Abigail Melville: Business is getting something for nothing – we need a new deal

• 12th Dec 2014
• Poverty

By Abigail Melville
Associate, the RSA.

As the Chancellors Autumn statement made clear the UK problem is not lack of growth, it is that the benefits are not shared. They are certainly not reaching into disadvantaged communities. Too many people remain stuck in poverty and low pay. This is true in Liverpool, in West Bromwich, in Plymouth, but it is also true in London. Islington is a stark example of an apparently wealthy borough with plenty of highly paid jobs, yet a third of Islington’s children live in poverty.

These are deep structural problems which have got worse over recent years. Some argue that technological disruption and an over-focus on supply of workers has moved our economy to an hourglass with jobs at the top and bottom, but with a lack of jobs in the middle. This doesn’t just affect new graduates looking for their first job, it rules out opportunities for career progression for those at the bottom.

Our network represents diverse communities across the UK and they see the potential for a different economic future which focusses on productivity and opportunities for progression. Where local knowledge and local connections create opportunities for new economic growth and jobs building on the assets and skills of the area – whether that be marine technology in Plymouth, high value manufacturing in the Black Country or digital design and media in Liverpool.

Cooperative Councils have been examining how working cooperatively can help us build community resilience, jobs and growth. There are two critical challenges:

• How can local economies thrive and create jobs and wealth for local people?
• How can the most disadvantaged can be connected to opportunities for employment and enterprise?

In our evidence sessions we have heard many stories about the waste, disconnection and perverse incentives that exist in the top-down silos that deliver services for employment support, welfare and skills. Young people shunted into inappropriate training while yawning skills gaps (especially in construction) remain unmet and employers recruit from abroad. Job seekers forced onto a hamster wheel of inappropriate job applications while a cycle of rejection and sanctions push them into hopelessness and depression. People who can’t afford to take opportunities for work or start a new business because their family will lose financial support. Job Centre mandated qualifications binned by employers. Colleges not recognising another colleges qualification so young people have to start again.

We have heard stories of frustration not just from job seekers and apprentices, but from providers and brokers who feel trapped in a narrow tick box mentality. So, far from building on the strengths and assets of our people, we are wasting, and for some actually destroying, confidence and capabilities.

On the other side, how does it feel for business? The businesses who came to our evidence sessions also felt frustrated and wanted a better way of working. The difficulty of engaging with a multitude of schemes and advice puts them off. We heard a few examples of excellent employer engagement, like the Black Country Skills Factory focussed on high value manufacturing, and the Plymouth 1000 club led by the local Chamber, which has outstripped its target of creating 1000 jobs by a factor of five. But genuinely employer led initiatives are still rare.

Building business leadership and engagement will be crucial if we are to achieve inclusive and productive growth. This has been recognised by Government through the creation of LEPs. Ideas for improving business representation and networks are suggested by Lord Heseltine in his comprehensive review for Government.

But as Cooperative Councils we think there is something important missing in this analysis, a crucial cooperative value – reciprocity. A shared sense of responsibility is central to our core value of social partnership.

Business often portray themselves as it they are the creators of wealth and if government would just get out of their way all would be well. This is completely wrong. Private enterprise and the state exist in a symbiotic relationship – each dependent on the other. Business is in fact a huge recipient of billions in state support – what some have started to call corporate welfare. In the Black Country we heard stories of companies given £2million of state aid to buy new, state of the art, manufacturing equipment, with no expectation that they would give anything back. We heard of factory floors kept empty because of the tax relief that could be claimed.

Wouldn’t it be great if citizens got something back? How about giving small businesses use of the empty factory floor? How about letting colleges train their apprentices on the new bit of equipment. How about the large employer mentoring some small start-ups and growing their local supply chain?

The growth opportunities cannot be realised and connected to opportunities for citizens without a new kind of civic leadership which includes business and enterprise. This goes beyond social responsibility. It means a genuine social partnership with shared commitment to a thriving local economy and genuine and deep engagement from business in pursuing their direct interest in driving growth in a sustainable and inclusive way. Leading business in particular must engage in long term thinking about how to drive productivity through the application of skills and technology and how to coordinate the resources of the area, including schools, colleges and universities, to support growth priorities.

Our Policy Commission reports in February and in the run up to the next election we will set out a cooperative vision for how places can work differently and how we can engage citizens and business in leading and developing solutions that give all our citizens a share in the creation of wealth. After all, a fair share is what being cooperative is all about.

Abigail Melville is the RSA’s CCIN Lead.