Give London power to level up the rest of the country
If Andy Burnham is to make a success of his devolution agenda he must give London more powers and money to invest in the main drivers of the whole country’s international competitiveness, says Patrick Diamond
The new prime minister, Andy Burnham, has put devolution and economic growth at the heart of his government’s narrative. London needs to be part of that story as much as anywhere else in the UK. The success of London is vital for the rest of the country given the capital generates over a fifth of the nation’s GDP. Tax revenues collected in London fund public services everywhere. The dense network of legal, financial and professional services invariably support growth in major cities like Birmingham, Leeds, Manchester, Newcastle and Bristol.
Another rationale is that growth and productivity in London over the last 15 years has stagnated. The financial crisis of 2008 dealt a lasting blow to financial services, while global headwinds and Brexit further depleted economic output. There are parts of London where low growth is the norm: the divisions within the capital are as great as those between London and the rest of the UK (compare affluent Westminster with deprived Newham or Barking and Dagenham). The Burnham administration can’t afford to ignore London. The capital needs a robust plan with more devolved powers to stimulate improvements in economic growth and productivity.
25 years of the GLA
More than 25 years since the Greater London Authority (GLA) was created, this is an opportune moment to take stock. There is a perception that London devolution is a done deal; the government’s task is simply to level up other city-regions. On the contrary, if London is to grow sustainably in the future, it needs more powers and money to invest in the main drivers of competitiveness.
London is a unique global city. It needs a radical devolution settlement which reflects that status. There are aspects of the current governance arrangements which don’t work as well as they should: London’s institutions don’t always scrutinise policy effectively. The city has fewer powers than its equivalents in New York, Paris and Tokyo. The creation of an ‘integrated financial settlement’ that pools existing budgets is a welcome step, but there are too many strings attached to Whitehall. The city needs autonomy to run the economy and reform its public services, particularly given the ageing population.
The government of London should have the same powers as devolved bodies in Wales and Scotland, including control over major taxes. As the London Finance Commission proposed nearly a decade ago, stamp duty, property-related capital gains tax, business rates and council tax should be devolved. The capital must also keep a proportion of income tax to finance major infrastructure and economic development projects, meeting its needs for capital investment in housing, transport and net zero rather than relying on Treasury largesse.
But greater devolution shouldn’t simply mean more power for the Mayor. London boroughs need budgets and levers to drive growth locally. Too often, local councils are ignored. The evidence shows that residents are more likely to accept controversial decisions – about where to build new housing or transport facilities – if they see decisions are taken locally. Most voters in London identify first and foremost with the borough where they live. Local councils should not be treated as a delivery arm of the GLA, but as key players in joint decision-making given their democratic mandate. Like combined authorities elsewhere, the boroughs should be a driving force in the governance of the capital.
This new devolution settlement isn’t just a nice-to-have. London is at grave risk of falling behind. Growth and productivity have been stagnating over the last decade. The capital needs a shot in the arm, with freedom to spend on what matters most for the future economy.
Patrick Diamond is professor of public policy at Queen Mary University of London.