Do you buy into local currencies?

With the pound weak and the economy floundering, some local communities have come up with a novel idea to try to improve trade – setting up their own currencies.

No, this isn’t an early April Fools – Totnes in Devon launched the first major local pound in 2007. And Brixton in London, Lewes in East Sussex and Stroud in Gloucestershire have all followed suit.

Fans say that local currencies boost an area’s economy by ensuring the money circulates within it. Critics dismiss them as inconvenient gimmicks. So, are local currencies worth the paper they’re printed on?

What are local currencies?

Local currencies work just like pound sterling, with every local pound equivalent to one standard one. But the notes aren’t legal tender – local currencies are only legal as vouchers, meaning there’s no obligation for shops to accept them.

The idea is to keep the money in the local economy, and to encourage people to buy locally sourced goods and boost trade, rather than leak out of the area through chain stores.

You get the cash at participating businesses, and the money can be spent at any shop signed up to the scheme. There are no coins – just notes, which come in £1, £5, £10 and £20 denominations and are printed on high security paper. They even have £21 notes in Lewes, where 140 traders have signed up.

Ideally, shops pay their local suppliers with the money, as well as their employees, if they’re happy to accept it.

Some stores offer discounts on certain products or services to encourage their use – Olley’s Fish Experience, for example, offers free chips on a Tuesday when you buy their fish with the Brixton pound.

Are they worth it?

I recently visited Lewes and found many retailers with mixed views on the currency. Stephen Catlin, who runs a tobacconist and confectionery shop on the high street, was one of the original 70 traders to sign up in 2008. But he’s now sceptical about the idea.

Without a local chocolate maker or cigar manufacturer, the goods he sells can’t be sourced from the local economy. This means the bulk of the money he makes disappears out of Lewes.

Jeweller Jonathan Swan told me he was in favour of the idea, saying Lewes is the ideal environment for a local currency to succeed. But he also said that it was ‘a bit like preaching to the converted’, as the concept only appealed to those already ethically minded.

Across the pond, the BerkShares scheme – launched in Massachusetts in 2006 – is said to have the equivalent of more than $2 million in circulation and 12 local banks issuing the money.

So, it appears that the potential is there, although there’s some way to go before local currencies make a real impression in the UK. Would you like your community to launch their own local currency?