Bristol pound is just one example of what local currencies can achieve
Councils in the UK and around the world are starting to recognise how local currencies keep money in their areas
In Bristol local businesses can pay their rates in local pounds. Photograph: Paul C Stokes/Getty Images
The budgets of local authorities are being cut while the needs of their populations remain the same. In this difficult financial environment, borrowing is rising. UK local authorities owed £81.8bn in the financial year 2011-12, costing hundreds of millions in interest on repayments.
However, borrowing on the money market is not going to do anything for the local economy. Faced with this reality, some councils are discovering that the use of local currencies offers an alternative to more cuts or debt.
Mayor Georg Moosbrugger from the Austrian village of Langenegg, which issues its own Talente currency, puts it best when he says: "Wherever the money rolls, there it has an effect. Local money doesn't roll very far and so it can get to work in my area."
The community council can decide which local taxes may be paid in local currency to subsidise the rural economy, keep purchasing power in the region and support cultural and educational organisations as well as solar energy generation. Social enterprises also accept local money in payment for local food, arts and crafts and holiday lets.
In Britain, local businesses in Brixton and Bristol can pay their rates in local pounds. The local authority uses this income to pay its employees, who then spend it with local businesses. The mayor of Bristol, George Ferguson, takes 100% of his salary in Bristol Pounds (₤B) and the chief executive accepts ₤5,000 of her salary in "local". The city also earns local currency from market traders who use their ₤B earnings to pay their pitch fees.
Now 50 Lambeth council employees even receive some of their wages in Brixton Pounds through the payroll and so increase spending in the local economy. Leader of Lambeth council, Lib Peck, says the Brixton Pound "has proved to be a really good way to encourage people to think and act locally. It encourages people to shop locally, supports our local businesses and fosters an even greater sense of local pride."
The Brixton and Bristol Pounds are run by not-for-profit community interest companies, which helps ensure that the local currency is run in the public interest.
In times of austerity, cities want to attract employers and tourists, but have little cash for marketing. International media coverage of the Brixton and Bristol Pound launches was worth hundreds of thousands of pounds in advertising, and promoted their vibrant and entrepreneurial communities.
The city of Nantes, France has been even more ambitious. Citizens and businesses will soon be able to earn local currency and use it to offer goods and services, pay for bus tickets, car parking and after-school activities and pay their rates.
A lot of the pioneering work has already been done. The New Economics Foundation, Tudor Trust, Doen Foundation and Qoin have supported the Brixton and Bristol Pound teams to develop the technology for both e-payments and for circulating notes with full security features.
The potential of local currencies as an innovative response to austerity and recession is even becoming recognised at European level. A European Union funded project Community Currencies in Action is now helping the public sector to understand the purpose and function of local currencies through a series of pilot projects. They have also established the legal basis for local currencies with the Financial Services Authority. Twenty other UK authorities have shown a serious interest and a number are currently developing local projects.
Professor Jem Bendell of the University of Cumbria, which offers training for local authorities and others in how to create and scale local currencies, says: "There is a need to experiment with new systems, and replicate what works."
In the Great Depression of the 1930s many local authorities created their own currencies to help put people back to work. They were eventually closed down by central banks and central governments. But could a more enlightened policy like this work today? Taking this view, local authorities could lead the economic revival of Britain, and some councils are already showing the way.
John Rogers offers consulting and training about local currencies.
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