City Hall is to be allowed to keep a greater slice of London’s business rates following “persistent lobbying” by outgoing Mayor Boris Johnson.
Mr Johnson has been pushing the case of greater fiscal devolution since his re-election in 2012 and has been working with other cities to convince ministers to allow local politicians a greater say in how locally raised taxes are spent.
The Mayor’s lobbying has now paid off, with Chancellor George Osborne using Wednesday’s budget to announce that the next Mayor will get to keep a larger share of the money collected through business rates from 2017/18.
In addition, City Hall, the Government and London’s Boroughs will “explore the potential” for London to keep 100& of the business rates ahead of a programme of national reforms.
In keeping with proposals outlined by the London Finance Commission there will be a corresponding cut in the grants London receives from central Government. City Hall is also taking on responsibility for funding Transport for London’s major infrastructure projects.
One exception to this arrangement is the planned Crossrail 2 rail link for which the government will provide additional money on the condition that TfL funds more than half of the scheme’s estimated £27bn price tag.
Mr Osborne also confirmed that he would contribute £80m towards the development work needed before Parliament can give the scheme the final go-ahead. TfL will match this sum in line with the National Infrastructure Commission’s recommendations.
The chancellor has also agreed, in principle, to transfer land at Old Oak in west London to the Old Oak and Park Royal Development Corporation in a move the mayor’s office says will help create 25,000 homes and 65,000 jobs.
Mr Johnson said: “The commitments made in this Budget are hugely significant and a major step forward for London. George Osborne has given us the green light to motor ahead with work on Crossrail 2 and to completely regenerate a key part of northwest London.
“Both those schemes are absolutely critical in enabling us to deliver the new homes and jobs that are required to cope with the staggering increase in population of this city.”
Mr Johnson’s would-be successors and business groups have also given their reactions:
Sadiq Khan, Labour candidate for Mayor of London:
“The one thing that London needed most from this Budget was new support to fix the housing crisis – which has gone from bad to worse under the Tories.
“Yet there was nothing to help deliver the thousands of new, affordable homes Londoners desperately need each year. Housing costs in London continue to soar – and it’s shocking that this Budget does nothing to help make housing affordable for Londoners.
“This was also another anti-London Budget. What have the Tories got against Londoners? London’s schools, councils and public services face bigger cuts than anywhere else in the UK.
“And rather than getting the green light for Crossrail 2, we got an amber light at best. It’s clearer than ever that Londoners need a Labour Mayor.”
Zac Goldsmith, Conservative candidate for Mayor of London:
“London needs a Mayor who can work with a Conservative Government over the next four years to deliver the big things our city needs, and today we have seen how important that is. Business rate devolution is a huge opportunity for London but our city’s success depends on a strong economy and competent management.
“With London only keeping 7% of the money we raise, the question of who can work with this Government is central to the choice Londoners face in just 50 days’ time.
“I am the only candidate who can secure the funds and powers necessary to deliver my Action Plan for Greater London: more homes, better transport, cleaner air and safer streets. Sadiq Khan would spend four years scoring political points for Jeremy Corbyn’s Labour – the world would watch London descend into gridlock and chaos.”
Caroline Pidgeon, Liberal Democrat candidate for Mayor of London:
“This is a ‘microwave’ budget from George Osborne. He has just re-heated many announcements already made.
“We had already been told last week that Crossrail 2 was going ahead and the need for Londoners to match fund the development costs. The increase in the share of business rates retained by London will help fund this vital new project, but a £1.9billion cut in TfL funds, as a result of Sadiq Khan’s fares policy, puts at risk important investment in London’s future transport needs.
“If elected Mayor I will ignore the Chancellor’s and Zac Goldsmith’s obsession with road building and ‘flyunder’ tunnels, and use the opportunity for financing infrastructure projects from land value increases to improve public transport and tackle air pollution in London.”.
Sian Berry, Green Party candidate for Mayor of London:
“I welcome the Chancellor’s commitment to Crossrail 2. With the government covering only half the cost, it’s vital the next Mayor of London has plans to raise the rest. I will cut fares for outer Londoners and flatten the fare zones by 2025 and invest in new infrastructure by raising funds from people driving in our city.
Other candidates are either leaving a gaping hole in the finances that threatens public transport and cycling investment, or have no plans to make fares fairer.
“The early retention of business rates is welcome, but the government should give London more options to raise money through property taxes with even more fiscal devolution, so we don’t have to go to the Exchequer with a begging bowl for major projects.
“On housing, I’m very disappointed that the Chancellor isn’t cutting the huge mortgage tax subsidy the Government currently gives to landlords. I have urged him to do this repeatedly, and wrote to him in November to demonstrate that the savings could be used by the Mayor of London to provide 16,000 additional truly affordable homes in London over the period of the next Mayoralty.
The is the kind of measure he ought to be considering given the scale of our housing crisis, and I’m sorry he has again decided to rule it out.”
Sue Terpilowski OBE, London Policy at the Federation of Small Businesses:
“We welcome the announcement in the budget to commission Crossrail 2. The population in London will hit 11.3 million by the year 2050 and London needs to take tough infrastructural decisions to meet the demands of small business.
“FSB will work closely with the Greater London Authority on how the retention of business rates will affect small businesses. Proper financial checks need to be in place and before implementation there should be full consultation with a range of stakeholders in the capital, in particular business groups including FSB, London Chamber, London First, IoD London and CBI London, the LEP, BIDs and local authorities”
Colin Stanbridge, Chief Executive of London Chamber of Commerce and Industry:
“The Chancellor has delivered a budget today that includes good news for London business.
“Funding to move Crossrail 2 to the next stage is most welcome, this is a transport project that, once operational, will bring economic dividends well beyond London.
“The announcement today to allow the Greater London Authority to retain all business rates revenue from April next year could see more effective targeting of resources towards local infrastructure that underpins local business priorities.
“Of course we await to learn fuller details on how rates reforms may work in London, given that a business rate supplement is in place to help fund Crossrail.
“LCCI’s vision for London is not just for business rates devolution, but more powers on housing, skills policy and property taxes are essential if the capital is to be able to fulfil its economic potential and meet its infrastructure needs.”