Leading business groups have called for Sadiq Khan to be given sweeping new powers over tax, spending and infrastructure investment in the capital, arguing that this would unlock the city’s full economic potential. The call comes in a new report by BusinessLDN, the Central District Alliance and London Heritage Quarter business improvement districts, which urges a radical overhaul of London’s devolution settlement, including greater control over locally raised taxes.
Report urges greater tax retention and innovative financing
The business groups argue that London should be allowed to retain a greater share of taxes, such as business rates, including some of the additional revenue generated by future economic growth. They also want the Mayor to have greater freedom to use innovative financing models for major transport schemes, including the Bakerloo line extension, West London Orbital and, eventually, Crossrail 2.
The report comes after Prime Minister Andy Burnham’s vow for a fiscal devolution roadmap alongside next month’s Budget and a white paper setting out how reforms to tax, transport, housing and education will be delivered.
Replacing grants with devolved funding
The report proposes replacing some existing government grants with devolved funding controlled by local leaders, arguing that this would give them an incentive to pursue policies designed to increase economic growth. On transport, it calls for the £500 million threshold above which locally funded schemes require government approval to be removed or substantially increased.
John Dickie, Chief Executive at BusinessLDN, said: “The Government’s devolution plans can play a pivotal role in unlocking London’s full potential as an economic powerhouse for the whole UK. Giving mayors greater powers to lead on the delivery of infrastructure projects, affordable housing and education will help to ensure they are better tailored to the needs of local businesses and communities. At the same time, allowing local leaders to retain more of the tax revenues raised locally will incentivise them to take decisions that drive growth, and to reinvest that income in a way that will boost the economy.”
Mayor’s demands and Prime Minister’s plans
Sadiq Khan has already laid out his three main demands for Mr Burnham in next month’s Autumn Budget. The Mayor said he was pushing the new Prime Minister and Chancellor John Healey on fiscal devolution, funding for housebuilding and more money for “core public services” like policing. He has praised the new Labour administration for enacting a “fundamental change” that will “free London to do more for itself”.
The Prime Minister has already announced significant expansions of powers for Mayors across England, including proposals for them to retain a share of income tax and pressing on with the previous government’s promise to allow authorities to impose an overnight levy on visitors. On Tuesday, Mr Burnham is due to give his first Labour Party conference speech as Prime Minister, where he has said he will “lay out a very clear path for the country”.
Ruth Duston, Chief Executive of London HQ, said: “The next phase of devolution must give London the confidence and capacity to plan for the long term. Bringing decisions on transport, skills and infrastructure investment closer together would help create the conditions for lasting economic growth.”
Alexander Jan, Chair of Central District Alliance, said: “London is within striking distance of finally seeing its financial freedoms restored to match its economic responsibilities and maturity as a leading world city. Retaining a bigger share of locally-generated tax revenues – including any growth, can help us to finance and fund the infrastructure and services that underpin the capital’s long-term success and generate prosperity for the country as a whole.”
