London Councils and the Mayor of London have joined with England’s largest cities to call for greater financial freedoms for city politicians.
They say this would enable local politicians to better direct growth to drive their local and the national economy. Together the cities involved account for over half of England’s economy and around half its population.
This cross-party initiative is the latest in a series of calls for more substantial devolution. In particular, it follows the publication in May this year of Professor Tony Travers’ London Finance Commission report, ‘Raising the Capital’, which recommended a comprehensive package of measures to give Londoners a more direct say over a greater proportion of taxes raised in their city. The report outlined the benefits for London of devolving financial and fiscal control rather than relying on the current formula of majority Government grant. It also found that this was a formula applicable not only to support the growth of London but other large cities.
As a next step, the Mayor of London, Boris Johnson and London Councils have now formally joined with the Core Cities group (representing Birmingham, Bristol, Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield) calling for a suite of fiscal reforms for England’s larger cities. The aim is the devolution of property tax revenues streams – including council tax, stamp duty, land tax and business rates – with the ability to reform those taxes while retaining prudential rules for borrowing, similar to recent changes in Scotland. This, say those involved, would provide stable and continuous funding to stimulate economic growth according to local needs, moving away from ad hoc financing for specific projects, allowing cities to raise sustained investment for vital infrastructure such as transport, schools, housing, energy supply and technology.
The partners argue that existing centralised funding models are ineffective in supplying the investment cities need to maximise their growth potential, and that empowered cities can be more competitive and can be incentivised to grow faster.
They point out that only seven per cent of tax paid by London residents and businesses is redistributed directly by locally elected bodies while the majority of London government’s budget is received through central government grants. This contrasts with other world cities; only 31 per cent of New York‘s budget comes from central grant, 25 per cent in Berlin, 17 per cent in Paris and eight per cent in Tokyo.
The Mayor of London, Boris Johnson, said: “That London’s government is joining with England’s largest cities to call for change is an historic and significant move. It’s a partial but positive and practical answer to the conundrum about English devolution and I believe it is good not just for the cities involved but for the country at large.”
Mayor Jules Pipe, Chair of London Councils, said: “Greater devolution to England’s cities and localities offers new hope for securing the sort of economic growth our country so critically needs. London’s boroughs need to be at the heart of shaping the capital’s economic and fiscal future, as well as working together to reform services in a way that reflects the reality of severely reduced public finances. London Councils believes that this campaign can play a vital part in driving that agenda forward.’