one needs to be reminded what, from a couple of years before that, ‘too big to fail’ means.

I’d love to say that I think the sterling efforts of campaign groups, investigative journalists, engaged Parliamentarians and consumers making their views known was creating a stronger regulatory climate. I’d love to, but I don’t think I can….not yet.

I hope that the encouraging signs of the new Financial Conduct Authority continue. I hope that prosecutions are brought on those who fraudulently manipulate markets and abuse their positions for vast personal gain. And I hope that a government that makes no secret of its distaste for regulation does not interfere. We may not be there yet, but there are some encouraging signs.

Better banking moves a small step closer

News this week that the seven largest banks and building societies have agreed to publish information about their lending is very welcome. The voluntary arrangement will see banks publishing quarterly figures on loans and overdrafts to SMEs, mortgage lending and unsecured personal loans by postcode. This is a hugely important first step towards reforming our financial services into a more responsible and properly functioning sector.Image

Some may wonder why this information is so important and why numerous campaigns over a number of years, including the Better Banking Coalition, have called for greater transparency of bank behaviour. The fact is that until we know how well banks are serving local communities, we cannot hope to identify unmet need and address gaps in provision. Amazingly millions of pounds of public money have been spent over many years tackling financial exclusion, without ever having this data. Quite how the government thought that the problem could be addressed without knowing where the market was failing I don’t know, but now we have the chance to address that.

Disclosure of bank lending is also important as it has been shown to be an important first step towards further change. In the US the Home Mortgage Disclosure Act was introduced in 1975, leading to a succession of further reforms, such as the Community Reinvestment Act and Responsible Banking Ordinances, all built on disclosure.

Access to this information can enable local communities, not-for-profit groups, the media and policy makers (we can hope right?) to hold financial service providers to account and challenge them if they fail to serve particular areas.

However everything isn’t totally sorted just yet…

The arrangement is voluntary and while that may be okay, there’s obviously a degree of uncertainty with that approach. We have voluntary arrangements for food manufacturers over food labelling, and what we’ve seen in that sector is the emergence of different ways of presenting information which make comparison hugely difficult for consumers. If we see similar differences in how bank lending data is published it will severely hamper the ability to make use of the data.

There are (as is the case with much the open data) issues around the way data is published and we must hope that banks do not try to inhibit the use of their data by putting it in a format which is difficult to use, like a pdf.

Then there is the fact that the data will be released on a postcode basis. Whilst this might sound sensible, actually postcodes are pretty big areas and the subtle differences within a postcode will be lost by aggregating the information in this way. At Better Banking we were clear that reporting had to be done at the lowest available size – which is Lower Super Output Area (LSOA) – in order to really understand what was going on. It is disappointing that the data will only be published by postcode, as it would not be any more work for the banks to do it by LSOA. I can only assume that they feel they are less exposed to the risk of being challenged by doing it on a postcode basis.

And then finally, there is the challenge of making sure the data is put to use. The value of banks’ disclosing information will only come about if people analyse the data, overlay it with other data – such as incidence of payday lenders, or the presence of credit unions and community development finance institutions – and find ways of presenting it. Developers will be needed to help campaigners, not-for-profit groups and local communities to make sense of the data and use it to bring about change. We will also need to raise awareness among consumers to highlight poor or good practice, and encourage them to make informed decisions about who they bank with.

Consumers need to start flexing their muscles – not just individuals, but local authorities, pension fund managers and other institutional investors – but they will need support from developers and analysts to make best use of the data.

Disclosure of bank lending is very welcome but it simply signals the next phase of a long road to a properly function and socially productive financial services sector.

Reaction to the Queen’s Speech 2012

14 Bills and 4 draft Bills represents a fairly modest legislative agenda – at least in terms of the amount of legislation being brought forward. But if it represents a real change from the previous government’s belief that legislation is the answer to everything, then that’s progress.

Since we’ve got used to successive government’s briefing the press of their plans in advance of occasions like the Budget and the Queen’s Speech, we shouldn’t be surprised that most of the content was expected. There was a time when briefing the press in advance of presenting in Parliament was considered a serious breach of protocol. In 1947 the Chancellor, Hugh Dalton, resigned after telling a journalist what was in the Budget before he gave his Statement to Parliament.


Coalition pledges

A number of Bills which were announced are things that were included in the Coalition Agreement and so have been in the pipeline for some time. The Green Investment Bank will finally be established to stimulate growth in the green economy through things like renewable energy. Let’s hope it take less time to set up than the four years it took from passing legislation to actually launching (what became) Big Society Capital.

