The Mayor of London, Sadiq Khan, has endorsed the findings of a report that calls for further powers to be devolved to the capital in the aftermath of the decision to leave the European Union.
Following last year’s referendum, Sadiq Khan tasked the London Finance Commission to bring forward a new, beefed-up set of devolution proposals, arguing that “nothing should be ruled out when it comes to giving London a stronger voice and the tools it needs to protect jobs, wealth and prosperity”.
The Commission, a group of cross-party political and business leaders led by Professor Tony Travers from the London School of Economics, has published a wide-ranging suite of devolution requests that will be presented to ministers. This builds on an initial set of devolution measures for the capital proposed by the Commission in 2013.
The overall approach that the Commission recommends is to allow the capital’s government control over a much wider range of taxes, in exchange for lower levels of government grant – which it says would bring London in line with most other global cities.
This, says the commission, would enable the city to operate more efficient, effective and integrated services, bring forward infrastructure investment, and reform property and other taxes which may not operate well in London.
The key recommendations of the report, entitled “Devolution: a capital idea” are:
- The government should work with the Mayor, London Councils and other local authorities to consult on the potential operation of a modest tourism levy which is already operated in international cities such as New York, Paris, Berlin, Rome and Amsterdam and would be used to promote tourism in London.
- London’s government should be assigned a percentage of Londoners’ income tax yield – broadly to match its overall expenditure, as and when further devolution occurs.
- If a larger share of public expenditure is devolved to London, the possibility of assigning a proportion of London businesses’ VAT yield to London’s government should also be considered.
- The report endorses recommendations from 2013 that the full suite of property taxes should be devolved to London’s government. This includes the operation and setting of council tax and business rates and the devolution of stamp duty
- The apprenticeship levy, due to be implemented from 2017, should be devolved to London in order to fund a wide range of skills and employment initiatives in the capital, as decided by London’s government
- A share of London’s contribution to vehicle excise duty (VED) revenue should be devolved for improvements to nationally strategic roads within the capital.
- The Government should consider devolving air passenger duty (APD) raised in London to so that the capital has the flexibility and autonomy to consider making local adjustments to the tax and to provide more diverse sources of revenue.
- London’s share of the soft drinks industry levy should be retained within the capital, with a longer-term view to devolving it fully, including the ability to set the rate. In the longer term (post 2020), London government should also consider other health-related taxes, including a sugar sales tax and a saturated fat tax, to be devised and fully managed by London government.
Professor Tony Travers, London Finance Commission, said: “The vote to leave the EU makes the case for further devolution more acute. It cannot be assumed that the current degree of fiscal centralisation within the UK is the only way of doing things.
“At present, the centralised nature of UK government makes it virtually impossible for the Mayor and the boroughs to bring about the required structural change to address the types of inequalities Londoners face, from housing to household income.
“This report makes the case for a much more ambitious devolutionary settlement for London. It argues that by giving London government greater power over the tax base and public services, the city’s leaders would be provided with stronger incentives to develop its economy and opportunities to reform public services.”
The Mayor of London, Sadiq Khan, said: “I fully endorse the recommendations of this excellent report and would like to thank Professor Tony Travers and the London Finance Commission for examining this vital issue.
“London has the same population as Wales, Scotland and Northern Ireland combined, but we have far less control over how our economy and public services are run.
“Giving London more control would allow us to manage the current economic uncertainty in the aftermath of the EU referendum, giving London the stronger voice it needs so we can protect jobs, growth and prosperity for the future.
“Now is the time for the Government to seize the moment and unleash the spirit of devolution seen in other parts of the UK the capital can continue to drive the UK economy for decades to come.”
Cllr Claire Kober OBE, Chair of London Councils, said: “This report vindicates our long-held position, and delivers a clear message that Government simply cannot ignore. The Mayor and boroughs must be given new powers if we are to realise economic growth in London and the UK and prepare for the huge challenges that lie ahead. This is critical to being able to deliver the jobs, homes and transport that Londoners need.”