You are here : Home > Bro Ddyfi Home > News > Plugging the leaks! - report

Plugging the leaks! - report

28th Nov 2005

Plugging the leaks! - report

Bro Ddyfi Communities First seminar: "Plugging the leaks" - an introduction to tools developed by the New Economics Foundation to help communities understand how money flows through local economies

Context

Communities First is a Welsh Assembly Government initiative to help selected communities work with the public sector to break the cycle of disadvantage.
Bro Ddyfi was selected to explore how this approach could work in a rural area.
This work was commissioned by the Bro Ddyfi Communities First Partnership, to further the work of its Economy & Employment Group.
The remit of the group is to drive forward the Economy & Employment section of the Local Action Plan.
The Communities First Partnership also acts as the core group of the Machynlleth & District Local Community Forum (LCF). The LCF is the means for the community to engage with the Powys Community Strategy.

Aim

One aim of the Group is to make the local economy more robust - more self-reliant and less vulnerable to factors outside its control - through increasing the circulation of money within the economy.

For the local economy, a pound spent in a locally-owned business will typically be worth 1.7 times a pound spent on other businesses, in the sense that it is more likely to be re-spent locally and therefore support local jobs.

Objective

The event sought to engage local people in considering the significance of the spending decisions of local consumers and businesses and to put some of them in a position where they would be willing and able to take this message out into the rest of the community.

Contractors

The community regeneration group, ecodyfi, was commissioned to organize the event.

In turn, they commissioned Liz Bickerton to deliver the content.

Liz is an independent Powys-based consultant with experience in community economic development and regeneration.

Top

The event

The meeting was held at 7pm on 30th March 2006 at the Owain Glyndwr Institute in Machynlleth.

It was attended by 16 people, who participated fully and said they had found it to be worthwhile.

They had been attracted by posters, by an article in the Cambrian News and by direct mail / email to contacts of Communities First and ecodyfi.

1. Liz began with a critique of those regeneration projects that direct capital investment into an area without sufficient consideration to keeping that money in the local economy.

Often it is spent on large contractors from outside the area.

They may hire some local labour but otherwise spend their money elsewhere, as if the community had a financial umbrella over it.

These situations can bring longer-lasting benefit if the 'umbrella' is replaced with a 'funnel', such that investment money is channeled to local businesses.

An example of an umbrella effect might be new-HEES and other grants for improving energy efficiency in low-income households: the nearest registered contractors to Bro Ddyfi are in Shropshire and Anglesey, so while householders benefit from the grant the local economy does not.

2. The Circulating Pound is another way to see the process: imagine a pound coin has blue dye on it and think about how many hands it will touch before it leaves the local economy.

If it's spent in the butchers, who then spends it in the shoe shop, whose proprietor buys a haircut... etc... it's keeping all those people productively employed.

3. The concept of the Leaky Bucket is that the local economy is like a bucket being filled with money.

The money leaks out of the local economy every time goods and services are purchased from elsewhere.

Analysing the major leaks can lead to action.

For example, around £4 million is spent every year on energy in Bro Ddyfi, but very little of this is spent with local suppliers.

This particular leak has been reduced a little in recent years by people using less energy (after insulating their houses) and by setting up local electricity generation (e.g.the community wind turbine), but there is potential to do much more.

For example, if new housing developments (such as those envisaged at Heulfryn in Ceinws, Llanwrin and Cemmaes) were heated by district heating systems fuelled by chipped local wood, the "energy spend" would support the jobs of local forestry contractors.

4. Liz suggested that we talk to major local purchasers in both the public and private sectors, to audit where they buy from and to look for opportunities to substitute local goods and services for these.

5. Liz then introduced a similar concept: Irrigating the Desert.

We can identify money coming into the economy, for example tourism expenditure.

Then follows a risk assessment or audit, seeking to identify who receives the money and how they use it.

The more times the money is re-spent locally the more effectively the "desert" is "irrigated".

Ideally, the money flowing into each sector of the local economy is quantified and the relative value of each subsequent expenditure category is estimated.

For example, a hotel may spend x% of its income on laundry services and y% on staff.

How effectively do each of these expenditure categories keep the money local?

6. The meeting split into 4 groups to try out this approach, although such an exercise would normally take several hours rather than 30 minutes.

They considered the following monetary inflows: Farming, Forestry, Tourism, Grant aid.

7. Discussion of the results included the following points:

a. Farming - outflows included energy expenditure and rent (if absentee landlord)

b. Forestry - how to buy local timber? Lack of knowledge of where to source it; quality sufficiently high (for construction)?; imbalance / fluctuation in supply and demand

c. Tourism - the pattern of expenditure will depend partly on who owns the business (local or not).

Forward pointers for consideration by the Economy & Employment Group

1. Discussion on the night raised the importance of information: where can I buy such and such locally? Word of mouth is important, but support was also expressed for the creation of a local directory, which is something that ecodyfi is considering.

2. Participants considered the tools to be valuable in raising awareness of the issues and thought that this would lead to changes in purchasing behaviour.

How can we widen the circle of those thinking in this way? We could take the discussion to Women's Institute meetings and those who make procurement decisions at e.g. schools.

Benefits need to be demonstrated, preferably with evidence that the approach has worked elsewhere, for example the experience of Stroud.

3. We also need to encourage a wider range of local goods to be on offer e.g. vegetables.

Perhaps a more flexible vegetable box scheme could be devised so that Guest Houses could order what they need week by week instead of placing a standard order.

References

Plugging the Leaks - Making the most of every pound that enters your local economy New Economics Foundation 1899 407529
The Money Trail New Economics Foundation. Both publications are available from Central Books on 0845 458 9910 or may be downloaded from www.pluggingtheleaks.org
A number of related tools and approaches, as well as subscription to an e-Newsletter, can be accessed at www.neweconomics.org/gen/tools_top.aspx
A yahoo discussion group - ReAction - has been set up to encourage networking and discussion for subscribers to the eNewsletter.