The abolition of the Audit Commission, which was first announced by Communities and Local Government Secretary Eric Pickles back in 2010, will herald a new regime of local audits introduced. Budding armchair auditors prepare yourselves…your time is coming!


Quango Bonfire Watch

I suspect Ministers’ appetite for demonstrating their ‘bureaucracy busting’ credentials is unabated, but their plans this time around are fairly modest by previous Coalition efforts. The Competition Commission and the Office of Fair Trading are to be merged into a new Competition Markets Authority.

Fans of the ‘bonfire of the quangos’ shouldn’t start celebrating yet, as although the Queen’s speech announced the scrapping of two public bodies, we got two new ones to replace them – the Groceries Code Adjudicator and the National Crime Agency. Is this the quango equivalent of a fiscally neutral budget?


More consumer power? Not so much…

A key recommendation of last year’s Independent Banking Commission report, to separate retail and investment banking will be brought forward. This is supposed to make bank bailouts a thing of the past, by keeping the riskier investment banking activity apart from looking after your money. What it won’t do – and what the government shows no signs of wanting to address – are the systemic flaws within our entire financial services sector.

But in a nice piece of tinkering on the periphery shareholders are to be given power to vote on the pay of directors. Although the Queen’s speech would have been agreed a week or two ago, the policy fits with the recent shareholder revolts we’ve seen at William Hill, Barclays and Aviva. Curbing excessive executive pay is no bad thing, but pension fund and investment fund managers already have plenty of influence should they wish to flex their muscles. This Bill will make a vote legally binding, but recent events have shown that when they express their displeasure over remuneration packages the position of the senior executives is practically untenable anyway.


Political hot potatoes

Much of the media spotlight from the Queen’s speech will focus on Lords Reform, probably because it is one of the more prominent ‘fault lines’ running between the Coalition partners. Although I support political reform to strengthen our democracy, I have to say I tend to side with those who feel we have more important things to address right now than something which clearly has little resonance with the public. If we have to choose between having a strategy to get the economy going again and reforming the House of Lords I know which one I’d go for. Having said that, it will be interesting to see how the Coalition manages the inevitable tensions in the coming months. And we’ll just have to wait to see if there’s an economic recovery strategy any time soon.

Another political hot potato will be pensions – reforming public pensions seems far more contentious than raising the pension age to 67 sometime before 2028. But perhaps people will start getting het up about that in a decade or so….or maybe we are collectively accepting of the need for longer working lives.

A Draft Care and Support Bill will, we are told, provide greater choice and more personally tailored services in adult social care. The government’s record in this area is rather patchy (to put it politely) and we will have to examine the detail carefully. But since it’s a Draft Bill, there bound to be plenty of parliamentary thrashing around before it comes close to seeing the light of day.

The introduction of new powers for the Police and the intelligence service to help themselves to your emails, SMS and other personal data online is likely to be met with fierce resistance. I wonder if this will propel the UK Pirate Party into the political mainstream, in the same way that their counterparts in Germany and Sweden have?


Charities to benefit from practically irrelevant new legislation

In a remarkable piece of insignificance….sorry, understatement, the aptly named ‘Small Donations Bill’ will allow charities to claim back tax on donations under £20. Oh and there’s a limit to the amount you can claim back of £5,000.

This follows the government’s decision to limit the amounts that philanthropists can donate to charity in a tax efficient way and the furore it’s caused. George has clearly not ‘given it back’ so much as proffered the sector the loose change from his pockets.


Feral underclass or feral ‘overclass’?

As the dust settles on the riots that swept our cities recently, attention turns to understanding and responding to them. The Prime Minister and his Ministerial colleagues have, along with sections of the press and, it’s fair to say, sections of the public, been using highly emotive language to describe what happened. Ken Clarke, the Justice Secretary, recently described the rioters as a ‘feral underclass’. Describing anyone as ‘feral’ is simply dehumanising – something the Nazis and other early 20th century eugenicists were particularly fond of. [And no….I’m not saying Ken Clarke is a Nazi. Just making a point about the practice of using language that suggests people are ‘sub-human’]. Although the Justice Secretary goes on to make some salient points about the failure of the criminal justice system, this type of language undermines whatever else he might have to say. It is hardly the sort of mature politics that are required in times of social stress.


The concept of an ‘underclass’ has long been a contentious battleground for political scientists and philosophers – coming to the fore in the UK during the late 1980s when US libertarian sociologist Charles Murray published ‘The Emerging British Underclass’. Murray suggested that an over-generous welfare state is giving rise to increases in violent crime, labour market drop-out and single parent families. [He subsequently went on to say – in The Bell Curve – that black people had lower IQs than white people – sparking further controversy and accusations of racism]. The similarities between Murray’s thinking and many of the comments made by politicians in the wake of the riots is striking. Have we somehow gone through a timewarp back to the 1980s?


