You may have read last week about the launch of a new local currency in Brixton – a community-based currency for use by local people to help re-build the economy.

There is a long tradition of such ‘community currencies’, from Wörgals, Wara and Social Credit to Local Exchange Systems (LETs), Time Dollars and Ithaca Hours. Whilst the operation and underpinning theory of these currencies is more or less identical, there are differences. For example, LETs started as a form of currency for re-building local economies, but soon became associated with the green movement and alternative ways of living promoted by the middle classes. Time Dollars, created by American lawyer and activist Edgar Cahn, have been designed to involve people in re-building the non-market economy. They generate social capital and reciprocity in local communities.

In a recently published paper for Local Economy, I presented an argument highlighting the benefits of Time Dollars in re-building and sustaining local economies by showing that they can help people of limited financial resources and interact with local businesses. Time Dollars are earned through voluntary activity. For each hour an individual gives to their community, they receive one time credit, which grants access to one hour’s worth of services/goods from the community. This is best illustrated with examples from the Time Centre in Blaengarw in the South Wales Valleys, where local members can earn time credits through local environment improvement projects, education courses which benefit the wider community and membership to the local pantomime group. They can then spend their credits accessing education courses, from information technology to cooking and music lessons and various social events. Time Dollars can also be spent in the local café to access foods at reduced prices.

In this way, Time Dollars help people to limit their dependence on mainstream financial resources. They provide an additional currency with which to access locally produced goods and services, reducing the burden placed on people’s incomes and savings and enabling them to access services – from childcare to the computer course that will help them gain new qualifications. This gives individuals and families an additional form of purchasing power which can be used instead of, or in conjunction with, the national currency, reducing the burden on financial resources, as they don’t need to be spread so widely. Additionally, where businesses have worked with the Time Centre to accept currencies – such as the café or local social club – they have seen their business improve and become more sustainable.

The difficulty with Time Dollars, when compared to other alternative community currencies, is that they have been established on a value of equality: one hour of work equals one hour of currency. Such equality is unusual in currency systems where earning is based on the value placed upon the activity being provided. Despite the unfamiliarities of these methods of exchange, Time Banking can still provide benefits – and it is the potential of all community currencies that the Labour government needs to consider.

With the recession hitting the spending power of individuals hard, especially the unemployed, alternative community currencies offer a means by which people can earn additional purchasing power – benefitting not only their family but the local economy as a whole. Labour could help those worst hit by the recession by helping develop the spread and use of local currencies. This would not only help families sustain themselves through these difficult times, but also reinvest in the local economies hit hard during the financial crisis.