The Government should enable local leaders in London and beyond to retain a material share of locally raised taxes to incentivise decisions that boost growth, when setting out its devolution plans at the Budget later this month.
That’s according to the Budget submission from London’s leading business campaign group, BusinessLDN, which represents more than 170 major employers in the capital.
The submission also calls for city-regions with a proven track record, such as Manchester and London, to be empowered to borrow against future revenue streams to encourage investment in growth-boosting infrastructure without requiring case-by-case approval from HM Treasury. If combined with bolder use of innovative financing models, this could kickstart funding of projects such as the Bakerloo line extension and West London Orbital that can directly unlock 36,000 new homes and create more than 20,000 jobs.
Alongside devolution, BusinessLDN’s wide-ranging asks – spanning taxation, infrastructure, housing and skills – to the Chancellor include:
- incentivising the hiring of young people including through an employer national insurance contributions holiday and increased Employment Allowance for firms that hire unemployed 18 – 24-year-olds;
- jumpstarting London’s housing market by cutting Stamp Duty Land Tax on new homes by capping it at 1% for all first-time buyers and downsizers; and
- maintaining momentum behind already green-lit major infrastructure projects that are vital for growth, such as Heathrow expansion and the extension of the Docklands Light Railway to Thamesmead, so that they are delivered as quickly as possible.
John Dickie, Chief Executive at BusinessLDN, said: “What matters most in this Budget is maintaining fiscal stability, so keeping a tight grip on spending and avoiding tax increases that undermine Britain’s competitiveness.
“The plans to rewire the state through greater devolution have great potential. They promise an improvement in delivery of public services and, crucially, give local leaders the ability to drive forward the infrastructure, housing and education that their communities and businesses need. Allowing more of the tax revenues raised locally to be retained locally will be key to enabling and incentivising decision-making that drives growth.
“This now needs to be matched with a concerted push to rewire the administrative state, so that businesses can get things done quicker. The Chancellor has rightly pledged to take an axe to the thicket of consultation, litigation and administration that has too often held back private investment. Expansion of Heathrow – which a Labour Government first got behind in 2003 and has since been discussed and debated for decades – is a case in point.
“The Government also needs to rewire the way policy is made, so that regulation does not unnecessarily increase costs to investment. Ensuring different parts of the Government pull in the same direction consistently will increase growth at no cost.”
London is responsible for almost a quarter of the UK’s GDP, made a net positive fiscal contribution to the Exchequer of £48.8bn – a record high – in 2024/25 and acts as a gateway for investment to the whole UK. BusinessLDN is calling for a number of measures to further enhance London’s international competitiveness, including:
- tackling London’s acute housing crisis, which is both a social challenge and hitting the city’s competitiveness by making it more difficult to recruit and retain talented people, by:
- increasing resource for the Building Safety Regulator so that applications are processed quicker;
- extending the funding and capacity of the New Homes Accelerator London, which is helping to unblock stalled housing sites across the capital; and
- allowing full expensing of brownfield housing delivery, providing the same upfront investment incentive available for other forms of capital expenditure, to make more sites viable to develop.
- Boost the capital’s infrastructure and connectivity to benefit the whole UK by:
- taking steps to build momentum behind the Bakerloo Line extension and the West London Orbital, including through greater fiscal devolution and Government capital investment;
- providing an ongoing long-term renewals settlement for Transport for London (TfL) to address the historic backlog of investment in infrastructure and provide certainty beyond 2030; and
- Give TfL greater control over the Great Northern Inner rail network to improve services and better integrate them into the capital’s network.
- Enhance London’s international competitiveness by:
- providing an immediate boost to investment certainty by ruling out any further sector-specific tax rises for the lifetime of this Parliament to avoid any chilling effects on investment in the build-up to future Budgets;
- fulfilling the Government’s manifesto commitment to replace the business rates system;
- announcing a roadmap to scrap stamp duty on share transactions to improve the attractiveness of the UK as a place to list and invest; and
- reviewing the business case for restoring VAT-free shopping for international visitors to boost the attractiveness of the UK for international tourists.
- Ensure London and Londoners have the skills and talent to succeed by:
- publishing a Growth and Skills Levy roadmap, backed by multi-year funding settlements, that aligns apprenticeship policy, skills funding and Industrial Strategy priorities;
- rethinking the proposed higher education levy to avoid our universities being put at a disadvantage to their global counterparts; and
- incentivising employers to deliver a step-change in up-skilling and re-skilling as the world of work changes rapidly due to AI through a new tax credit mechanism.
- Speed up the ability for businesses to get things done across the capital and the UK by:
- resolving policy inconsistencies that are holding back investment, jobs and growth. For example, the Government is encouraging telecoms providers to accelerate digital connectivity and infrastructure rollout but planning and redevelopment frameworks can result in key infrastructure being displaced before they can be replaced.