The Government should urgently grant London a new trailblazer devolution deal so that the capital has the powers, resources and accountability needed to fire on all cylinders. That’s according to a new report published today by BusinessLDN, supported by three Business Improvement Districts: Central District Alliance, EC BID and London Heritage Quarter.
Labour has put kickstarting economic growth at the heart of its mission-led approach. London is an engine of growth for the whole UK, producing nearly a quarter of the UK’s total output and contributing a net fiscal surplus of almost £38 billion to the Exchequer that supports public spending across the country.
But while the capital remains the country’s most productive region, it has gone from leading national productivity growth to lagging behind it. The city is also performing worse than its global competitors on this important metric. And once housing costs are taken into account, a quarter of Londoners live in poverty.
With the 25th anniversary of the Mayor of London role being created fast approaching next year, the report calls for the capital’s devolution settlement to be updated so that it has more effective tools to drive growth regionally and nationally.
A new trailblazer deal for London should put it on a par with Greater Manchester and the West Midlands by providing a single cash settlement from central government, with a consolidated, long-term budget similar to departmental budgets. London should also be able to retain business rates growth in full to give local leaders the incentive to drive growth and the resources to manage it.
John Dickie, Chief Executive of BusinessLDN, said: “The Government has talked a good game about devolving power from Whitehall. Now is the time to deliver so that London – and other city-regions – have the tools they need to boost growth. Empowering local leaders with the powers and resources they need is essential to unlock the full potential of the capital and other parts of the country so we can sustainably fund public services and invest for the future.”
Alexander Jan, Chair of Central District Alliance, said: “Devolution of powers from central to local government in London is crucial for business as it fosters tailored decision-making, responsiveness to local economic needs and drives innovation and growth. The Government’s relentless focus on good growth and renewed enthusiasm for allowing London to prosper marks a sea change in policy. We have a once in a generation opportunity to give London government the resources and incentives it needs to deliver prosperity for Londoners and the nation as a whole.”
England remains one of the most centralised democracies in the G7 as highlighted by OECD data on the share of overall tax revenues raised by local or state governments. The London Finance Commission found that the Mayor and the city’s boroughs retain only a tiny proportion of the taxes raised in the capital – around seven per cent. By contrast, the equivalent figure in New York is more than 50 per cent.
Greater devolution could help to tackle some of the key challenges holding the capital’s economy back, including housing delivery by joining it up more effectively with other infrastructure to ensure the right sort of housing mix, in the right place, with the right connectivity. More broadly, it could also help major infrastructure projects that are vital to London’s future growth – such as the Bakerloo line extension – get off the ground.
The report also calls for a more ambitious devolution model to be developed in the medium-term, which would allow London and other city regions to make investments which will increase economic growth and yield higher taxes.
The English Devolution Bill, and accompanying White Paper, presents an imminent opportunity to act on these recommendations and support London’s role as an engine of growth for the UK.