The combination of ‘feral’ and ‘underclass’ seems to conjure up a picture of uncontrollable animals roaming the streets. Perhaps that is the intention. But it also has the effect of distancing responsibility – since the rioters operate on purely animal instinct and cannot be reasoned with like you or I. But even if we put to one side the philosophical and semantic overtones of the term, the existence of a section of society so alienated from society and so disaffected that they riot and loot cannot be something we view as simply someone else’s fault. Blame for society’s ills rests with society as a whole. We cannot separate ourselves from the causes or effects of society. Like the popular environmental saying – you are not stuck in traffic, you are traffic.


We cannot absent ourselves from being part of a society that (in small numbers) took to the streets to riot and loot.


David Cameron has talked about a ‘slow motion moral collapse’, suggesting we need to renew our morality and ethics.

I’m not particularly opposed to this idea – in fact I share the Prime Ministers concerns about a lack of ethics and commons social values. However I think our views on the causes of this and how you address differ markedly.


Where do the values and ethics of a society come from? In part they are formed by the influence of our families, peers and social networks. But they also come from the opinion formers and influencers of public life – politicians, the press (or perhaps more accurately those who control the media?), celebrities and the leaders of business and civil society.

When David Cameron talks about moral collapse is he alluding to the lack of morality displayed by MPs and Peers in Parliament over the expenses scandal? Does he mean the greed that fuelled the banking crisis? And what about the (illegal) invasion of personal privacy by the press in order to sell a few more papers? If he does, it’s far from clear.


And yet for many people who are neither MPs, nor bankers, nor rioters, they don’t seem so radically different. There seems to be a distinct lack of appreciation of the social norms and morals that guide the lives of millions of Britons in all instances. You can argue about the degree to which they have ‘stepped over the line’ but few would dispute that they have all acted unethically. What appears to differ significantly is the language used to describe the people involved and the prescribed remedy. I don’t recall hearing any Ministers talking about ‘feral bankers’ (perhaps you could argue that Vince Cable has come closest!) or ‘out of control parliamentarians’….but maybe I missed it.


The tough punishment handed out to the looters and even to those (unsuccessfully) inciting unrest is in stark contrast with the treatment of the powerful.

Take Sir Fred Goodwin, erstwhile CEO of RBS, who oversaw the near collapse of the biggest bank in the world – saved only by the injection of billions of pounds of public money. And his ‘punishment’ for contributing to a worldwide global banking crisis and unprecedented public spending cuts? To walk away with his £16m pension pot in tact – belatedly bowing to public anger by voluntarily agreeing to reduce it to just £350,000 per year (on top of the £2.7m payout he’d already taken from it). Of course one can argue that, unlike the looters, Fred Goodwin did not break the law and so ought not to be punished. Of course that’s true, but we are talking about morality, and it rather overlooks the fact that laws are made and as such determine the social norms and ethics that govern society. If our political leaders decided that excessive risk taking motivated by greed in the banking sector was illegal (as well as immoral) then Fred Goodwin (and others) might have gone to jail. So, while the distinction between bankers and looters is a fair one, the finger points firmly at our political leaders to act, where the laws fail to reflect our social norms and values.


Similarly, the expenses scandal that shrouded Westminster resulted in over 350 MPs (that’s well over half of them!) being told to repay expenses totalling £1.2m. These were, in all but a tiny number of instances, simply ‘mistakes’. Indeed many of them were…grave errors of judgement. And yet only a handful of parliamentarians have faced criminal proceedings. And the remedy? Changing the system for claiming expenses. Not blaming the parents. How strange.


Politicians seem to like using terms like ‘moral compass’ but it appears as if many of them missed out on their Scouts or Girl Guides orienteering badges.


The riots require a measured and ethical response. Moral leadership, some might call it. But how can our politicians be expected to provide it when they have so patently failed to address a lack of ethics in corporate and political governance? [And I’ve barely mentioned the illegality and corruption at the heart of our press and police…we’ll see how the current investigations on these fronts progress].


At a recent meeting I attended, Children’s Minister Tim Loughton dismissed the possibility of their being any link between the riots and Douglas Hogg’s moat (a point I was quick to challenge him on). Of course there were probably rioters who’ve never heard of Douglas Hogg – but that misses the point about the exposure of the expenses scandal in general. In the eyes of many many people, unethical and immoral behaviour is the same whether it’s inner city looters or MPs in the shires.


