The Chamberlain News

Ed Balls gets a lesson in ‘Clancynomics’… but don’t tell Sir Albert Bore

Whisper it softly and certainly don’t tell Sir Albert Bore but it seems that ‘Clancynomics’, the radical financial policy devised by backbench Birmingham city councillor John Clancy, is making an impact at the very top of the Labour Party.

In fact the political weather appears to be moving sharply in the direction of Clancy, who stood against Sir Albert for the council leadership this year and will do so again in May 2014.

Several of the ideas floated in the comprehensive Alternative Vision for Labour manifesto Clancy produced last May are now either being pursued by the council or are under consideration at government level. More importantly from Clancy’s perspective, his economic strategy has apparently found its way on to the agenda of key shadow cabinet members.

Close to the top of Clancy’s wish list of policies is the notion that councils should be encouraged to raise money from private investors through selling bonds – as happens routinely in Europe and the USA. These could be backed by the local authority’s extensive property portfolio, including rental income from council houses, and assets like the NEC.

The suggestion was ridiculed and written off as pie in the sky by Sir Albert’s supporters during the 2013 leadership contest, which Clancy lost but ominously still managed to attract support from almost a third of the Labour group.

However, Birmingham City Council, never shy of nabbing other people’s ideas, is preparing to embrace a venture very similar to Clancy’s proposal by joining with 17 other local authorities to investigate setting up a municipal bonds agency.

The wheeze would enable the councils to borrow at lower interest rates than the Public Loans Board and allow them to raise substantial sums of money for infrastructure improvements.

The Local Government Association is backing the idea and has calculated that a council, borrowing £100 million through the agency could save almost £5 million in interest payments over 20 years.

Two other Clancy ideas have also gained traction, even with Sir Albert, although he may have been persuaded by the Labour group to get on board. A suggestion that the city council should raise cash through selling some of its substantial assets, such as the NEC and Birmingham Airport, as well as hundreds of city centre buildings, is being looked at with some urgency and also has the backing of the District Auditor.

A second proposal, that the Greater Birmingham and Solihull LEP must work far more closely with the Black Country LEP, and eventually amalgamate, is now one of Sir Albert’s pet projects, and is also being pushed by the Government.

The bulk buying of energy by local authorities, which is another of Clancy’s ideas, is being backed by the Core Cities group of leading metropolitan councils, of which Sir Albert is a cabinet member.

The biggest of Clancy’s initiatives, allowing local government pension funds to invest in local infrastructure projects, may have to be underpinned by legislation. But Chamberlain News has learnt that the idea is being taken seriously at shadow cabinet level and may even feature in Labour’s manifesto at the next election.

Clancy has spoken about the idea with Rachel Reeves, the shadow social security minister, and shadow chancellor Ed Balls. Labour leader Ed Miliband has been briefed on the matter and it is possible that Labour’s 2015 General Election manifesto may have something to say about releasing pension fund cash for local investment.

Indeed, the Greater Manchester authorities, often portrayed as Birmingham’s great municipal rival, are already using their pension fund to invest in housing and the initiative was praised by Ms Reeves when she was shadow pensions secretary.

Clancy makes the point, reasonably enough, that council pension funds in England and Wales have about £220 billion sloshing around in investments, largely global equities. The West Midlands Local Government Pension Fund is worth about £10 billion. These funds are certainly not investing even a small proportion of their cash locally, preferring instead to buy into foreign companies.

Clancy’s “venture socialism” scheme would permit the funds to invest 10 per cent of their total pot into regional infrastructure schemes – immediately raising £22 billion. For the West Midlands, the figure would amount to £1 billion.

But he would go even further by creating a sub-Heseltine regional investment pot, bringing together pensions money and the assets of councils to create a fund worth up to £10 billion.

And on the matter of just who would control such a substantial fund and make decisions about investing the money, Clancy says the venture “must be hard-nosed and business-led”.

It goes almost without saying that Clancy will have another tilt at Bore’s leadership in May 2014. His chances may depend to a large extent on the way Sir Albert deals with the council’s financial crisis, which the council leader insists means identifying £550 million of spending cuts by 2017-18.

Clancy says much of the funding gap can be bridged through the radical measures set out in his manifesto, as well as cancelling the £125 million a year council ICT contract with Service Birmingham/Capita and replacing it with something more affordable.

The Labour group will meet this Saturday November 30 to approve a ‘white paper’ setting out the 2014-15 budget. This document may or may not contain details of services that Sir Albert is proposing to decommission as a result of the public spending squeeze.

On Friday November 29, chairmen of Birmingham’s 10 district committees meet to discover their fate and to be told the extent of the spending cuts they will be expected to deliver in 2014-15.

As ever, at both meetings, Capita will be the elephant in the corner of the room. A proposal by Sir Albert to trim Service Birmingham costs by a mere £20 million won’t cut much ice with Cllr Clancy and his supporters, who think that £80 million is closer to the mark.

The council leader’s response to this issue will shape the start of Clancy’s 2014 leadership campaign. It could be a tough few months coming up for Sir Albert.