Until politicians get to grips with this ‘feral overclass’ they can have little moral credibility in responding adequately to the riots.



The sound of one hand clapping

The government’s rhetoric on the Big Society, and its legislative sibling the Localism Bill, suggest a desire to transform our social and political architecture. Local areas are to be (at least on paper) far more control to determine local priorities and deliver improved outcomes and citizens are being asked to play a far greater role in what happens in their communities.


However this ambition to establish a new settlement between central and local government and to redesign the relationship between citizens and the state appears to be limited to social and political reform. There is little to suggest that the Coalition government has the same radical vision for reforming our economic landscape, despite Eric Pickles’ statement that “a recovering economy needs local remedies [1]”. 

I quite agree. It seems absurd to think that you can hope to achieve social and political reform without giving local areas control over their economies too. To me this seems a bit like clapping with one hand. How else can civil society, the public sector and the private sector seek to stimulate enterprise (social and commercial) and address local needs? The fact is that our economic architecture is hopelessly outdated to respond to the challenges we face and the opportunities that Big Society and localism might bring. Everyone seems to be agreed that we cannot simply do ‘the same but less’, and that we need to change – so why does there seem to be so little appetite for radical economic reform?


How can we expect true localism and the Big Society to flourish without giving local communities control over the levers to determine economic policy?

A senior government advisor recently admitted to me that economic policy was currently under-developed in the Big Society narrative. He suggested that no one had yet ‘done the heavy lifting’ required to flesh out the theoretical and practical implications of Big Society on our economy. Whilst I don’t fully accept this – numerous thinkers and practitioners have explored these issues and suggest a range of possible solutions – I think that it’s pertinent that this is the view of at least some of those in government. One needs look no further than the work of the new economics foundation[2], Phillip Blond[3], Centre for Local Economic Strategies[4], our own thinking at Urban Forum[5] and indeed earlier work by Ivan Illich[6] and E.F. Schumacher[7], to find precisely the sort of heavy lifting that’s needed.


The government would no doubt point to Local Enterprise Partnerships (LEPs) and the Regional Growth Fund and their plans to give local authorities control of business rates revenue as evidence of economic reform. However this amounts to no more than tinkering at the edges of our economic architecture, when what’s needed is something far more ambitious and transformative. The development of new Local Enterprise Partnerships (LEPs) has bordered on a farce and gives me little confidence that they will foster new approaches to economic development and build a local enterprise culture.


Banks provide a good illustration of how ill-equipped our economic policy is to respond to the challenges of Big Society and localism. Banks are supposed to deploy ‘surplus’ capital to where it is needed and, for many years that’s what they did. The growth of global banking institutions now provides little real connection to localities and we have lost the value of a bank manager who knows his customers and can provide access to loans without the need for complex and inefficient formulaic risk-pricing models. We need local banks, connected to their communities, which understand the local economy (and the people seeking finance). Regulation can either create conditions for local provision to flourish, or it can encourage mergers and acquisitions that inhibit local provision. This is not about an interventionist approach versus a laissez-fair approach. It is about supporting a locally-focused economic policy instead of a global one.


Small steps are being taken, but we need to be much more ambitious

There are signs of small steps in the right direction, such as; giving councils control of business rates, planning reform to give neighbourhoods greater control over development, changes to feed-in tariffs for renewable energy production and the Localism Bill’s community rights. The introduction of a general power of competence will also enable the most forward thinking areas to make progress. But there are more fundamental barriers to true economic localism. The review of local government finance should be an opportunity to rethink things, but I fear a lack of appetite within central government will curtail any truly ambitious thinking.


The Lib Dems’ election manifesto included a number of proposals that would have helped stimulate local economies and provided the foundation for economic localism. Local Income Tax and Regional Stock Exchanges are just two that would help reform our economic architecture to support local enterprise.


Bank reform is urgently needed as I have been saying for some time[8], but it is by no means a panacea. We need to look at ways to value and protect independent retail on our high streets, to better regulate global finance and the power of corporations, as well as looking at ways to simplify our tax system (which is not a euphemism for dismantling it). We need to find ways to factor in the externalities of private enterprise – so the profits are pocketed by individuals and institutions and the burden of paying for the negative impacts borne by the state. In short, must find ways to address state and market failure, with a more sophisticated appreciation of the true cost and value of things.

I do not claim to have all the answers – even the few solutions I’ve suggested are ideas I have appropriated from others – but I believe strongly that until we have the stomach for radical economic reform we will be chewing on the gristle of Big Society.


Toby Blume

Chief Executive 
Urban Forum